As filed with the Securities and Exchange Commission on October 4, 2013
Registration No. 333
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Mavenir Systems, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 3576 | 61-1489105 | ||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
Mavenir Systems, Inc.
1700 International Parkway, Suite 200, Richardson, TX 75081
(469) 916-4393
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
Pardeep Kohli
President and Chief Executive Officer
Mavenir Systems, Inc.
1700 International Parkway, Suite 200, Richardson, TX 75081
(469) 916-4393
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Alan Bickerstaff Ted Gilman Andrews Kurth LLP 111 Congress, Suite 1700 Austin, TX 78701 (512) 320-9200 |
Sam Garrett General Counsel and Secretary Mavenir Systems, Inc. 1700 International Parkway, Suite 200 Richardson, TX 75081 (469) 916-4393 |
Richard D. Truesdell, Jr. Davis Polk & Wardwell LLP 450 Lexington Avenue New York, New York 10017 (212) 450-4000 |
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, please 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. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (check one)
Large Accelerated filer ¨ | Accelerated filer ¨ | |||
Non-accelerated filer x | (Do not check if a smaller reporting company) | Smaller reporting company ¨ |
CALCULATION OF REGISTRATION FEE
| ||||
Title of Each Class of Securities to be Registered |
Proposed Maximum Offering Price(1) |
Amount of Registration Fee | ||
Common stock, $0.001 par value per share |
$86,250,000 | $11,109 | ||
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(1) | Estimated solely for the purpose of computing the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. Includes the offering price of additional shares that the underwriters have the option to purchase. |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant files a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and neither we nor the selling stockholders are soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.
PROSPECTUS (Subject to completion)
Issued October 4, 2013
Shares
Common Stock
Mavenir Systems, Inc. is offering shares of common stock and the selling stockholders are offering shares. We will not receive any proceeds from the sale of shares by the selling stockholders. This is our initial public offering and no public market currently exists for our shares. We expect that the initial public offering price will be between $ and $ per share.
We have applied to list our common stock on the New York Stock Exchange under the symbol MVNR.
We are an emerging growth company under applicable federal securities laws and will be subject to reduced public company reporting requirements. Investing in our common stock involves risks. See Risk Factors beginning on page 14.
Price $ Per Share
Price to Public |
Underwriting Discounts and Commissions |
Proceeds to Mavenir |
Proceeds to Selling Stockholders |
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Per share |
$ | $ | $ | $ | ||||||||||||
Total |
$ | $ | $ | $ |
We have granted the underwriters the right to purchase an additional shares of common stock.
The Securities and Exchange Commission and state securities commissions have not approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares of common stock to purchasers on , 2013.
Morgan Stanley |
BofA Merrill Lynch | Deutsche Bank Securities |
Needham & Company
, 2013
Neither we, the selling stockholders nor the underwriters have authorized anyone to provide you with any information other than that contained in this prospectus and any free writing prospectus prepared by us or on our behalf. We, the selling stockholders and the underwriters take no responsibility for, and can provide no assurances as to the reliability of, any information that others may give you. This prospectus may only be used in jurisdictions where it is legal to sell these securities. The information contained in this prospectus is only accurate as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our common stock.
Dealer Prospectus Delivery Obligation
Through and including , 2013 (the 25th day after the date of this prospectus), all dealers that buy, sell or trade shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold share allotments or subscriptions.
This summary highlights the information contained elsewhere in this prospectus and is a brief overview of the key aspects of the offering. Because this is only a summary, it does not contain all of the information that may be important to you. Before investing in our common stock, you should read this entire prospectus, including the information set forth under the headings Risk Factors, Selected Historical Consolidated Financial and Operating Information, Managements Discussion and Analysis of Financial Condition and Results of Operations, Our Business and our consolidated financial statements and related notes thereto. Some of the statements in this prospectus constitute forward-looking statements. Please read Special Note Regarding Forward-Looking Statements for more information. For a description of some key mobile communications industry terms used in this summary and elsewhere in this prospectus, please read Description of Key Terms Used in Our Industry elsewhere in this prospectus.
Unless the context otherwise requires, references in this prospectus to Mavenir Systems, Mavenir, we, our, us, and the company refer to Mavenir Systems, Inc. together with its subsidiaries.
MAVENIR SYSTEMS, INC.
Overview
We are a leading provider of software-based telecommunications networking solutions that enable mobile service providers to deliver internet protocol (IP)-based voice, video, rich communications and enhanced messaging services to their subscribers globally. Our solutions deliver Rich Communication Services (RCS), which enable enhanced mobile communications, such as group text messaging, multi-party voice or video calling and live video streaming as well as the exchange of files or images, over existing 2G and 3G networks as well as next generation 4G Long Term Evolution (LTE) networks. Our solutions also deliver voice services over LTE technology and wireless (Wi-Fi) networks, known respectively as Voice over LTE (VoLTE) and Voice over Wi-Fi (VoWi-Fi). We enable mobile service providers to offer services that generate increased revenue and improve subscriber satisfaction and retention, while allowing them to improve time-to-market of new services and reduce network costs. Our mOne® Convergence Platform has enabled leading mobile service providers to introduce the industrys first live network deployment of VoLTE and the industrys first live deployment of next-generation RCS 5.
The capabilities of smartphones and tablets have caused consumers to shift their communication preferences from traditional voice service to a combination of voice, video and messaging services, which are offered by rich communication services. Additionally, many consumers are using their mobile devices to browse the internet, run software applications, access cloud-based services and consume, create and share rich multimedia and user-generated content. These trends have placed substantial capacity constraints on the existing networks of mobile service providers. According to the February 2013 Cisco Visual Networking Index report, the average smartphone and tablet generate 50 and 120 times more data traffic, respectively, than the average basic-feature cell phone. As a result, mobile data traffic is projected to continue to increase exponentially, driven by the rapid adoption of smartphones and tablets and the demand for enhanced and high-bandwidth mobile services such as video. In order to alleviate the resulting spectrum and network capacity challenges, mobile service providers are making significant investments to transition their networks to the 4G Long Term Evolution (4G LTE) standard for voice and data transmission over mobile networks, as that standard enables higher data speeds and allows more efficient use of the frequency spectrum. In a September 2013 report, Gartner estimated that worldwide annual spending on 4G LTE mobile infrastructure would grow from $5.9 billion in 2012 to $33.9 billion by 2017, representing a compound annual growth rate (CAGR) of 42%. (Source: Gartner, Forecast: Carrier Network Infrastructure, Worldwide, 20102017 3Q13 Update, September 2013.)
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Because our solutions are interoperable across network generations, we enable mobile service providers to leverage their existing investments in 2G and 3G networks while offering a seamless, cost-effective migration path to 4G LTE networks. We provide our solutions to over 120 mobile networks globally, including three of the top five mobile service providers in the United States and four of the top five pan-European mobile service providers in Western Europe, as measured by number of mobile device connections as of December 2012. Our end customers include AT&T, MetroPCS (now part of T-Mobile), T-Mobile USA, Vodafone, Tele2, Deutsche Telekom AK and Telstra. Our customers include the first mobile service providers to deploy VoLTE and RCS 5 services to their subscribers, which services were deployed utilizing our technology. Our solutions can be deployed on-premise within the mobile service providers network or hosted in a mobile cloud environment. Our solutions enable mobile service providers to generate additional revenues by providing their subscribers with rich communications and cloud-based services, including:
| carrier-grade (at least 99.999% reliable), integrated communications services, including voice calling, video calling and messaging; |
| a rich communications experience, with integrated one-to-one and group voice chat, video chat, messaging and sharing of content such as videos, images, links or locations; |
| a single identity across multiple devices and services, based on a subscribers mobile phone number, that allows seamless delivery of mobile services and applications globally; |
| interworking with legacy short message service (SMS), which is an older technology used to convey short text messages, multimedia messaging service (MMS), which is an existing technology allowing delivery of images in a relatively low-resolution format, and social networks; and |
| cloud-based delivery of next generation mobile communications, including voice, video, enhanced messaging, which includes voice and video mail and interworking with social media platforms, and storage of mobile subscriber content and media. |
We commenced operations in 2005 and began product sales in 2007. Our unaudited pro forma 2011 revenue, which assumes a full-year contribution from Airwide Solutions, Inc. (Airwide Solutions), a business we acquired in May 2011, was $66.8 million. For the year ended December 31, 2012, our reported revenue was $73.8 million, compared with $49.5 million and $8.3 million for the years ended December 31, 2011 and 2010, respectively. In addition, our operating loss was $(14.6) million, $(19.2) million and $(10.2) million for the years ended December 31, 2012, 2011 and 2010, respectively. For the six months ended June 30, 2013 and 2012, our reported revenue was $48.2 million and $39.9 million, respectively, and operating loss was $(2.6) million and $(4.5) million, respectively. We are headquartered in Richardson, Texas and had approximately 670 full-time employees worldwide as of June 30, 2013.
Industry Background
The market for mobile communications services is evolving rapidly, characterized by the following trends:
Proliferation of Smartphones and Tablets. Global adoption of smartphones and tablets is in its early stages, and future growth is expected to accelerate as mobile subscribers increasingly rely on these powerful devices. Despite increased usage of smartphones, a June 2013 Ericsson publication estimated that smartphones accounted for only 19% of total global mobile subscriptions, highlighting the potential for growth in smartphone usage.
Increased Use of Mobile Applications, Mobile Media and Cloud-Based Services. Powerful smartphones and tablets are rapidly replacing desktop computers and laptops as the primary computing platform used for browsing the internet, running software applications, accessing cloud-based services, and consuming media content such as streaming video and internet radio. Also, many consumers are increasingly creating, sharing and accessing user-generated content, such as photos and videos, on their mobile devices through online services such as Facebook and YouTube. In addition, cloud-based storage is growing significantly as consumers purchase content from
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media services, such as Amazon, Apple and Google, and utilize online storage services to access their purchased content from multiple mobile device types. Furthermore, mobile subscribers are increasingly seeking more rich communication services, such as video chat, to enhance the communications experience on their mobile devices. These trends in consumer behavior related to mobile device usage are driving a substantial increase in the amount of mobile data traffic.
Mobile Service Provider Challenges
Proliferation of smartphones and tablets as well as increased use of mobile applications and cloud-based services by subscribers present the following challenges for mobile service providers:
| Strain on Existing Network Resources. Faced with increased subscriber demand for bandwidth-consuming mobile applications and cloud-based services, mobile service providers are facing spectrum and capacity constraints. |
| Competition from Over-The-Top / Web Services. Over-The-Top (OTT) applications compete with services that are, or could be, offered by mobile service providers, reducing revenue sources that traditionally have gone to mobile service providers. For example, OTT services such as Skype, Apple Facetime, Facebook Chat and Blackberry Messenger, allow consumers to engage in rich communications experiences in a simple, easy-to-use interface. These OTT services provide free and feature-rich alternatives that compete with traditional voice and SMS services offered by mobile service providers. |
| Need to Offer Subscribers Enhanced Services. As mobile voice service access has become commoditized and average voice revenue per subscriber has decreased, mobile service providers are seeking to offer their subscribers new, differentiated services that increase revenue per subscriber, enhance customer satisfaction and reduce subscriber turnover. |
| Migration Path to 4G LTE. As mobile service providers migrate to 4G LTE, they will look to minimize capital expenditures and operational costs, while maximizing subscriber usage of their network. Mobile service providers are seeking a common solution platform that can address existing 2G and 3G network requirements without requiring additional investments and that can also be utilized for next-generation 4G LTE network introductions. |
Benefits of 4G LTE
The next generation of mobile technology, broadly defined as 4G, includes Long Term Evolution (LTE), Worldwide Interoperability Microwave Access (WiMAX) and Evolved High Speed Packet Access (HSPA+) and can be extended to include Wi-Fi. 4G LTE has been developed to handle mobile data more efficiently and allows for faster, more reliable and more secure mobile service than existing 2G and 3G networks. The faster data transfer capabilities of 4G LTE networks enable mobile subscribers to use a wide variety of bandwidth-intensive software applications and cloud-based services with a rich mobile computing experience. In addition to the benefits for mobile subscribers, 4G LTE technology is inherently more efficient and cost-effective, resulting in a better network infrastructure for mobile service providers.
4G LTE offers the opportunity to fundamentally lower the cost of network operational centers by leveraging technologies widely used in the IT industry, such as Network Functions Virtualization (NFV), which refers to the deployment of telecommunications application software on virtualized hardware platforms often referred to as private clouds, and Software-Defined Networking (SDN), which simplifies network administration through the use of software. Both of these technologies drive down network cost and complexity and increase network flexibility and responsiveness.
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4G LTE is a new architecture that enables mobile service providers to offer a wide range of new and innovative services across their networks. Mobile service providers can deliver device independent services over 4G LTE networks and offer a cloud-based subscriber experience that is comparable to communication services providers such as Apple, Google and Skype. Mobile service providers will be able to offer a platform that third-party application developers can leverage to integrate new and innovative services through open network standards.
Market Opportunity
The development of 4G LTE is a generational change in technology for the mobile industry, a level of change that occurs approximately every ten years on average. Every generational change spurs a new investment cycle as mobile service providers seek to invest in equipment upgrades to support new standards. In the transition of communication services from 2G and 3G to 4G LTE, a complete change of infrastructure to deliver new services is required. Unlike 3G, migration to the next-generation 4G LTE standard is no longer an option, but rather a time-critical business priority for many mobile service providers.
Many mobile service providers are currently making the needed infrastructure investments to accommodate the growing subscriber demand for next-generation mobile communication services. A September 2013 Gartner report estimated that next-generation 4G LTE mobile infrastructure spending worldwide was $5.9 billion in 2012 and is forecast to reach $33.9 billion by 2017, representing a 42% CAGR. (Source: Gartner, Forecast: Carrier Network Infrastructure, Worldwide, 2010-2017 3Q13 Update, September 2013.) We believe 4G LTE network investments will accelerate as mobile service providers seek to meet growing subscriber demand.
Our Solutions
Our solutions, based on our mOne® Convergence Platform, enable mobile service providers to deliver IP-based voice, video, rich communications and enhanced messaging services over their existing 2G and 3G networks and next-generation 4G LTE networks. IP-based communication services, which involve the transmission of voice and text data using the more efficient internet protocol that underlies the internet, rather than through traditional and less efficient circuit-switched phone networks, are being developed and deployed today. These services are faster, more efficient and demand less spectrum than the circuit-based communication methods employed by existing 2G and 3G networks.
Our solutions are focused on delivering a seamless and intuitive communications experience to mobile subscribers and an integrated, flexible, differentiated platform for mobile service providers. We enable mobile service providers to capitalize on their IP-based network investments by efficiently and cost-effectively offering a broad range of services.
Our mOne® Convergence Platform offers our customers the following key benefits:
Comprehensive, Highly Configurable and Converged Communication Solution. The mOne® Convergence Platform enables mobile service providers to deploy any or all of a wide range of services. Some of these services include:
| carrier-grade, integrated communication services, including voice calling, video calling and messaging; |
| a rich communications experience, with integrated one-to-one and group voice chat, video chat, messaging and sharing of content such as videos, images, links or locations; |
| a single identity across multiple devices and services, based on a subscribers mobile phone number, that allows seamless delivery of mobile services and applications globally; and |
| interworking with legacy SMS/MMS and social networks. |
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Cloud-Based Implementation. The design of our software products enables mobile service providers to use private cloud implementations to deliver next generation mobile communications, including voice, video, enhanced messaging and storage of mobile subscriber content and media. These solutions allow our customers to share capacity in a cloud deployment with commercial off-the-shelf servers for all services rather than deploying dedicated, proprietary hardware for each service. The key benefits of utilizing private clouds include more agile use of the network infrastructure, the ability to deploy and prove-in new services rapidly using commercially available off-the-shelf hardware available from major manufacturers, combined with our software, without large up-front infrastructure costs and avoiding the network upgrade costs associated with obsolescence of proprietary hardware. For example, one of the largest pan-European mobile service providers has commercially launched our virtualized Rich Communication Services (RCS) to provide joyn® an industry initiative that enables one-on-one and group chat services and the enhancement of voice calls through the sharing of multi-media content such as videos, pictures and music on its own single common hardware platform for nine different national networks across the continent, thereby deploying its own mobile cloud environment. Although we offer to host our solutions in our own cloud-computing center for mobile service providers, we do not currently have any contracts to provide cloud-based hosting services.
Seamless Migration Path to 4G LTE. Our solutions offer mobile service providers a cost-effective migration path to 4G LTE by supporting existing 2G and 3G networks and next-generation 4G LTE networks, eliminating the need to prematurely retire existing investments. Our platform features a comprehensive, standards-based set of interfaces to ensure a seamless integration into existing, multi-vendor infrastructure and can be deployed over a wide range of network types including 2G, 3G, LTE, WiMAX, HSPA+ and Wi-Fi.
Ability to Improve Subscriber Experience and Deliver Revenue-Generating Services. Mobile service provider competition continues to exert downward pressure on the prices and profits associated with traditional voice, SMS and data services. When a mobile service provider offers a rich communications platform with multiple high-value services, its subscribers will be more likely to pay for these services, either by direct subscription or through increased data revenue, and less likely to switch providers.
Scalable Architecture and Carrier-Grade Reliability. Our solutions form a highly scalable carrier-grade platform that provides subscribers with high-quality service, as measured by the breadth of services offered and reliability, or lack of downtime. Our platform is fully compatible with the mobile industrys standards and interoperability framework, allowing full compatibility across mobile service providers and geographies. Unlike OTT service providers, who cannot control quality or reliability of service because they do not own or control underlying access networks, mobile service providers using our solutions over their networks can deliver high-quality and consistent service to all subscribers.
Open Platform and Social Interworking. Our standards-based open solution architecture and APIs (Application Programming Interfaces) allow mobile service providers to develop or incorporate third-party enhanced application services (social or otherwise), for example, by embedding messaging or voice calling capabilities within consumer applications such as shopping or banking applications. We enable mobile service providers to interconnect various OTT applications and social networking services so that a subscriber can engage in voice, video and rich messaging communications with anyone, anywhere, on any device or in any communications ecosystem. A subscriber can communicate with another subscriber through one central identity based on the subscribers mobile phone number, rather than having to worry about what specific application to use to connect with that other subscriber. Mobile service providers can leverage this neutral position and technology to bring more users into their networks.
Our Competitive Strengths
We are a leading provider of software-based telecommunications networking solutions that enable mobile service providers to deliver carrier-grade integrated communications services to their subscribers because we
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have been first to market with solutions that enable many enhanced subscriber services, we have a broad customer base and we have a history of successfully competing for business with some of the largest solutions providers in the mobile industry. Our competitive strengths include the following:
| First-Mover Advantage. Since our inception, we have developed significant expertise around solving the key challenges that mobile service providers face as they deploy next-generation networks and we have been first to market with solutions that enable many enhanced subscriber services. |
| Singular Focus on Next-Generation Communication Solutions. We are focused on developing and selling next-generation IP-based voice, video, rich communications and enhanced messaging services to mobile service providers. Unlike many of our competitors, we are not encumbered by a product portfolio full of legacy solutions and an installed customer base that generates significant revenue and cash flow streams from legacy solutions. |
| Modular Platform for Next-Generation Communication Solutions. Our mOne® Convergence Platform is based on a flexible software architecture that enables mobile service providers to provide IP-based voice, video, rich communications and advanced messaging applications to their subscribers. We have worked closely with many of our mobile service provider customers to understand their unique requirements and have developed a platform with the specific product features that are most relevant to help them achieve their strategic priorities. Our modular platform approach allows mobile service providers to selectively deploy the services they want for their subscribers, with the ability to add additional services and scale as needed. We believe that our ability to provide mobile service providers with customized deployment strategies gives us a significant competitive advantage. |
| Interoperability across Network Generations. Seamless and cost-effective migration of subscribers and services from 2G and 3G networks to 4G LTE networks can be achieved by bridging disparate technologies, while preserving existing investments, through intelligent gateways and interworking software. Our industry standards-based products support fully-integrated legacy interfaces that enable mobile service providers to continue to use much of their existing core network infrastructure, which is the centralized network of switches, routers and application services that deliver consumer services and includes elements such as subscriber databases, billing systems and intelligent network systems, without costly upgrades or replacements. Our ability to interoperate across traditional network boundaries mitigates the cost and complexity of deploying 4G LTE networks and accelerates time-to-market. |
| Technology Team. We believe our management team and the depth and diversity of our engineering and operations talent provide us with a competitive advantage. The extensive domain expertise of our engineering team is derived from its members combined experience in different areas of technology, including voice technology, software development, cellular/mobility applications, internet protocol networking, social networking and communications networks. |
Our Strategy
Our goal is to establish our position as the leading global provider of 4G LTE solutions. Key elements of our strategy include:
| Leverage First-Mover Advantage to Increase Sales to Existing Customers and Grow Our Customer Base. We have the advantage of being a first-mover with our innovative solutions that enable operators to efficiently address network challenges. For example, our VoLTE solution allowed a U.S. mobile service provider in August 2012 to become the first in the world to launch a commercial VoLTE service. Additionally, with our mOne® Convergence Platform deployed for VoLTE, the customer was positioned to quickly launch new value-added RCS 5 services over 4G LTE, which it did less than three months later in October 2012, becoming the first mobile service provider in the world to launch |
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RCS 5, which is an advanced set of standards enabling the delivery of mobile communications services such as group text messaging, multi-party voice or video calling and live video sharing as well as the exchanging of files or images. We believe that the experience and detailed technical knowledge that our employees obtained during the course of enabling a mobile service provider to launch these first-to-market services will be directly applicable to expanding existing customer networks, as well as new customer networks, with our next-generation solutions. We intend to further capitalize on our early market success in deploying next-generation 4G LTE solutions and the strong customer relationships we have to supply our existing customers with new product offerings and gain new customers. |
| Extend our Technology Advantage Through Continued Innovation. We will utilize the valuable insight into product and performance requirements that we have gained in our early market achievements in the transition from 2G and 3G to 4G LTE to continue to deliver market-leading solutions focused on 4G LTE services, including a full suite of integrated mobile communications that can be deployed through a cloud-based implementation. |
| Simplify Mobile Service Providers Transition to 4G LTE. Our solutions give mobile service providers the ability to deliver next-generation services over existing networks, which positions them to cost-effectively optimize the useful lives of their existing networks. Mobile service providers can then focus their investments on a seamless, cost-effective path from existing 2G and 3G networks to next-generation 4G LTE networks. We intend to continue delivering solutions that use existing 2G and 3G networks today, and then cost-effectively transition mobile service providers to 4G LTE networks in the future. |
| Leverage Virtualization Technology to Enable Cloud Computing and Service Deployment Flexibility. We believe that virtualization technology can be leveraged to build 4G LTE core networks on standard cloud computing platforms, significantly lowering the cost for network infrastructure equipment. As many of the largest mobile service providers pursue strategies to implement their own private cloud infrastructures, we intend to continue pioneering solutions for virtualized cloud-based environments. Virtualization also enables an ideal approach to providing hosted services, which we can deliver for both small and large mobile service providers. |
| Selectively Pursue Strategic Acquisitions. We intend to continue to expand our product portfolio through opportunistic business acquisitions and intellectual property transactions. For example, we acquired Airwide Solutions in May 2011 to strengthen our mobile messaging solutions portfolio and expand our global market presence with additional locations in Europe, the Middle East and Africa (EMEA) and the Asia-Pacific region, in addition to significantly expanding our employee and talent base. |
| Expand into Adjacent Market Segments. As access networks converge towards all-IP, mobile service providers with solutions across wireless, wireline and enterprise see an opportunity for significant savings by consolidating infrastructure equipment into a single converged 4G LTE network. With our expertise and first-mover advantage in VoLTE and RCS, we intend to provide converged solutions for adjacent market segments such as residential wireline, mobile center office exchange service (centrex) and enterprise. |
Risks Affecting Our Business
Our business is subject to a number of risks that you should consider before making a decision to invest in our common stock. These risks are discussed more fully in the Risk Factors section of this prospectus. These risks include, but are not limited to, the following:
| we have incurred significant losses in each year since inception, we expect to continue to incur significant product development, sales and marketing, administrative and other expenses, and we cannot assure you that we will become or remain profitable; |
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| our future operating results are substantially dependent on the speed of adoption of 4G LTE technology and mobile service providers investment in rich communications solutions, and our operating results could be adversely affected if the market for our solutions does not develop as we anticipate; |
| a number of our current or potential competitors have longer operating histories, greater brand recognition, larger product and customer bases and significantly greater resources than we do and we may lack sufficient financial or other resources to maintain or improve our competitive position; |
| our operating results may fluctuate materially from quarter to quarter due to the long, variable and unpredictable sales and deployment cycles for our products, due to revenue recognition policies or due to other factors that are outside of our control; |
| intellectual property infringement claims are common in our industry and third parties, including competitors, could assert infringement claims against us or we may be obligated to indemnify our customers for expenses and liabilities resulting from infringement claims related to our solutions; |
| we may be unable to adequately protect our intellectual property rights, which could harm our competitive position; and |
| we depend upon a limited number of customers and a limited number of products for a substantial portion of our revenues. |
Corporate Information
Our company was originally formed as a Texas limited liability company in April 2005. We converted to a corporation in August 2005, and we changed our jurisdiction of incorporation to Delaware in March 2006. Our principal executive office is located at 1700 International Parkway, Suite 200, Richardson, TX 75081 and our telephone number is (469) 916-4393. Our website address is http://www.mavenir.com. The information contained in or accessible from our website is not incorporated into this prospectus, and you should not consider it part of this prospectus.
The Mavenir Systems® name, the mOne® name, the Airwide® name, the AirMessenger® name, the Mavenir name, the mStore name, the mCloud name, Transforming Mobile Networks and related images, logos and symbols appearing in this prospectus are our properties, trademarks and service marks. Other marks appearing in this prospectus are the property of their respective owners.
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SUMMARY OF THE OFFERING
Shares of common stock offered by us |
shares. |
Shares of common stock offered by the selling stockholders |
shares. |
Shares of our common stock outstanding after this offering |
shares (assuming no exercise of the underwriters option to purchase additional shares). |
Option to purchase additional shares |
We have granted the underwriters a 30-day option to purchase up to additional shares of our common stock. |
Use of proceeds |
We estimate that the net proceeds to us from this offering, after deducting underwriting discounts and estimated offering costs payable by us, will be approximately $ million, assuming an initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus), or approximately $ million if the underwriters exercise in full their option to purchase additional shares. We intend to use the net proceeds of this offering for working capital and other general corporate purposes, which may include financing growth (including payment of increased levels of expenditures), developing new products and funding capital expenditures, acquisitions and investments. We will not receive any of the proceeds from the sale of shares of common stock by the selling stockholders. See Use of Proceeds. |
Dividend policy |
We do not anticipate paying any cash dividends on our common stock for the foreseeable future. In addition, the terms of our loan and security agreement currently restrict our ability to pay dividends. See Dividend Policy. |
Proposed NYSE ticker symbol |
MVNR |
Risk Factors |
Investment in our common stock involves substantial risks. You should read this prospectus carefully, including the section entitled Risk Factors and the consolidated financial statements and the related notes to those statements included in this prospectus, before investing in our common stock. |
The number of shares of common stock outstanding after this offering is based on 124,558,248 shares of our common stock outstanding as of June 30, 2013, which number reflects the conversion of all of our redeemable convertible preferred stock into an aggregate of 115,167,418 shares of common stock. The number of shares of common stock outstanding after this offering excludes the following:
| 20,260,292 shares of common stock issuable upon the exercise of options outstanding at June 30, 2013 at a weighted-average exercise price of $0.33 per share; |
| 6,366,588 shares of common stock issuable upon the conversion and subsequent exercise of warrants to purchase redeemable convertible preferred stock at an exercise price of $0.9542 per share; |
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| 920,000 shares of common stock issuable upon the exercise of warrants to purchase common stock at an exercise price of $0.73 per share; |
| 1,362,858 shares of common stock issuable upon the exercise of warrants to purchase common stock at an exercise price of $0.001 per share; |
| 11,723,202 shares of common stock reserved as of June 30, 2013 for future issuance under our 2013 Equity Incentive Plan, as described in the section of this prospectus titled Executive Compensation Benefit Plans 2013 Equity Incentive Plan; and |
| 3,375,000 additional shares of common stock reserved for future issuance under our 2013 Employee Stock Purchase Plan, subject to adjustment as described in the section of this prospectus titled Executive Compensation Benefit Plans 2013 Employee Stock Purchase Plan. |
Except as otherwise noted, all information in this prospectus:
| assumes no exercise of the underwriters option to purchase additional shares; |
| gives effect to the automatic conversion upon the completion of this offering of all of our outstanding shares of redeemable convertible preferred stock, on a one-for-one basis, into an aggregate of 115,167,418 shares of common stock; and |
| assumes the filing of our amended and restated certificate of incorporation and the effectiveness of our amended and restated bylaws, which will occur immediately prior to the closing of this offering. |
10
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following tables summarize the consolidated financial and operating data for the periods indicated. The summary consolidated statement of operations data for the years ended December 31, 2010, 2011 and 2012 and the summary consolidated balance sheet data as of December 31, 2011 and 2012 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated statements of operations data for the six months ended June 30, 2012 and 2013 and the summary consolidated balance sheet data as of June 30, 2013 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The summary consolidated balance sheet data as of December 31, 2010 have been derived from our audited consolidated financial statements, which are not included in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future. The summary financial information below should be read in conjunction with the information contained in Selected Historical Consolidated Financial and Operating Information, Managements Discussion and Analysis of Financial Condition and Results of Operations, the consolidated financial statements and notes thereto, and other financial information included elsewhere in this prospectus.
Year Ended December 31, | Six months ended June 30, | |||||||||||||||||||
2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||
(in thousands, except per share amounts) |
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(unaudited) | ||||||||||||||||||||
Consolidated Statement of Operations Data: |
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Total revenue |
$ | 8,251 | $ | 49,504 | $ | 73,840 | $ | 39,949 | $ | 48,190 | ||||||||||
Cost of revenue |
5,103 | 30,784 | 30,459 | 15,091 | 20,241 | |||||||||||||||
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Gross profit |
3,148 | 18,720 | 43,381 | 24,858 | 27,949 | |||||||||||||||
Total operating expenses |
13,324 | 37,905 | 57,944 | 29,401 | 30,515 | |||||||||||||||
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Operating loss |
(10,176 | ) | (19,185 | ) | (14,563 | ) | (4,543 | ) | (2,566 | ) | ||||||||||
Net interest expense |
108 | 61 | 383 | 25 | 1,107 | |||||||||||||||
Foreign exchange loss (gain) |
(21 | ) | 1,182 | (529 | ) | 871 | 2,644 | |||||||||||||
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Loss before income tax expense |
(10,263 | ) | (20,428 | ) | (14,417 | ) | (5,439 | ) | (6,317 | ) | ||||||||||
Income tax expense |
131 | 1,330 | 1,152 | 211 | 1,618 | |||||||||||||||
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Net loss |
$ | (10,394 | ) | $ | (21,758 | ) | $ | (15,569 | ) | $ | (5,650 | ) | $ | (7,935 | ) | |||||
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Net loss per share attributable to common shareholders (basic and diluted) |
$ | (1.35 | ) | $ | (2.69 | ) | $ | (1.73 | ) | $ | (0.65 | ) | $ | (0.85 | ) | |||||
Weighted average common shares outstanding (basic and diluted) |
7,726 | 8,092 | 9,016 | 8,752 | 9,376 | |||||||||||||||
As adjusted net loss per share(1) |
$ | (0.11 | ) | $ | (0.18 | ) | $ | (0.13 | ) | $ | (0.05 | ) | $ | (0.06 | ) | |||||
As adjusted weighted-average shares outstanding used to compute net loss per share(1) |
91,008 | 123,259 | 124,183 | 123,919 | 124,543 | |||||||||||||||
Non-GAAP Financial Measure: |
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Adjusted EBITDA(2) |
$ | (9,298 | ) | $ | (14,938 | ) | $ | (10,224 | ) | $ | (2,753 | ) | $ | (472 | ) |
(1) | As adjusted amounts give effect to the automatic conversion of all outstanding shares of our redeemable convertible preferred stock into 115,167,418 shares of our common stock immediately prior to the completion of this offering. |
(2) | We include adjusted earnings before interest, tax, depreciation and amortization and certain other expenses, or adjusted EBITDA, because it is a measure that our management uses to evaluate our operating results. We calculate adjusted EBITDA as our net loss, adding back net interest expense, income tax expense, depreciation and amortization, stock-based compensation expense and certain acquisition-related expenses. We present adjusted EBITDA as a supplemental performance measure because our management believes |
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that it facilitates operating performance comparisons from period to period by excluding potential differences caused by variations in capital structures (affecting net interest expense), tax positions (such as the impact on periods of changes in effective tax rates), the depreciation of assets (affecting depreciation expense), the amortization of intangibles (affecting amortization expense), stock-based compensation expenses and certain acquisition-related expenses. Adjusted EBITDA is not a measurement of our financial performance under generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income (loss), operating income (loss) or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operations as a measure of our profitability or liquidity. We understand that although adjusted EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are: |
| adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; |
| adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
| adjusted EBITDA does not reflect changes in our effective tax rate; |
| although depreciation is a non-cash charge, the assets being depreciated will often have to be replaced in the future, and adjusted EBITDA does not reflect any cash requirements for such replacements; and |
| other companies in our industry may calculate adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. |
The following table reconciles net loss to adjusted EBITDA for the periods presented:
Year Ended December 31, | Six months ended June 30, | |||||||||||||||||||
2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||
(unaudited) | ||||||||||||||||||||
(in thousands) |
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Net loss |
$ | (10,394 | ) | $ | (21,758 | ) | $ | (15,569 | ) | $ | (5,650 | ) | $ | (7,935 | ) | |||||
Net interest expense |
108 | 61 | 383 | 25 | 1,107 | |||||||||||||||
Income tax expense |
131 | 1,330 | 1,152 | 211 | 1,618 | |||||||||||||||
Depreciation and amortization |
807 | 2,933 | 4,048 | 1,685 | 1,794 | |||||||||||||||
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EBITDA |
(9,348 | ) | (17,434 | ) | (9,986 | ) | (3,729 | ) | (3,416 | ) | ||||||||||
Stock-based compensation expense |
71 | 138 | 291 | 105 | 300 | |||||||||||||||
Foreign exchange loss (gain) |
(21 | ) | 1,182 | (529 | ) | 871 | 2,644 | |||||||||||||
Other acquisition-related expenses including: |
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Acquisition-related restructuring costs |
| 514 | | | | |||||||||||||||
Transaction costs |
| 662 | | | | |||||||||||||||
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Adjusted EBITDA |
$ | (9,298 | ) | $ | (14,938 | ) | $ | (10,224 | ) | $ | (2,753 | ) | $ | (472 | ) | |||||
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Consolidated Balance Sheet Data:
As of December 31, | As of June 30, |
As
Further Adjusted(2) | ||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | As Adjusted(1) | ||||||||||||||||||
(unaudited) | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||
Cash and cash equivalents |
$ | 5,425 | $ | 19,466 | $ | 7,402 | $ | 20,453 | $ | 20,453 | ||||||||||||
Working capital |
5,812 | 15,728 | 13,228 | 31,420 | 31,420 | |||||||||||||||||
Total assets |
16,797 | 60,387 | 60,481 | 79,999 | 79,999 | |||||||||||||||||
Long-term debt, net of current portion |
| | 14,700 | 38,153 | 38,153 | |||||||||||||||||
Total liabilities |
9,682 | 34,131 | 48,718 | 74,328 | 74,328 | |||||||||||||||||
Total redeemable convertible preferred stock |
64,558 | 104,558 | 104,558 | 104,558 | | |||||||||||||||||
Total shareholders equity (deficit) |
(57,443 | ) | (78,302 | ) | (92,795 | ) | (98,887 | ) | 5,671 |
(1) | The as adjusted column reflects the automatic conversion of all outstanding shares of our redeemable convertible preferred stock into 115,167,418 shares of our common stock immediately prior to the completion of this offering. |
(2) | The as further adjusted column reflects the conversion described in footnote (1) above, as well as the estimated net proceeds of $ million from our sale of shares of common stock that we are offering, based upon the initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting underwriting discounts and estimated offering costs payable by us. |
Each $1.00 increase or decrease in the assumed initial public offering price would increase or decrease, as applicable, our cash and cash equivalents, working capital, total assets and total shareholders equity by approximately $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and assuming no exercise of the underwriters option to purchase additional shares, and after deducting the estimated underwriting discounts and estimated offering costs payable by us.
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Any investment in our common stock involves risk. You should carefully consider the risks and uncertainties described below and all information contained in this prospectus, including our consolidated financial statements and the related notes thereto, before you decide whether to purchase our common stock. If any of the following risks or uncertainties actually occurs, our business, financial condition, results of operations, cash flows and prospects would likely suffer, possibly materially. In addition, the trading price of our common stock could decline due to any of these risks or uncertainties, and you may lose part or all of your investment.
Risks Related to Our Business and Our Industry
We have incurred net losses in the past and may not be able to achieve or sustain profitability in the future.
We have incurred significant losses in each year since inception, including net losses of $(10.4) million, $(21.8) million and $(15.6) million in 2010, 2011 and 2012, respectively, and net losses of $(7.9) million in the six months ended June 30, 2013. As a result of ongoing net losses, we had accumulated deficits of $(95.6) million at December 31, 2012 and $(103.5) million at June 30, 2013. We expect to continue to incur significant product development, sales and marketing, administrative and other expenses. We have only a limited operating history on which you can base your evaluation of our business and our ability to increase our revenue. We commenced operations in 2005 and began product sales in 2007. We will need to generate significant additional revenue to achieve and maintain profitability, and even if we achieve profitability, we cannot be sure that we will remain profitable for any substantial period of time. To the extent we are unable to become or remain profitable, the market price of our common stock will probably decline.
Our future revenue growth is substantially dependent upon the speed of adoption of 4G LTE technology by mobile service providers.
While we derive, and expect to continue to derive, a substantial portion of our revenue from our messaging solutions, we expect our future revenue growth to be driven largely by sales of our internet protocol (IP)-based voice, video, rich communications and enhanced messaging services, which collectively represent our 4G LTE solutions. IP-based communication services and 4G LTE technology represent new, data-packet-based mobile communications technologies, and their deployment is still in its early stages. Our 4G LTE solutions are dependent upon the use of 4G LTE technology because these solutions are high-bandwidth data applications that require the high-bandwidth access networking provided by 4G LTE technology.
Mobile service providers may delay implementation of 4G LTE technology for one or a number of reasons, including that they may not perceive an immediate need for improved quality, they may not know about the potential benefits that 4G LTE technology may provide or their subscribers may not be willing or able to pay for any increased costs that result from the implementation of 4G LTE technology. As a result, if 4G LTE technology is adopted more slowly than we expect, our future revenue growth will be materially and adversely affected.
Our revenue growth will be limited if mobile service providers choose the 4G LTE solutions of our competitors over ours, or if 4G LTE products and solutions do not achieve and sustain high levels of demand and market acceptance.
Our future revenue growth depends on mobile service providers choosing our 4G LTE solutions over those of our competitors. Additionally, the market for 4G LTE products and solutions is relatively new and still evolving, and it is uncertain whether these products and solutions will achieve and sustain high levels of demand and market acceptance. Even if mobile service providers perceive the benefits of 4G LTE products and solutions, they may not select our 4G LTE solutions for implementation and may instead choose our competitors solutions or wait for the introduction of other solutions and technologies that might serve as a replacement or substitute for, or represent an improvement over, our 4G LTE solutions, which would significantly and adversely affect our operating results. We began selling our 4G LTE solutions in the fourth quarter of 2007 and have generated $114.2 million of revenue from such solutions through June 30, 2013.
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Our future success depends significantly on our ability to sell our solutions to mobile service providers operating wireless networks that serve large numbers of subscribers.
Our future success depends significantly on our ability to sell our solutions to mobile service providers operating wireless networks that serve large numbers of subscribers and transport high volumes of traffic. The mobile communications services industry historically has been concentrated among a relatively small number of providers. For example, as of June 2013, the largest twenty mobile service providers in the world, as measured by number of mobile device connections, accounted for approximately 57% of total mobile device connections globally. Nine of these largest twenty mobile service providers are already our customers. Because the twenty largest mobile service providers continue to constitute a significant portion of the market for mobile communications equipment, our success depends significantly on our ability to sell solutions to them. Additionally, if we fail to expand our customer base to include additional customers that deploy our solutions in large-scale networks serving significant numbers of subscribers, our revenue growth will be limited.
Our future software products and maintenance revenue and our revenue growth depend significantly on the success of our efforts to sell additional solutions and maintenance services to our existing mobile service provider customers.
Our business strategy and our plan to achieve profitability depend significantly on our sales of additional solutions to our existing mobile service provider customers. In addition, our solutions are generally accompanied by right-to-use licenses under which we receive periodic payments based upon the numbers of subscribers to such services from time to time. Therefore, our growth will also depend on our customers expanded use of our solutions over greater numbers of subscribers over time. Mobile service providers may choose not to purchase additional solutions from us or may choose not to expand their use of, or not to purchase continued maintenance and support for, our solutions, or might delay additional purchases that we may expect. These events could occur for a number of reasons, including because our mobile service provider customers are not experiencing sufficient subscriber demand for the services that our solutions enable, or because mobile service providers choose solutions other than ours. If we are not successful in selling new and additional solutions to our existing mobile service provider customers or if those customers do not elect to expand their use of our solutions over additional subscribers in their networks, our revenue could grow at a slow rate or decrease and we may not achieve or maintain profitability.
Our success depends in large part on mobile service providers continued deployment of, and investment in, modern telephony equipment and rich communications solutions.
A significant portion of our product and solution suite is dedicated to enabling mobile service providers to deliver voice and multimedia services over newer and faster IP-based broadband networks. As a result, our success depends significantly on these mobile service providers continued deployment of, and investment in, their IP-based networks. Mobile service providers deployment of IP-based networks and their migration of communications services from existing circuit-based 2G and 3G networks to IP-based networks is still in its early stages. These mobile service providers continued deployment of, and investment in, IP-based networks and rich communications solutions depends on a number of factors outside of our control. These factors include capital constraints, the presence of available capacity on legacy networks, perceived subscriber demand for rich communications solutions, competitive conditions within the telecommunications industry and regulatory issues. If mobile service providers do not continue deploying and investing in their IP-based networks, for these or other reasons, our operating results will be materially and adversely affected.
Most of our competitors have longer operating histories, greater brand recognition, larger product and customer bases and significantly greater resources (financial, technical, sales, marketing and other) than we do, and we may lack sufficient financial or other resources to maintain or improve our competitive position.
Our principal competitors include major network infrastructure providers such as Alcatel-Lucent, Ericsson, Huawei, Nokia Siemens Networks, Samsung Electronics and ZTE Corporation as well as specialty solutions
15
providers such as Acision, Acme Packet (recently acquired by Oracle), Broadsoft, Comverse, Metaswitch and Sonus Networks. Our brand is not currently as well-known as those of our larger and more established competitors. In addition, many of our competitors have significantly broader product bases and intellectual property portfolios, as well as significantly greater financial, technical, sales, marketing and other resources than we do. They therefore may be better positioned to acquire and offer complementary solutions and technologies. As a result, potential customers may prefer to purchase products or solutions from their existing suppliers or one of our larger competitors. In addition, larger competitors may have more flexibility to agree to financial terms that we are unable to agree to by virtue of our more limited financial resources. We expect increased competition from other established and emerging companies if our market continues to develop and expand. As we enter new markets, we expect to face competition from incumbent and new market participants.
In addition, some of our competitors have made acquisitions or entered into partnerships or other strategic relationships with one another to offer a more comprehensive solution than they had offered individually. This consolidation may continue as companies attempt to strengthen or maintain their market positions in an evolving industry and as companies enter into partnerships or are acquired. The competitors resulting from these possible consolidations may develop more compelling product or solution offerings and be able to offer greater pricing flexibility, making it more difficult for us to compete effectively, including on the basis of price, sales and marketing programs, technology, support capacity or product functionality. Industry consolidation may adversely impact perceptions of the viability of smaller and even medium-sized technology companies and, consequently, willingness of mobile service providers to purchase from such companies. These pricing pressures and competition from more comprehensive solutions could impair our ability to sell our solutions, which could negatively affect our revenues and results of operations.
We depend on a limited number of mobile service provider customers for a substantial portion of our revenue in any fiscal period, and the loss of, or a significant shortfall in orders from, key customers could significantly reduce our revenue.
We derive a substantial portion of our total revenue in any fiscal period from a limited number of mobile service provider customers as a result of the relatively concentrated nature of our target market and the relatively early stage of our development. During any given fiscal period, a small number of customers may account for a significant percentage of our revenue. For example, two of our end customers (T-Mobile USA and MetroPCS, now part of T-Mobile) together accounted for approximately 97% of our total revenue in 2010, three of our end customers (T-Mobile USA, AT&T and Vodafone) together accounted for approximately 49% of our total revenue in 2011, four of our end customers (AT&T, MetroPCS, now part of T-Mobile, T-Mobile USA and Vodafone) together accounted for approximately 55% of our total revenue in 2012 and four of our end customers (T-Mobile USA, Vodafone, AT&T, and Deutsche Telekom) together accounted for approximately 62% of our total revenue for the six months ended June 30, 2013. Generally, we do not have and we do not enter into multi-year purchase contracts with our customers, nor do we have contractual arrangements to ensure future sales of our solutions to our existing customers. Our inability to generate anticipated revenue from our key existing or targeted customers, or a significant shortfall in sales to them, would significantly reduce our revenue and adversely affect our business. Our operating results in the foreseeable future will continue to depend on our ability to effect sales to existing and other large mobile service provider customers. For more information about our existing customer base, please see Our Business Customers.
Our large mobile service provider customers have substantial negotiating leverage, which may require that we agree to terms and conditions that could result in increased cost of sales, decreased revenues or delayed recognition of revenues and could adversely affect our operating results.
Many of our customers are large mobile service providers that have substantial purchasing power and leverage in negotiating contractual arrangements with us, including pricing terms. These large mobile service provider customers may require us to develop additional features and impose penalties related to performance issues, such as delivery, outages and response time. As we seek to sell more solutions to large mobile service providers, we may be required to agree to additional performance-based terms and conditions, which may affect the timing of revenue recognition and may adversely affect our operating results.
16
We rely significantly on channel partners to sell our solutions in domestic and international markets, and if we are unable to maintain successful relationships with them, our business, operating results, liquidity and financial condition could be harmed.
We sell our solutions to mobile service providers both directly and, particularly in international markets, indirectly through channel partners such as telecommunications equipment vendors, value-added resellers and other resellers. We believe that establishing and maintaining successful relationships with these channel partners contributes, and will continue to contribute, to our success, but there can be no guarantee that any such relationships will continue. For example, our contract with Cisco Systems, currently our most significant channel partner in terms of revenue, may be terminated by Cisco with advance notice prior to the end of each automatically renewable one-year term, and we cannot be certain that Cisco will choose not to terminate this contract. Notwithstanding any such decision by Cisco, under our contract with Cisco we would have continuing fulfillment, maintenance and support obligations with respect to any ongoing end-user projects, and we must offer maintenance and support services to Cisco for all of our products already deployed by Cisco at the time of expiration or termination for at least five years from the last commercial sale of our products by Cisco prior to such expiration or termination. For more information about our contract with Cisco Systems, please see Certain Relationships and Related Person Transactions Reseller OEM Agreement with Cisco Systems elsewhere in this prospectus.
Recruiting and retaining qualified channel partners and training them in our technology and solutions offerings require significant time and resources. To develop and expand our channels, we must continue to scale and improve our processes and procedures that support our channels, including investment in systems and training.
In addition, existing and future channel partners will only partner with us if we are able to provide them with competitive solutions on terms that are acceptable to them. If we fail to maintain the quality of our solutions or to update and enhance them, existing and future channel partners may elect to partner with one or more of our competitors. If we are unable to reach agreements that are beneficial to both parties, then our channel partner relationships will not succeed.
The reduction in or loss of sales by these channel partners could materially reduce our revenue, either temporarily or permanently. For example, our reseller agreement with Cisco Systems, our most significant sales channel by revenue, accounted for approximately 70%, 47% and 35% of our total revenue for the years ended December 31, 2010, 2011 and 2012, respectively, and 37% of our revenue for the six months ended June 30, 2013. We cannot assure you that our channel partners will continue to cooperate with us when our reseller agreements expire or are up for renewal. If we fail to maintain successful relationships with our channel partners, fail to develop new relationships with other channel partners in new markets, fail to manage, train or incentivize existing channel partners effectively, fail to provide channel partners with competitive solutions on terms acceptable to them, or if these partners are not successful in their sales efforts, our revenue may decrease and our operating results could suffer.
Our channel partners may offer their customers the products of several different companies, including those of our competitors. Our channel partners generally do not have an exclusive relationship with us; thus, we cannot be certain that they will prioritize or provide adequate resources for selling our solutions. Divergence in strategy or contract defaults by any of these channel partners may harm our ability to develop, market, sell or support our solutions. Furthermore, some of our competitors may have stronger relationships with our channel partners than we do, and we have limited control, if any, as to whether those partners resell our solutions, rather than our competitors products or solutions, or whether they devote resources to market and support our products or solutions rather than those of our competitors. Our failure to establish and maintain successful relationships with channel partners could materially and adversely affect our business, operating results, liquidity and financial condition.
The long and variable sales and deployment cycles for our solutions may cause our operating results to vary materially from quarter to quarter, which may negatively affect our operating results, and potentially our stock price, for any given quarter.
Our solutions have lengthy sales cycles, which typically extend from six to eighteen months. A mobile service providers decision to purchase our solutions often involves a significant commitment of its resources
17
after an evaluation, qualification and competitive bid process with an unpredictable length. The length of our sales cycles also varies depending on the type of mobile service provider to which we are selling, the solution being sold and the type of network in which our product will be utilized. We may incur substantial sales, marketing and technical expenses and expend significant management effort during this time, regardless of whether we make a sale.
Even after making the decision to purchase our products, our mobile service provider customers may deploy our products slowly. Timing of deployment can vary widely among mobile service providers. The length of a mobile service providers deployment period may directly affect the timing of any subsequent purchase of additional solutions by that mobile service provider. In addition, in some situations we recognize revenue only upon the final acceptance of our solution by a customer, so the timing of purchase and deployment by our customers can significantly affect our operating results for a fiscal period.
As a result of the lengthy and uncertain sales and deployment cycles for our solutions, it is difficult for us to predict the quarter in which our mobile service provider customers may purchase additional solutions or features from us or in which we may recognize revenues. Therefore, our operating results may vary significantly from quarter to quarter, which may negatively affect our operating results, and potentially our stock price, for any given quarter.
As a further result of these lengthy sales cycles, we may accept terms or conditions that negatively affect pricing or payment in order to consummate a sale. Doing so can negatively affect our gross margin and results of operations. Alternatively, if mobile service providers ultimately insist upon terms and conditions that we deem too onerous or not to be commercially prudent, we may decline, and thus incur substantial expenses and devote time and resources to potential relationships that never result in completed sales or revenue. If this were to happen often, it would have a material adverse impact on our results of operations.
Our quarterly revenue and operating results are unpredictable and may fluctuate significantly from quarter to quarter due to factors outside our control, which could adversely affect our business, consolidated financial statements and the trading price of our common stock.
Our revenues and operating results may vary significantly from quarter to quarter due to a number of factors, many of which are outside of our control and any of which may cause our stock price to fluctuate. Generally, purchases by mobile service providers of telecommunications solutions from software-based network solutions providers have been unpredictable and clustered, rather than steady, as the various mobile service providers build out their networks according to their own timing, resources and surrounding circumstances. The primary factors that may affect our revenues and operating results include, but are not limited to, the following:
| fluctuations in demand for our 4G LTE solutions, our messaging solutions or our services, and the timing and size of customer orders; |
| length and variability of the sales cycle for our solutions; |
| competitive conditions in our markets, including the effects of new entrants, consolidation, technological innovation and substantial price discounting; |
| new solution announcements, introductions and enhancements by us or our competitors, which could result in deferrals of customer orders; |
| market acceptance of new solutions and solution enhancements that we offer and our services; |
| the mix of solution configurations sold; |
| the quality and degree of execution of our business strategy and operating plan, and the effectiveness of our sales and marketing programs; |
| our ability to develop, introduce, ship and successfully deliver new solutions and solution enhancements that meet customer requirements in a timely manner; |
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| our ability to provide customer support solutions in a timely manner; |
| our ability to meet mobile service providers solution installation and acceptance deadlines; |
| our ability to attain and maintain production volumes and quality levels for our solutions; |
| cancellation or deferral of existing customer orders or the renegotiation of existing contractual commitments; |
| changes in our pricing policies, the pricing policies of our competitors and the prices of the components of our solutions; |
| timing of revenue recognition and the application of complex revenue recognition accounting rules to our customer arrangements, including rules requiring that we estimate percentage of completion of a contract, the amount of time required to complete a contract and whether or not we expect to incur a loss on a contract; |
| consolidation within the telecommunications industry, including acquisitions of or by our mobile service provider customers; |
| general economic conditions in our markets, both domestic and international, as well as the level and pace of discretionary IT spending by businesses and of service choices by individual consumers; |
| fluctuations in foreign exchange rates; |
| variability and unpredictability in the rate of growth in the markets in which we compete; |
| costs related to acquisitions; and |
| corporate restructurings. |
As with other software-based network solutions providers, we typically recognize a portion of our revenue in a given quarter from sales booked and shipped in the last weeks of that quarter. As a result, delays in customer orders may result in delays in shipments and recognition of revenue beyond the end of a given quarter. Additionally, as discussed elsewhere in this section, it can be difficult for us to predict the timing of receipt of major customer orders, and we are unable to control timing decisions made by our customers. As a result, our quarterly operating results are difficult to predict even in the near term and a delay in an anticipated sale past the end of a particular quarter may negatively impact our results of operations for that quarter, or in some cases, that year. Therefore, we believe that quarter-to-quarter comparisons of our operating results are a poor indication of our future performance. If our revenue or operating results fall below the expectations of investors or securities analysts or below any guidance we may provide to the market, the price of our common stock could decline substantially. Such a stock price decline could also occur when we have met our publicly stated revenue or operating results guidance.
A significant portion of our operating expenses is fixed in the short term. If revenues for a particular quarter are below expectations, we would likely be unable to reduce costs and expenses proportionally for that quarter. Any such revenue shortfall would, therefore, have a significant effect on our operating results for that quarter.
Consolidation in the communications industry can reduce the number of mobile service provider customers and adversely affect our business.
Historically, the communications industry has experienced, and it may continue to experience, consolidation and an increased formation of alliances among mobile service providers and between mobile service providers and other entities. For instance, in May 2013, two mobile service provider customers that have been significant customers of ours at certain times in the past, MetroPCS and T-Mobile USA, completed a merger transaction. MetroPCS and T-Mobile USA collectively accounted for approximately 24% of our revenue for the year ended December 31, 2012. As a result of the merger of T-Mobile USA and MetroPCS, or should one of our other significant mobile service provider customers consolidate or enter into an alliance with another customer, it is
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possible that the combined entity could reduce capital expenditures on technology that requires our solutions. It is also possible that such combined entity could decide to either use a different supplier or to renegotiate its supply and service arrangements with us. These consolidations or alliances may cause us to lose customers or require us to reduce prices as a result of enhanced customer leverage, which could have a material adverse effect on our business. We may not be able to offset the effects of any price reductions. We may not be able to expand our customer base to make up any revenue declines if we lose customers or business.
The quality of our support and services offerings is important to our mobile service provider customers, and if we fail to offer high quality support and services, mobile service providers may not buy our solutions and our revenue may decline.
Once our solutions are deployed within our mobile service provider customers networks, the customers generally depend on our support organization to resolve issues relating to those solutions. A high level of support is critical for the successful marketing and sale of our solutions. If we are unable to provide the necessary level of support and service to our customers, we could experience:
| a loss of customers and market share; |
| a failure to attract new customers, including in new geographic regions; |
| increased service, support and warranty costs and a diversion of development resources; and |
| network performance penalties, including liquidated damages for periods of time that our customers networks are inoperable. |
Any of the above results would likely have a material adverse impact on our business, revenue, results of operations, financial condition, liquidity and reputation.
Our business is dependent on our ability to maintain and scale our resources, and any significant disruption in our service and support could damage our reputation, result in a potential loss of customers and adversely affect our financial results.
Our reputation and ability to attract, retain and serve our mobile service provider customers is dependent upon the reliable performance of our service and support and our underlying technical infrastructure. Our systems may not be adequately designed with the necessary reliability and redundancy to avoid performance delays or outages that could be harmful to our business. If our services and/or support are unavailable when our customers attempt to access them, mobile service providers may not continue to purchase our services and support or our solutions as often in the future, or at all. In addition, customers of ours may seek a refund for solutions purchased under warranty.
As our customer base continues to grow, we will need an increasing amount of technical infrastructure, including human resources, to continue to satisfy the needs of our mobile service provider customers. It is possible that we may fail to effectively scale and grow our technical infrastructure to accommodate these increased demands. In addition, our business is subject to interruptions, delays or failures resulting from earthquakes, other natural disasters, terrorism or other catastrophic events.
We might require additional capital to support business growth, and this capital might not be available on terms favorable to us or at all.
We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new solutions or enhance our existing solutions and platform, upgrade our operating infrastructure and acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders
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could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock, including shares of common stock sold in this offering. Any debt financing obtained by us in the future would likely be senior to our common stock, would likely cause us to incur interest expenses and could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may increase our expenses, make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may also be required to secure any such debt obligations with some or all of our assets. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. It is also possible that we may allocate significant amounts of capital toward solutions or technologies for which market demand is lower than anticipated and, as a result, abandon such efforts. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, or if we expend capital on projects that are not successful, our ability to continue to support our business growth and to respond to business challenges could be significantly limited, or we may be required to reduce the scale of our operations. Any of these negative developments could have a material adverse effect on our business, operating results, liquidity, financial condition and common stock price.
If we lose members of our senior management or development team or are unable to recruit and retain key employees on a cost-effective basis, we may not be able to successfully grow our business.
Our success is substantially dependent upon the performance of our senior management and other key technical and development personnel. The loss of the services of one or more of these members of our team may significantly delay or prevent our development of successful solutions and the achievement of our business objectives. Our future success will also depend on our ability to attract, retain and motivate skilled personnel in the United States and internationally. Experienced management and technical, sales, marketing and support personnel in the telecom industry are in high demand, and competition for their talents is intense. We may not be successful in attracting and retaining such personnel on a timely basis, on competitive terms, or at all. The loss of, or the inability to recruit and retain, such employees could have a material adverse effect on our business.
We have experienced rapid growth in recent periods. If we fail to manage our growth effectively and develop and implement appropriate control systems, our business and financial performance may suffer.
We have substantially expanded our overall business, number of customers, headcount and operations in recent periods. We increased our number of full-time equivalent employees from approximately 150 as of January 1, 2010 to approximately 670 as of June 30, 2013. In particular, many members of our senior management and technical teams joined us recently. During this same period, we made investments in our information systems and significantly expanded our operations outside the United States through our acquisition of Airwide Solutions in May 2011. Our expansion has placed, and our expected future growth will continue to place, a significant strain on our managerial, administrative, operational, financial and other resources. Our business model reflects our operation with limited infrastructure, support and administrative headcount, so risks related to managing our growth are particularly salient and we may not have sufficient internal resources to adapt or respond to unexpected challenges. Although we have put certain policies and procedures in place, certain of these policies have recently been adopted or recently changed and we have limited staff responsible for their implementation and enforcement. If we are unable to manage our growth successfully, or if our control systems do not operate effectively, our ability to provide high quality solutions and services could be harmed, which would damage our reputation and brand, and our business and operating results would suffer.
Prolonged negative economic conditions in domestic and global markets may adversely affect us, our suppliers, counterparties and consumers, which could harm our financial position.
As has been widely reported, global credit and financial markets have been experiencing extreme disruptions over the past several years, including severely diminished liquidity and availability of credit, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. Credit and financial markets and confidence in economic conditions might deteriorate further.
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Our general business strategy may be adversely affected by the recent economic downturn, the volatile business environment and continued unpredictable and unstable market conditions. In addition, there is a risk that one or more of our current mobile service providers, suppliers or other partners may not continue to operate, which could directly affect our ability to attain our operating goals on schedule and on budget. Any lender that is obligated to provide funding to us under any now existing or future credit agreement may not be able to provide funding in a timely manner, or at all, when we require it. The cost of, or lack of, available credit or equity financing could impact our ability to develop sufficient liquidity to maintain or grow our company, which in turn may adversely affect our business, results of operations, liquidity or financial condition. We also manage cash and cash equivalents and short-term investments through various institutions. There may be a risk of loss on investments based on the volatility of the underlying instruments that will prevent us from recovering the full principal of our investments. These negative changes in domestic and global economic conditions or additional disruptions of either or both of the financial and credit markets may also affect third-party payors and may have a material adverse effect on our stock price, business, results of operations, liquidity and financial condition.
If we undertake business combinations and acquisitions, they may be difficult to close or integrate, or they could disrupt our business, dilute stockholder value or divert managements attention.
We have completed one business acquisition to date, when we acquired Airwide Solutions in May 2011 for a purchase price of $16.9 million. The primary purpose of the acquisition was to gain access to Airwide Solutionss international customer base and infrastructure. In the future, we may continue to support our growth through acquisitions of businesses, services or technologies that we perceive to be complementary or otherwise beneficial to us. Future acquisitions involve risks, such as:
| misjudgment with respect to the value, return on investment or strategic fit of any acquired operations or assets; |
| challenges associated with integrating acquired technologies, operations, financial reporting systems and cultures of acquired companies; |
| exposure to unforeseen liabilities; |
| diversion of management and other resources from day-to-day operations; |
| possible loss of key employees, clients, suppliers and partners; |
| higher than expected transaction costs; |
| potential loss of commercial relationships and customers based on their concerns regarding the acquired business or technologies; and |
| additional dilution to our existing stockholders if we use our common stock as consideration for such acquisitions. |
As a result of these risks, we may not be able to achieve the expected benefits of any acquisition. If we are unsuccessful in completing or integrating acquisitions, we may be required to reevaluate our growth strategy and we may incur substantial expenses and devote significant management time and resources in seeking to complete and integrate the acquisitions.
Future business combinations could involve the acquisition of significant intangible assets. We may need to record write-downs from future impairments of identified intangible assets and goodwill. These accounting charges would reduce any future reported earnings or increase a reported loss. In addition, we could use substantial portions of our available cash, including some or substantially all of the proceeds of this offering, to acquire companies or assets. Subject to the provisions of our existing indebtedness, it is possible that we could incur additional debt or issue additional equity securities as consideration for these acquisitions, which could cause our stockholders to suffer significant dilution.
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During the audit of our consolidated financial statements for the year ended December 31, 2012 and the preparation of our financial statements for the six months ended June 30, 2013, we determined we have material weaknesses and significant deficiencies in our internal controls over financial reporting, and we may experience additional material weaknesses or significant deficiencies in the future or otherwise fail to maintain an effective system of internal controls in the future, and may not be able to accurately report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
As a result of becoming a public company, we will be required, under Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal controls over financial reporting beginning with our Annual Report on Form 10-K for the year ended December 31, 2014. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal controls over financial reporting. A material weakness is a deficiency or combination of deficiencies in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of a companys annual and interim financial statements will not be detected or prevented on a timely basis.
Prior to the completion of this offering, we have been a private entity with limited accounting personnel and other supervisory resources to execute accounting processes and address internal controls over financial reporting. In particular, in connection with the audit of our consolidated financial statements for the year ended December 31, 2012, our management and its independent registered public auditors identified a material weakness relating to the failure to record certain entries and adjustments during the year-end closing process. The material weakness resulted in several audit adjustments to our consolidated financial statements for the year ended December 31, 2012. Additionally, during the preparation of our financial statements for the six months ended June 30, 2013, management, along with our independent registered public accounting firm, identified a material weakness in our processes and procedures over system implementations. Specifically, our implementation of a revenue application during the first half of 2013 was not properly documented or tested, resulting in numerous adjustments and additional time needed to close.
Any material weakness, including those described above, could result in a misstatement of our accounts or disclosures that would result in a material misstatement of our annual or interim combined financial statements that would not be prevented or detected on a timely basis. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weaknesses described above or avoid potential future material weaknesses.
We are further enhancing the computer systems processes and related documentation necessary to perform the evaluation needed to comply with Section 404 of the Sarbanes-Oxley Act. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal controls over financial reporting, we will be unable to assert that our internal controls over financial reporting are effective. If we are unable to conclude that our internal controls over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which would likely cause the price of our common stock to decline.
After we cease to be an emerging growth company under the federal securities laws, our independent registered auditors will be required to express an opinion on the effectiveness of our internal controls over financial reporting. Until that time, it is possible that a material weakness in internal controls over financial reporting could remain undetected as a result of our exemption from these auditor attestation requirements under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. See Risks Related to Our Common Stock and this Offering We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors elsewhere in this section. If we are unable to confirm that our internal controls over financial reporting are effective, or if our independent registered auditors are unable to express an opinion on the effectiveness of our internal controls over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline.
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We expect to incur significant additional costs as a result of being a public company, which may adversely affect our operating results and financial condition.
We expect to incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act, as well as rules implemented by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC and the national stock exchanges. These rules and regulations are expected to increase our accounting, legal and financial compliance costs and make some activities more time-consuming and costly. In addition, we will incur additional costs associated with our public company reporting requirements and we expect those costs to increase in the future. For example, we will be required to devote significant resources to complete the assessment and documentation of our internal control system and financial process under Section 404 of the Sarbanes-Oxley Act, including an assessment of the design, implementation and operating effectiveness of our information systems associated with our internal controls over financial reporting. We will incur significant costs to remediate any material weaknesses we identify through these efforts. We also expect these rules and regulations to make it more expensive for us to maintain directors and officers liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our Board of Directors, our board committees or as executive officers. We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
New laws and regulations, as well as changes to existing laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act and rules adopted by the SEC and the national stock exchanges, would likely result in increased costs to us as we respond to their requirements, which may adversely affect our operating results and financial condition.
Changes in effective income tax rates or adverse outcomes resulting from examinations of our tax returns could adversely affect our operating results and financial condition.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:
| any earnings being lower than anticipated in countries where we have lower statutory tax rates and higher than anticipated in countries where we have higher statutory tax rates; |
| changes in the valuation of our deferred tax assets and liabilities; |
| expiration of, or lapses in, the research and development tax credit laws; |
| expiration or non-utilization of net operating losses; |
| foreign withholding taxes for which no benefit is realizable; |
| tax effects of stock-based compensation; |
| costs related to intercompany restructurings; |
| changes in transfer pricing studies; or |
| changes in tax laws, regulations, accounting principles or interpretations thereof. |
In addition, in the ordinary course of business we are subject to routine examinations of our income tax returns by federal, state and non-U.S. tax authorities regarding the amount of taxes due. An unfavorable outcome from one of these examinations may result in additional tax liabilities or other adjustments to our historical results.
Furthermore, we may determine that it is advisable from time to time to repatriate earnings from non-U.S. subsidiaries under circumstances that could give rise to the imposition of potentially significant withholding taxes by the jurisdictions in which such amounts were earned and substantial tax liabilities in the United States.
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In addition, we may not receive the benefit of any offsetting tax credits, which also could adversely impact our effective tax rate. As of June 30, 2013, we held $2.5 million of our $20.5 million of cash and cash equivalents in accounts of our subsidiaries outside of the United States and we may incur significant tax liabilities if we repatriate those amounts.
Although we believe our tax estimates are reasonable, our ultimate tax liabilities may materially differ from the tax amounts recorded in our consolidated financial statements and may materially affect our income tax provision, net income or cash flows in the period or periods for which such determination is made.
We may be unable to utilize our net operating loss and/or our research tax credit carryforwards, which could adversely affect our operating results.
As of June 30, 2013, we had total net operating loss carryforwards of approximately $82.5 million, $73.0 million and $9.5 million on a global, U.S. and non-U.S. basis, respectively, after consideration of limitations of approximately $53.5 million, $12.5 million and $41.0 million on a global, U.S. and non-U.S. basis, respectively, placed on losses of the Airwide group of companies acquired by us during 2011. The tax effect of these remaining net operating loss carryforwards is approximately $27.8 million, $25.6 million and $2.2 million on a global, U.S. and non-U.S. basis, respectively. The U.S. net operating loss carryforwards will expire beginning in 2024. Of the tax-affected foreign net operating loss carryforwards, $1.2 million are carried forward indefinitely and the remainder begin to expire in 2013. As of June 30, 2013, we also had research and development tax credit carryforwards of approximately $0.8 million that will begin to expire in 2016. Due to our history of operating losses, we have established full valuation allowances against all of our deferred tax assets which include the tax effect of our net operating loss carryforwards and research and development tax credits.
Realization of these net operating loss and research tax credit carryforwards depends on many factors, including our future income. There is a risk that, due to regulatory changes or unforeseen reasons, our existing carryforwards could expire or otherwise be unavailable to offset future income tax liabilities, which would adversely affect our operating results. In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an ownership change, the corporations ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income may be limited. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards or other pre-change tax attributes to offset United States federal and state taxable income may be subject to limitations.
Public scrutiny of data privacy issues, worldwide or in particular countries or markets, may result in increased regulation and different industry standards, which could require us to incur significant expenses in order to comply or support compliance with such regulations or deter or prevent us from providing our solutions or services to our mobile service provider customers, thereby harming our business.
As part of our business, we supply and support telecommunications equipment as part of mobile service provider networks that collect and store personal information. We expect that collection and storage of personal information to increase, primarily in connection with increased use of mobile data access. The regulatory framework for privacy issues worldwide is currently uncertain and is likely to remain so for the foreseeable future. We or our mobile service provider customers may also face additional privacy issues as we or they expand in international markets, as many nations have privacy protections more stringent than those in the United States. For example, the European Union is in the process of proposing reforms to its existing data protection legal framework, which may result in a greater compliance burden for mobile service providers with subscribers in Europe. Various government and consumer agencies have also called for new regulation and changes in industry practices.
We have incurred, and will continue to incur, expenses to comply with privacy and security standards and protocols imposed by law, regulation, industry standards or contractual obligations. Increased domestic or international regulation of data utilization and distribution practices, including self-regulation, could require us to
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modify our operations and incur significant expense, which could have an adverse effect on our business, financial condition and results of operations. Our business, including our ability to operate and expand internationally, could be adversely affected if legislation or regulations are adopted, interpreted or implemented in a manner that is inconsistent with our current or planned business practices and that require changes to these practices, the design of our solutions or our customers or our privacy policies.
Compliance with worker health and safety laws and environmental laws could be costly, and noncompliance with these laws could cause us to be subject to material fines and result in substantial additional expenses.
Our hardware suppliers manufacture the standard servers and other hardware necessary to operate our solutions using substances regulated under various federal, state, local and international laws and regulations governing worker health and safety and the environment. If we and our contract manufacturers do not comply with these laws and regulations, we may suffer a loss of revenues, be unable to sell our solutions in certain markets and/or countries, be subject to penalties and enforced fees and/or suffer a competitive disadvantage. Costs to comply with current laws and regulations and/or similar future laws and regulations, if applicable, could include costs associated with modifying our solutions, recycling and other waste processing costs, legal and regulatory costs and insurance costs. We have recorded and may also be required to record additional expenses for costs associated with compliance with these regulations. We cannot assure you that the costs to comply with these new laws, or with current and future worker health and safety laws and environmental laws will not have a material adverse effect on our business, operating results and financial condition.
Risks Related to Our Intellectual Property and Our Technology
Infringement claims are common in our industry and third parties, including competitors, have and could in the future assert infringement claims against us or our customers that we are obligated to indemnify.
The communications industry is highly competitive and its technologies are complex. Companies file patent applications and obtain patents covering these technologies frequently and maintain programs to protect their intellectual property portfolios. In addition, patent holding companies regularly bring claims against communications companies. These patent holding companies and some communications companies actively search for, and routinely bring claims against, alleged infringers. For example, we were previously a defendant, along with a number of other communications companies, in a suit brought by a non-operating patent holding company alleging that each of the defendants had infringed upon one of its patents, which suit has been settled with respect to Mavenir.
Our solutions are technically complex and compete with the products and solutions of significantly larger companies. The likelihood of our being subject to infringement claims may increase as a result of our real or perceived success in selling solutions to mobile service providers, as the number of competitors in our industry grows and as we add functionality to our solutions. We may in the future receive communications from third parties alleging that we may be infringing their intellectual property rights. The visibility we receive from being a public company may result in a greater number of such allegations.
We have also agreed, and expect to continue to agree, to indemnify our customers for certain expenses or liabilities resulting from claimed infringement of intellectual property rights of third parties with respect to our solutions and software. As a result, in the case of infringement claims against these customers, we could be required to indemnify them for losses resulting from such claims or to refund license fees they have paid to us. If a customer asserts a claim for indemnification against us, we could incur significant costs and reputational harm disputing it. If we do not succeed in disputing it, we could face substantial liability.
Regardless of the merit of third-party claims that we or our customers infringe their rights, these claims could:
| be time-consuming and costly to defend; |
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| divert our managements attention and resources; |
| cause shipment and installation delays; |
| require us to redesign our solutions, which may not be feasible or cost-effective; |
| cause us to cease producing, licensing or using software or solutions that incorporate challenged intellectual property; |
| damage our reputation and cause customer reluctance to license our solutions; or |
| require us to pay amounts for past infringement, potentially including treble damages, or enter into royalty or licensing agreements to obtain the right to use a necessary product or component, which may not be available on terms acceptable to us, or at all. |
It is possible that other companies hold patents covering technologies similar to one or more of the technologies that we incorporate into our solutions. In addition, new patents may be issued covering these technologies. Unless and until the U.S. Patent and Trademark Office issues a patent to an applicant, there is no reliable way to assess the scope of the potential patent. We may face claims of infringement from both holders of issued patents and, depending upon the timing, scope and content of patents that have not yet been issued, patents issued in the future. The application of patent law to the software technologies in the communications industry is particularly uncertain because the time that it takes for a software-related patent to issue is lengthy, which increases the likelihood of pending patent applications claiming inventions that may pre-date development of our own proprietary software. This uncertainty, coupled with litigation or the potential threat of litigation related to our intellectual property, could adversely affect our business, revenue, results of operations, financial condition and reputation.
If we are unable to protect our intellectual property rights, our competitive position could be harmed or we could be required to incur significant expenses to enforce our rights.
Our success depends to a significant degree upon the protection of our software and other proprietary technology rights, particularly our 4G LTE solutions. In addition to patents, we rely on trade secret, copyright and trademark laws and confidentiality agreements with employees and third parties, all of which offer only limited protection. Our confidentiality agreements may not effectively prevent disclosure of our confidential information or provide an adequate remedy in the event of unauthorized disclosure. Others may independently discover our trade secrets and proprietary information, in which case we could not assert any trade secret rights against such parties. Furthermore, the steps we have taken to protect our intellectual property may not prevent misappropriation of our proprietary rights, the reverse engineering of our solutions or other circumvention, invalidation or challenge of our intellectual property.
Additionally, patent and other intellectual property protection outside the United States is generally not as comprehensive as in the United States and may not protect our intellectual property in some countries where our solutions are sold or may be sold in the future. Even if patents are granted outside the United States, effective enforcement in those countries may not be available. Many companies have encountered substantial intellectual property infringement in countries where we sell, or intend to sell, our solutions. Consequently, we may be unable to prevent our proprietary technology from being exploited abroad.
Policing the unauthorized use of our solutions, trademarks and other proprietary rights is expensive, difficult and, in some cases, impossible. Litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. Such litigation could result in substantial costs and diversion of management resources, either of which could harm our business. Moreover, such litigation could provoke our opponents to assert counterclaims that we infringe their own intellectual property. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property.
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Our patent applications may not result in issued patents, which may allow competitors to more easily exploit technology similar to ours.
Our business depends in part on our ability to maintain adequate protection of our intellectual property for our technologies and solutions and potential solutions in the United States and other countries. We have adopted a strategy of seeking patent protection in the United States and in other countries with respect to certain of the technologies used in or relating to our solutions and processes. As of June 30, 2013, we had a total of ten patent applications pending in the United States, and 19 pending non-U.S. patent applications, many of which are counterparts to our U.S. patents or patent applications. These patent applications are directed to aspects of our technology and/or to our methods and solutions that support our business. However, the issuance and enforcement of patents involve complex legal and factual questions. Accordingly, we cannot be certain that the patent applications that we file will result in patents being issued, or that our patents and any patents that may be issued to us will cover our technology or the methods or products that support our business, or afford protection against competitors with similar technology. Moreover, the issuance of a patent is not conclusive as to its validity, scope or enforceability, and competitors or other third parties might successfully challenge the validity, scope or enforceability of any issued patents should we try to enforce them. In addition, patent applications filed in other countries are subject to laws, rules and procedures that differ from those of the United States, and thus we cannot be certain that non-U.S. patent applications will be granted even if corresponding U.S. patents are issued.
If new industry standards emerge or if we are unable to respond to rapid technological advances in a timely manner, mobile service providers may not buy our solutions and our revenue may decline.
The market for telecommunications products and solutions is characterized by rapid technological advances, frequent introductions of new products, evolving industry standards and recurring or unanticipated changes in customer requirements. To succeed, we must effectively anticipate, and adapt in a timely manner to, customer requirements and continue to develop or acquire new solutions and features that meet market demands, technology and architectural trends and new industry standards. This requires us to identify and gain access to or develop new technologies. The introduction of new or enhanced solutions also requires that we carefully manage the transition from older products to minimize disruption in customer ordering practices and ensure that new solutions can be timely delivered to meet demand.
Developing our solutions is expensive, complex and involves uncertainties and requires significant research and development expenditures. We may not have sufficient resources to successfully manage lengthy development cycles. In 2010, 2011, 2012 and the six months ended June 30, 2013, our research and development expenses were $6.5 million, or 79% of our total revenue, $15.0 million, or 30% of our total revenue, $23.3 million, or 32% of our total revenue, and $11.5 million, or 24% of our total revenue, respectively. We believe we must continue to dedicate a significant amount of resources to our research and development efforts to remain competitive. These investments may take several years to generate positive returns or they may never do so. In addition, we may experience design, manufacturing, marketing and other difficulties that could delay or prevent the development, introduction or marketing of new solutions and enhancements. If we fail to meet our development targets, demand for our solutions will decline. Even if we introduce new solutions and enhancements, we may experience a decline in demand for, or revenue from, our existing solutions that is not fully matched by the revenue from new solutions. For example, customers may delay making purchases of a new solution to make a more thorough evaluation of such solution, or until industry reviews become widely available. In addition, we may lose existing customers who choose a competitors solution rather than migrate to our new solution. This could result in a temporary or permanent revenue shortfall and harm our business.
Furthermore, because our solutions are based on complex technology, we can experience unanticipated delays in developing, improving or deploying them. Each phase in the development of our solutions presents serious risks of failure, rework or delay, any one of which could impact the timing and cost effective development of such solution and could jeopardize customer acceptance of the solution. Intensive software
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testing and validation are critical to the timely introduction of enhancements to several of our solutions and schedule delays sometimes occur in the final validation phase. Unexpected intellectual property disputes, failure of critical design elements and a variety of other execution risks may also delay or even prevent the introduction of these solutions. In addition, the introduction of new solutions by competitors, the emergence of new industry standards or the development of entirely new technologies to replace existing product offerings could render our existing or future solutions obsolete. If our solutions become technologically obsolete, mobile service providers may purchase solutions from our competitors and we may be unable to sell our solutions in the marketplace and generate revenue, which would have a material adverse effect on our financial condition, results of operations or cash flows.
We may not be able to detect errors or defects in our solutions until after full deployment and product liability claims by customers could result in substantial costs.
Our solutions are sophisticated and are designed to be deployed in large and complex telecommunications networks that require a very high degree of reliability. Because of the nature of our solutions, they can only be fully tested when substantially deployed in very large networks with high volumes of telecommunications traffic. Some of our mobile service provider customers have only recently begun to commercially deploy our solutions and they may discover errors or defects in the software, or the solutions may not operate as expected. Because we may not be able to detect these problems until full deployment, any errors or defects in our solutions could affect the functionality of the networks in which they are deployed, given the use of our solutions in business-critical applications. As a result, the time it may take us to rectify errors can be critical to our mobile service provider customers. Because of the complexity of our solutions, it may take a material amount of time and resources for us to resolve errors or defects, if we can resolve them at all. The likelihood of such errors or defects is heightened as we acquire new products and solutions from third parties, whether as a result of acquisitions or otherwise.
Because our mobile service provider customers telecommunications networks into which they deploy our solutions require a very high degree of reliability, the consequences of an adverse effect on their networks, including any type of communications outage, can be very significant and costly. If any network problems were caused, or perceived to be caused, by errors or defects in our solutions, our reputation and the reputation of our solutions could be significantly damaged with respect to that customer and other customers. Such problems could lead to a loss of that customer or other customers.
If one of our solutions fails, we could also experience:
| payment of liquidated damages for performance failures; |
| loss of, or delay in, revenue recognition; |
| increased service, support, warranty, product replacement and product liability insurance costs, as well as a diversion of development resources; and |
| costly and time-consuming legal actions by our customers, which could result in significant damages awards against us. |
Any of the above events would likely have a material adverse impact on our business, revenue, results of operations, financial condition and reputation.
We currently use a limited number of standard hardware suppliers, and in the event any such supplier ceases to supply us timely, qualifying a replacement hardware supplier could require thirty to sixty days, during which time there could be some delay in our scheduled delivery to one or more of our mobile service provider customers, potentially damaging that customer relationship.
We currently use a limited number of suppliers for the standard servers and other standard hardware necessary to operate our solutions and to fulfill our customers orders on a timely basis. Although we have not
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experienced any significant supplier delay in the past, purchasing from third-party hardware suppliers exposes us to a limited risk of short-term unavailability of adequate supply because we do not have hardware manufacturing capabilities. In the event any such supplier ceases to supply us timely, qualifying a replacement hardware supplier could require thirty to sixty days, during which time there could be some delay in our scheduled delivery to one or more of our customers, potentially damaging that customer relationship.
Man-made problems such as computer viruses or terrorism may disrupt our operations and could adversely affect our operating results and financial condition.
Despite our implementation of network security measures, our servers are vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering with our computer systems. Any such event could have a material adverse effect on our business, operating results and financial condition. Efforts to limit the ability of third parties to disrupt the operations of the Internet or undermine our own security efforts may be ineffective. In addition, the continued threat of terrorism and heightened security and military action in response to this threat, or any future acts of terrorism, may cause further disruptions to the economies of the United States and other countries and create further uncertainties or otherwise materially harm our business, operating results, and financial condition. Likewise, events such as widespread electrical blackouts could have similar negative impacts. To the extent that such disruptions or uncertainties result in delays or cancellations of customer orders or the development or shipment of our solutions, our business, operating results, financial condition and reputation could be materially and adversely affected.
We may not be able to obtain necessary licenses of third-party technology on acceptable terms, or at all, which could delay sales and development and adversely impact the quality of our solutions.
We have incorporated third-party licensed technology into our current solutions. We anticipate that we are also likely to need to license additional technology from third parties to develop new solutions or enhancements in the future. Third-party licenses may not be available or continue to be available to us on commercially reasonable terms or at all. The inability to retain any third-party licenses required in our current solutions or to obtain any new third-party licenses to develop new solutions and enhancements could require us to obtain substitute technology of lower quality or performance standards or at greater cost, and delay or prevent us from making these solutions or enhancements, any of which could seriously harm the competitive position of our solutions.
We use some open source software in developing our solutions, which could in certain circumstances subject us to claims or judgments that some of our proprietary code is subject to general release or could require us to re-engineer our solutions and the firmware contained therein, which could materially harm our business and operating results.
We use open source software in developing our solutions, including in connection with our proprietary software, and we may use more open source software in the future. From time to time, there have been claims against companies that use open source software in their products challenging the ownership of such open source software or the terms and conditions upon which those companies make such products available to end users. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software or claiming that we have failed to comply with applicable licensing terms. Some open source licenses contain requirements that the licensee make available source code for modifications or derivative works created based upon the open source software and that the licensee license such modifications or derivative works under the terms of a particular open source license or other license granting third parties certain rights of further use. If we combine our proprietary firmware or other software with open source software in a certain manner, we could, under certain of the open source licenses, be required to release our proprietary source code publicly or license such source code on unfavorable terms or at no cost. Although we take steps to protect against our using any open source software that may subject our firmware to general release or require us to re-engineer our solutions and the firmware contained therein, we cannot guarantee that they will be effective, nor that we will not be
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subject to claims asserting or judgments holding that some of our proprietary source code is subject to general release or that we are required to re-engineer our solutions and firmware. In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on origin of the software. Open source license terms relating to the disclosure of source code in modifications or derivative works to the open source software are often ambiguous, and few if any courts in jurisdictions applicable to us have interpreted such terms. As a result, many of the risks associated with usage of open source software cannot be eliminated, and could, if not properly addressed, negatively affect our business.
Risks Related to Our International Operations
We are exposed to risks related to our international operations and failure to manage these risks may adversely affect our operating results and financial condition.
We market, license and service our solutions globally and have a number of offices around the world. During the years ended December 31, 2010, 2011 and 2012 and the six months ended June 30, 2013, 1%, 49%, 54% and 59% of our revenue, respectively, was attributable to our customers outside of the United States. As of June 30, 2013, approximately 82% of our employees were located outside of the United States. We expect that our international activities will be dynamic over the foreseeable future as we continue to pursue opportunities in international markets. Therefore, we are subject to risks associated with having worldwide operations. These international operations will require significant management attention and financial resources.
International operations are subject to inherent risks and our future results could be adversely affected by a number of factors, including:
| requirements or preferences for domestic products or solutions, which could reduce demand for our solutions; |
| differing technical standards, existing or future regulatory and certification requirements and required features and functionality; |
| management communication and integration problems related to entering new markets with different languages, cultures and political systems; |
| greater difficulty in collecting accounts receivable and longer collection periods; |
| difficulties in enforcing contracts; |
| difficulties and costs of staffing and managing operations outside of the United States; |
| the uncertainty of protection for intellectual property rights in some countries; |
| potentially adverse tax consequences, including regulatory requirements regarding our ability to repatriate profits to the United States; |
| tariffs and trade barriers, export regulations and other regulatory and contractual limitations on our ability to sell our solutions in certain non-U.S. markets; and |
| political and economic instability and terrorism. |
Additionally, our international operations expose us to risks of fluctuations in foreign currency exchange rates. In certain circumstances and depending on the currencies in which certain sales are denominated and the countries in which we are profitable or not profitable, a significant decrease or increase in the value of the U.S. dollar relative to the value of other local currencies could have a material adverse effect on the gross margins and profitability of our international operations. To date, we have not used risk management techniques to hedge the risks associated with these fluctuations. Even if we were to implement hedging strategies, not every exposure can be hedged and, where hedges are put in place based on expected foreign currency exchange exposure, they are
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based on forecasts that may vary or that may later prove to have been inaccurate. As a result, fluctuations in foreign currency exchange rates or our failure to successfully hedge against these fluctuations could have a material adverse effect on our operating results and financial condition.
Failure to comply with the United States Foreign Corrupt Practices Act, or FCPA, and similar laws associated with our activities outside the United States could subject us to penalties and other adverse consequences.
As a substantial portion of our revenues is, and we expect will continue to be, from jurisdictions outside of the United States, we face significant risks if we fail to comply with the FCPA and other laws that prohibit improper payments or offers of payment to governments and their officials and political parties by us and other business entities for the purpose of obtaining or retaining business. In many countries, particularly in countries with developing economies, some of which represent significant markets for us, it may be a local custom that businesses operating in such countries engage in business practices that are prohibited by the FCPA or other laws and regulations. Although we have implemented a company policy requiring our employees and consultants to comply with the FCPA and similar laws, such policy may not be effective at preventing all potential FCPA or other violations. We also cannot guarantee the compliance by our channel partners, resellers, suppliers and agents with applicable U.S. laws, including the FCPA, or applicable non-U.S. laws. Therefore there can be no assurance that none of our employees and agents, or those companies to which we outsource certain of our business operations, will take actions in violation of our policies or of applicable laws, for which we may be ultimately held responsible. As a result of our focus on managing our growth, our development of infrastructure designed to identify FCPA matters and monitor compliance is at an early stage. Any violation of the FCPA and related policies could result in severe criminal or civil sanctions, which could have a material and adverse effect on our reputation, business, operating results and financial condition.
We may become subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets.
Our solutions may become subject to United States export controls under which they would be permitted to be exported outside the United States only with the required level of export license, through an available export license exception or if designated EAR 99 (no license required), if certain of our solutions in the future contain certain levels of encryption technology. In addition, various countries regulate the import of certain encryption technology and have enacted laws that could limit our ability to distribute certain of our solutions or could limit our mobile service provider customers ability to implement these solutions in those countries. Changes in our solutions or changes in export and import regulations may create delays in the introduction of our solutions in non-U.S. markets, prevent our customers with international operations from deploying our solutions throughout their networks or, in some cases, prevent the export or import of our solutions to certain countries altogether. Any change in export or import laws and regulations, shifts in approach to the enforcement or scope of existing laws and regulations, or change in the countries, persons or technologies targeted by such regulations, could result in decreased use of our solutions by, or in our decreased ability to export or sell our solutions to, existing or potential customers with international operations. Any decreased use of our solutions or limitation on our ability to export or sell our solutions would likely adversely affect our business, operating results and financial condition.
Risks Related to Our Common Stock and this Offering
No public market for our common stock currently exists and an active trading market may not develop or be sustained following this offering.
Prior to this initial public offering, there has been no public market for our common stock. An active trading market may not develop following the completion of this offering or, if developed, may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value or the trading
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price of your shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.
Our stock price may be volatile, and you may not be able to resell shares of our common stock at or above the price you paid.
The initial public offering price for our common stock has been determined through our negotiations with the underwriters and may not be representative of the price that will prevail in the open market following the offering. Our stock price after the completion of this offering may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. These factors include those discussed in this Risk Factors section of this prospectus and others such as:
| a slowdown in the telecommunications industry or the general economy; |
| actual or anticipated quarterly or annual variations in our results of operations or those of our competitors; |
| actual or anticipated changes in our growth rate relative to our competitors; |
| changes in earnings estimates or recommendations by securities analysts; |
| fluctuations in the values of companies perceived by investors to be comparable to us; |
| announcements by us or our competitors of new products or services, significant contracts, commercial relationships, capital commitments or acquisitions; |
| competition from existing technologies and products or new technologies and products that may emerge; |
| the entry into, modification or termination of customer contracts; |
| developments with respect to intellectual property rights; |
| sales, or the anticipation of sales, of our common stock by us, our insiders or our other stockholders, including upon the expiration of contractual lock-up agreements; |
| our ability to develop and market new and enhanced solutions on a timely basis; |
| our commencement of, or involvement in, litigation; |
| additions or departures of key management or technical personnel; and |
| changes in governmental regulations applicable to our solutions. |
In addition, in recent years, the stock markets generally, and the market for technology stocks in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may significantly affect the market price of our common stock, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our common stock shortly following this offering. If the market price of shares of our common stock after this offering does not ever exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment.
In addition, in the past, class action litigation has often been instituted against companies whose securities have experienced periods of volatility in market price. Securities litigation brought against us following volatility in our stock price, regardless of the merit or ultimate results of such litigation, could result in substantial costs, which would hurt our financial condition and operating results and divert managements attention and resources from our business.
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Securities analysts may not publish favorable research or reports about our business or may publish no information at all, which could cause our stock price or trading volume to decline.
The trading market for our common stock will be influenced to some extent by the research and reports that industry or financial analysts publish about us and our business. We do not control these analysts. As a newly public company, we may be slow to attract research coverage and the analysts who publish information about our common stock will have had relatively little experience with our company, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us provide inaccurate or unfavorable research or issue an adverse opinion regarding our stock price, our stock price could decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports covering us, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline.
The concentration of our capital stock ownership with insiders upon the completion of this offering will likely limit your ability to influence corporate matters.
We anticipate that our executive officers, directors, current five percent or greater stockholders and affiliated entities will together beneficially own approximately % of our common stock outstanding after this offering, or % if the underwriters exercise in full their option to purchase additional shares. These stockholders may in some instances exercise their influence in ways that you do not believe are in your best interests as a stockholder. In particular, these stockholders, acting together, may be able to control our management and affairs and matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as mergers, consolidations or the sale of substantially all of our assets. Consequently, this concentration of ownership could limit your ability to influence corporate matters and may have the effect of delaying or preventing a change of control, including a merger, consolidation or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if such a change of control would benefit our other stockholders. This significant concentration of share ownership may adversely affect the trading price for our common stock because some investors perceive disadvantages in owning stock in companies with concentrated equity ownership.
We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an emerging growth company, as defined in the JOBS Act, and we may take advantage of certain exemptions and relief from various reporting requirements that are applicable to other public companies that are not emerging growth companies. In particular, while we are an emerging growth company (i) we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, (ii) we will be exempt from any rules that may be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotations or a supplement to the auditors report on financial statements, (iii) we will be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and (iv) we will not be required to hold nonbinding advisory votes on executive compensation or stockholder approval of any golden parachute payments not previously approved. We may remain an emerging growth company until as late as December 31, 2018 (the fiscal year-end following the fifth anniversary of the completion of this initial public offering), though we may cease to be an emerging growth company earlier under certain circumstances, including (i) if the market value of our common stock that is held by nonaffiliates exceeds $700 million as of any June 30, in which case we would cease to be an emerging growth company as of the following December 31 or (ii) if our gross revenues exceed $1 billion in any fiscal year.
The exact implications of the JOBS Act are still subject to interpretation and guidance by the SEC and other regulatory agencies, and we cannot assure you that we will be able to take advantage of all of the benefits of the JOBS Act. In addition, investors may find our common stock less attractive if we rely on the exemptions and relief granted by the JOBS Act. If some investors find our common stock less attractive as a result, there may be
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a less active trading market for our common stock, our stock price may decline and/or become more volatile and we may face difficulties raising capital from the public equity markets in the future.
Our management might apply the proceeds of this offering in ways that do not increase the value of your investment.
Our management will have broad discretion as to the use of the net proceeds of this offering and you will be relying on the judgment of our management regarding the application of these proceeds. We might apply the net proceeds of this offering in ways with which you do not agree, or in ways that do not yield a favorable return. If our management applies these proceeds in a manner that does not yield a significant return, if any, on our investment of these net proceeds, it would adversely affect the market price of our common stock. For more information on our managements planned use of proceeds, please read Use of Proceeds elsewhere in this prospectus.
Because our initial public offering price is substantially higher than the pro forma net tangible book value per share of our outstanding common stock, new investors will incur immediate and substantial dilution.
The initial public offering price is substantially higher than the pro forma net tangible book value per share of common stock based on our total tangible assets, which consist of our total assets, reduced by the amount of our total liabilities, goodwill and intangible assets immediately following this offering. Therefore, if you purchase common stock in this offering, you will experience immediate and substantial dilution of approximately $ per share in pro forma as adjusted net tangible book value (based upon an offering price of $ , the midpoint of the price range on the cover of this prospectus), the difference between the price you pay for our common stock and its pro forma as adjusted net tangible book value per share after completion of this offering. Please read Dilution for more information on this calculation. Furthermore, any issuance of shares in connection with acquisitions by us, the exercise of stock options or warrants or otherwise would dilute the percentage ownership held by the investors who purchase our shares in this offering.
A significant portion of our total outstanding shares of common stock is restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is operating successfully.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares of common stock intend to sell shares, could reduce the market price of our common stock. As of June 30, 2013, entities affiliated with North Bridge Venture Partners, entities affiliated with Austin Ventures, entities affiliated with Alloy Ventures, entities affiliated with August Capital and Cisco Systems, Inc. beneficially owned, collectively, approximately 92% of our outstanding common stock. If one or more of them were to sell a substantial portion of the shares they hold, it could cause our stock price to decline. Based on shares outstanding as of June 30, 2013, upon completion of this offering, we will have approximately million outstanding shares of common stock, assuming no exercise of the underwriters option to purchase additional shares. As of the date of this prospectus, approximately million shares of common stock will be subject to a 180-day contractual lock-up with the underwriters. The underwriters may, in their sole discretion and without notice, release all or any portion of the shares from these lock-up arrangements, and the lock-up agreements are subject to certain exceptions. See Underwriters for more information. Of the shares subject to a contractual lock-up with the underwriters, approximately million shares of common stock also will be subject to a 180-day contractual lock-up with us.
After this offering, holders of an aggregate of approximately 115 million shares of our common stock will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.
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In addition, as of June 30, 2013, there were 20,260,292 shares subject to outstanding options granted under the Mavenir Systems, Inc. 2005 Stock Plan and our 2013 Equity Incentive Plan that will become eligible for sale in the public market to the extent permitted by any applicable vesting requirements, the lock-up agreements described above and Rules 144 and 701 under the Securities Act of 1933. We intend to register the shares of common stock issuable upon exercise of these options. We also intend to register all 11,723,202 shares of common stock that, as of June 30, 2013, we may issue under the Mavenir Systems, Inc. 2013 Equity Incentive Plan and all 3,375,000 additional shares of common stock that, as of June 30, 2013, we may issue under our 2013 Employee Stock Purchase Plan. Once we register these shares, they can be freely sold in the public market upon issuance and once vested, subject to the 180-day lock-up periods under the lock-up agreements described above and in the Underwriters section of this prospectus.
We do not anticipate paying any cash dividends in the foreseeable future, and accordingly, stockholders must rely on stock appreciation for any return on their investment.
After the completion of this offering, we do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future. In addition, the terms of our loan and security agreement with Silicon Valley Bank currently restrict our ability to pay dividends. Consequently, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not invest in our common stock.
Anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
Our amended and restated certificate of incorporation and our amended and restated bylaws to be effective upon the completion of this offering will contain provisions that could delay or prevent a change in control of our company. These provisions could also make it more difficult for stockholders to elect directors and take other corporate actions. These provisions include:
| providing for a classified Board of Directors with staggered, three-year terms; |
| prohibiting cumulative voting in the election of directors; |
| providing that our directors may be removed only for cause; |
| authorizing the Board of Directors to issue, without stockholder approval, preferred stock with rights senior to those of our common stock; |
| authorizing the Board of Directors to change the authorized number of directors and to fill board vacancies until the next annual meeting of the stockholders; |
| requiring the approval of our Board of Directors or the holders of a supermajority of our outstanding shares of capital stock to amend our bylaws and certain provisions of our amended and restated certificate of incorporation; |
| requiring stockholders that seek to present proposals before, or to nominate candidates for election of directors at, a meeting of stockholders to provide advance written notice of such proposals or nominations; |
| prohibiting stockholder action by written consent; |
| limiting the liability of, and providing indemnification to, our directors and officers; |
| prohibiting our stockholders from calling a special stockholder meeting; |
| requiring an advance notification procedure for stockholder nominations and proposals; and |
| providing that the Court of Chancery of the State of Delaware will be the exclusive forum for any derivative action, actions asserting a breach of fiduciary duty and certain other actions against us or any directors or executive officers. |
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As a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law, which, subject to some exceptions, prohibits business combinations between a Delaware corporation and an interested stockholder, which is generally defined as a stockholder who becomes a beneficial owner of 15% or more of a Delaware corporations voting stock, for a three-year period following the date that the stockholder became an interested stockholder.
These and other provisions in our amended and restated certificate of incorporation and our amended and restated bylaws to be effective upon the completion of this offering and under Delaware law could discourage potential takeover attempts, reduce the price that investors might be willing to pay in the future for shares of our common stock and result in the market price of our common stock being lower than it would be without these provisions. For more information, please read Description of Capital Stock Anti-Takeover Effects of Delaware Law and Certain Provisions of our Certificate of Incorporation Amended and Restated Bylaws and Description of Capital Stock Choice of Forum.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled Prospectus Summary, Risk Factors, Use of Proceeds, Managements Discussion and Analysis of Financial Condition and Results of Operations and Our Business. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as believe, will, may, estimate, continue, anticipate, intend, should, plan, expect, predict, could, potentially or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.
Forward-looking statements include, but are not limited to, statements about:
| our expectations regarding our revenue, expenses, sales, operations and profitability; |
| commercial acceptance of 4G LTE technology; |
| the development of markets for our products and solutions; |
| our ability to attract and retain customers; |
| future purchases of our solutions and support and maintenance services by existing customers; |
| the potential loss of or reductions in orders from our significant customers; |
| our ability to compete in our industry and innovation by our competitors; |
| our ability to anticipate market needs or develop new or enhanced solutions to meet those needs; |
| our ability to successfully identify, manage and integrate any potential acquisitions; |
| our ability to establish and maintain intellectual property protection for our solutions; |
| our ability to hire and retain key personnel; |
| our expectations regarding the use of proceeds from this offering; and |
| our anticipated cash needs and our estimates regarding our capital requirements. |
These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results of operation, financial condition, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements contained in this prospectus are reasonable, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which projections we cannot be certain. Moreover, we operate in a competitive and rapidly-changing industry in which new risks may emerge from time to time, and it is not possible for management to predict all risks.
You should refer to the section of this prospectus entitled Risk Factors for a discussion of important risks that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors and new risks that may emerge in the future, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We do not undertake to update any of the forward-looking statements after the date of this prospectus, except to the extent required by law.
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This prospectus contains estimates, information and data concerning the telecommunications industry including estimates and forecasts of market share, size and growth rates that are based on industry publications and reports, including those generated by the Cisco Visual Networking Index, Ericsson, Gartner, IDC, Informa Telecoms and Media, Infonetics and Ovum. Although we have not independently verified the data contained in these industry publications and reports, we believe based on our industry experience that these publications are reliable and that the conclusions they contain are reasonable. However, you should not give undue weight to the information contained in these reports because such information involves a number of assumptions and limitations and if any of these assumptions turn out to be incorrect, actual results may differ from the projections based on these assumptions. The markets described in these reports may not grow at the rates projected or at all, which could have a material adverse effect on our business and on the market price of our common stock.
The Gartner report described herein, Forecast: Carrier Network Infrastructure, Worldwide, 20102017 3Q13 Update, September 2013, represents data, research opinion or viewpoints published as part of a syndicated subscription service by Gartner, Inc., and are not representations of fact. The Gartner report speaks as of its original publication date (and not as of the date of this prospectus) and the opinions expressed in the Gartner report are subject to change without notice.
The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the Risk Factors section of this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the publishers of these industry publications and reports and by us.
DESCRIPTION OF KEY TERMS USED IN OUR INDUSTRY
In this prospectus, we discuss a number of terms specific to the mobile communications industry.
| IP-based communication refers to the transmission of voice and text data utilizing the more efficient packet-based internet protocol that underlies the internet, rather than through traditional and less efficient circuit-switched phone networks. |
| Voice-Over-LTE, or VoLTE, refers to the ability to deliver voice services over next-generation Long Term Evolution (LTE) networks by treating voice as data. |
| Voice-Over-Wi-Fi, or VoWi-Fi, refers to the ability to deliver voice services over wireless internet (Wi-Fi) networks by treating voice as data. |
| Enhanced messaging includes, in addition to the communication methods offered by rich communication services, voice and video mail and interworking with social media platforms. |
| Rich Communication Services, or RCS, refers to a set of standards set forth by the GSM Association (GSMA), a worldwide association of mobile service providers, that define an integrated set of mobile communication methods that includes instant messaging, voice or video calling, multimedia file transfer and live video streaming from one user to another over mobile networks. |
| Cloud-based refers to the delivery of communication services from a single, consolidated services network to a single subscriber identity shared across multiple devices reachable across different access networks, all of which share common stored data and synchronized services. |
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We estimate that the net proceeds to us from this offering of shares of our common stock, after deducting underwriting discounts and estimated offering costs payable by us, will be approximately $ million, assuming an initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus), or approximately $ million if the underwriters exercise in full their option to purchase additional shares. Each $1.00 increase or decrease in the assumed initial public offering price would increase or decrease, as applicable, our cash and cash equivalents, working capital, total assets and total stockholders equity by approximately $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and assuming no exercise of the underwriters option to purchase additional shares, and after deducting the estimated underwriting discounts and estimated offering costs payable by us. We will not receive any of the proceeds from the sale of shares of common stock by the selling stockholders.
The principal purposes of this offering are to obtain additional capital, create a public market for our common stock, facilitate future access to public equity markets, increase awareness of our company among potential customers and improve our competitive position.
We intend to use the net proceeds of this offering for working capital and other general corporate purposes, which may include financing growth (including payment of increased levels of expenditures), developing new products and funding capital expenditures, acquisitions and investments. We have not yet determined the manner in which we will allocate the net proceeds, and management will retain broad discretion in the allocation and use of the net proceeds, including the possibility of restructuring or repaying debt. The amount and timing of these expenditures will vary depending on a number of factors, including the amount of any cash generated by our operations, competitive and technological developments and the rate of growth, if any, of our business. Until we use the net proceeds of this offering, we intend to invest the net proceeds in short-term and immediate-term interest-bearing obligations, investment-grade securities, certificates of deposit or guaranteed obligations of the U.S. government.
We have not declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings to fund the development and expansion of our business, and therefore we do not anticipate paying cash dividends on our common stock in the foreseeable future. In addition, the terms of our loan and security agreement with Silicon Valley Bank currently restrict our ability to pay dividends.
Any future determination to pay dividends will be at the discretion of our Board of Directors and will depend on our results of operations, financial condition, capital requirements and other factors deemed relevant by our Board of Directors.
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The following table sets forth our capitalization as of June 30, 2013:
| on an actual basis; |
| on an as adjusted basis to reflect the automatic conversion of all outstanding shares of redeemable convertible preferred stock into an aggregate of 115,167,418 shares of common stock upon the consummation of this offering; and |
| on an as further adjusted basis to reflect (1) the automatic conversion of all outstanding shares of redeemable convertible preferred stock into an aggregate of 115,167,418 shares of common stock upon the consummation of this offering, (2) the effectiveness of our amended and restated certificate of incorporation upon the consummation of this offering, (3) the issuance by us of shares of our common stock in this offering at an assumed initial public offering price of $ per share (the midpoint of the range set forth on the cover page of this prospectus) and (4) the application of our estimated net proceeds from this offering as set forth under Use of Proceeds, after deducting the estimated underwriting discounts and estimated offering costs payable by us, as if this offering had occurred on June 30, 2013. |
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You should read the information below in conjunction with the consolidated financial statements and the related notes thereto and Managements Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this prospectus.
As of June 30, 2013 | ||||||||||||
Actual | As Adjusted | As
Further Adjusted(1) |
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(in thousands) |
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Cash and cash equivalents |
$ | 20,453 | $ | 20,453 | $ | |||||||
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|||||||
Long-term debt, net of debt discount of $1,847 |
$ | 38,153 | $ | 38,153 | $ | |||||||
Series A redeemable convertible preferred stock, $0.001 par value; 26,137,758 shares authorized, issued and outstanding, actual; 26,137,758 shares authorized and no shares issued and outstanding, as adjusted; no shares authorized, issued or outstanding, as further adjusted |
13,005 | | | |||||||||
Series B redeemable convertible preferred stock, $0.001 par value; 26,727,505 shares authorized, issued and outstanding, actual; 26,727,505 shares authorized and no shares issued and outstanding, as adjusted; no shares authorized, issued or outstanding, as further adjusted |
20,500 | | | |||||||||
Series C redeemable convertible preferred stock, $0.001 par value; 24,683,530 shares authorized and 18,316,941 shares issued and outstanding, actual; 24,683,530 shares authorized and no shares issued and outstanding, as adjusted; no shares authorized, issued or outstanding, as further adjusted |
17,478 | | | |||||||||
Series D redeemable convertible preferred stock, $0.001 par value; 12,100,007 shares authorized, issued and outstanding, actual; 12,100,007 shares authorized and no shares issued and outstanding, as adjusted; no shares authorized, issued or outstanding, pro forma as further adjusted |
13,575 | | | |||||||||
Series E redeemable convertible preferred stock, $0.001 par value; 32,135,213 shares authorized, 31,885,207 shares issued and outstanding, actual; 32,135,213 shares authorized and no shares issued and outstanding, as adjusted; no shares authorized, issued or outstanding, as further adjusted |
40,000 | | | |||||||||
|
|
|
|
|
|
|||||||
Total redeemable convertible preferred stock |
$ | 104,558 | $ | | $ | | ||||||
|
|
|
|
|
|
|||||||
Shareholders equity (deficit): |
||||||||||||
Common stock, $0.001 par value; 155,203,902 shares authorized, 14,636,455 shares issued and 9,390,830 shares outstanding, actual; 155,203,902 shares authorized, 124,558,248 shares issued and outstanding, as adjusted; 300,000,000 shares authorized, shares issued and outstanding, as further adjusted |
10 | 125 | ||||||||||
Preferred stock, $0.001 par value; no shares authorized, issued and outstanding, actual; 20,000,000 shares authorized and no shares issued and outstanding, as adjusted |
| | | |||||||||
Additional paid-in capital |
3,151 | 107,594 | ||||||||||
Accumulated (deficit) |
|
(103,512 |
) |
(103,512 | ) | |||||||
Accumulated other comprehensive income |
1,464 | 1,464 | ||||||||||
|
|
|
|
|
|
|||||||
Total shareholders equity (deficit) |
(98,887 | ) | 5,671 | |||||||||
|
|
|
|
|
|
|||||||
Total capitalization |
$ | 5,671 | $ | 5,671 | $ | |||||||
|
|
|
|
|
|
(1) | Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share, the midpoint of the price range reflected on the cover page of this prospectus, would increase (decrease) our cash and |
42
cash equivalents, working capital, total assets, and total shareholders equity (deficit) by approximately $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and assuming no exercise of the underwriters option to purchase additional shares, and after deducting the estimated underwriting discounts and estimated offering costs payable by us. |
The table above excludes the following:
| 20,260,292 shares of common stock issuable upon the exercise of options outstanding at June 30, 2013 at a weighted-average exercise price of $0.33 per share; |
| 6,366,588 shares of common stock issuable upon the conversion and subsequent exercise of warrants to purchase redeemable convertible preferred stock at an exercise price of $0.9542 per share; |
| 920,000 shares of common stock issuable upon the exercise of warrants to purchase common stock at an exercise price of $0.73 per share; |
| 1,362,858 shares of common stock issuable upon the exercise of warrants to purchase common stock at an exercise price of $0.001 per share; |
| 11,723,202 shares of common stock reserved for future issuance under our 2013 Equity Incentive Plan, as described in the section of this prospectus titled Executive Compensation Benefit Plans 2013 Equity Incentive Plan; and |
| 3,375,000 additional shares of common stock reserved for future issuance under our 2013 Employee Stock Purchase Plan, subject to adjustment as described in the section of this prospectus titled Executive Compensation Benefit Plans 2013 Employee Stock Purchase Plan. |
43
If you invest in our common stock in this offering, your interest will be diluted to the extent of the difference between the public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock after this offering.
Our net tangible book value, which we have defined as our total tangible assets less total liabilities, as of June 30, 2013 was $(0.6) million, or $(0.07) per share of common stock. Our pro forma net tangible book value per share, as of June 30, 2013, was $(0.00). Pro forma net tangible book value per share represents the amount of our total tangible assets less total liabilities and divided by the total number of shares of common stock outstanding, including shares of common stock issuable upon the conversion of all outstanding shares of our redeemable convertible preferred stock upon the completion of this offering as if that conversion had occurred on June 30, 2013. Dilution in pro forma net tangible book value per share to new investors in this offering represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the pro forma as adjusted net tangible book value per share of common stock immediately after the completion of this offering. After giving effect to the sale of shares of common stock offered in this offering at an assumed initial public offering price of $ per share, the midpoint of the range set forth in the cover page of this prospectus, and after deducting underwriting discounts and estimated offering costs payable by us, our pro forma as adjusted net tangible book value as of June 30, 2013 would have been $ million, or $ per share of common stock. This represents an immediate increase in pro forma net tangible book value of $ per share to existing stockholders and an immediate dilution of $ per share to new investors, or approximately % of the assumed initial public offering price of $ per share. The following table illustrates this dilution on a per share basis:
Assumed initial public offering price per share |
||||
Pro forma net tangible book value per share as of June 30, 2013, before giving effect to this offering |
$ | | ||
Increase in pro forma net tangible book value per share attributable to this offering |
||||
Pro forma as adjusted net tangible book value per share after giving effect to this offering |
||||
|
|
|||
Immediate dilution in net tangible book value per share to new investors in this offering |
$ | |||
|
|
A $1.00 increase or decrease in the assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover of this prospectus) would increase or decrease, respectively, our pro forma as adjusted net tangible book value per share after this offering by $ per share and the dilution in pro forma as adjusted net tangible book value to new investors by $ per share, assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and assuming no exercise of the underwriters option to purchase additional shares, and after deducting underwriting discounts and estimated offering costs payable by us.
The following table summarizes, on a pro forma as adjusted basis as of June 30, 2013 and after giving effect to the offering, based on an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover of this prospectus), the differences between existing stockholders and new investors with respect to the number of shares of common stock purchased from us, the total consideration paid to us, and the average price per share paid.
Shares Purchased | Total Consideration | Average
Price Per Share |
||||||||||||||||
Number |
Percent | Amount | Percent | |||||||||||||||
Existing stockholders |
% | $ | % | $ | ||||||||||||||
New investors |
||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||
Total |
100.0 | % | $ | 100.0 | % | |||||||||||||
|
|
|
|
|
|
|
44
A $1.00 increase or decrease in the assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover of this prospectus) would increase or decrease, respectively, total consideration paid by new investors and total consideration paid by all stockholders by approximately $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.
Sales of shares of common stock by the selling stockholders in this offering will reduce the number of shares of common stock held by existing stockholders to , or approximately % of the total shares of common stock outstanding after this offering, and will increase the number of shares held by new investors to , or approximately % of the total shares of common stock outstanding after this offering.
The discussion and tables above assume no exercise of the underwriters option to purchase additional shares. If the underwriters exercise their option to purchase additional shares of our common stock in full, our existing stockholders would own % and our new investors would own % of the total number of shares of our common stock outstanding after this offering.
The discussion and tables in this section are based on 124,558,248 shares of our common stock outstanding as of June 30, 2013, which number reflects the conversion of all of our redeemable convertible preferred stock into an aggregate of 115,167,418 shares of common stock. The number of shares of common stock outstanding after this offering excludes the following:
| 20,260,292 shares of common stock issuable upon the exercise of options outstanding at June 30, 2013 at a weighted-average exercise price of $0.33 per share; |
| 6,366,588 shares of common stock issuable upon the conversion and subsequent exercise of warrants to purchase redeemable convertible preferred stock at an exercise price of $0.9542 per share; |
| 920,000 shares of common stock issuable upon the exercise of warrants to purchase common stock at an exercise price of $0.73 per share; |
| 1,362,858 shares of common stock issuable upon the exercise of warrants to purchase common stock at an exercise price of $0.001 per share; |
| 11,723,202 shares of common stock reserved for future issuance under our 2013 Equity Incentive Plan, as described in the section of this prospectus titled Executive Compensation Benefit Plans 2013 Equity Incentive Plan; and |
| 3,375,000 additional shares of common stock reserved for future issuance under our 2013 Employee Stock Purchase Plan, subject to adjustment as described in the section of this prospectus titled Executive Compensation Benefit Plans 2013 Employee Stock Purchase Plan. |
To the extent any of these options or warrants are exercised, there will be further dilution to investors.
45
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING INFORMATION
The following tables present our selected consolidated financial and operating data for the periods indicated. The summary consolidated statement of operations data for the years ended December 31, 2010, 2011 and 2012 and the summary consolidated balance sheet data as of December 31, 2011 and 2012 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated statements of operations data for the six months ended June 30, 2012 and 2013 and the summary consolidated balance sheet data as of June 30, 2013 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The summary consolidated balance sheet data as of December 31, 2010 have been derived from our audited consolidated financial statements, which are not included in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future. The summary financial information below should be read in conjunction with the information contained in Managements Discussion and Analysis of Financial Condition and Results of Operations, the consolidated financial statements and notes thereto, and other financial information included elsewhere in this prospectus.
Year Ended December 31, | Six months ended June 30, | |||||||||||||||||||
2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Consolidated Statement of Operations Data: |
||||||||||||||||||||
Software product revenue |
$ | 7,009 | $ | 38,264 | $ | 52,409 | $ | 29,333 | $ | 37,264 | ||||||||||
Maintenance revenue |
1,242 | 11,240 | 21,431 | 10,616 | 10,926 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total revenue |
8,251 | 49,504 | 73,840 | 39,949 | 48,190 | |||||||||||||||
Cost of software product revenue |
4,537 | 26,200 | 23,891 | 11,247 | 17,414 | |||||||||||||||
Cost of maintenance revenue |
566 | 4,584 | 6,568 | 3,844 | 2,827 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cost of revenue |
5,103 | 30,784 | 30,459 | 15,091 | 20,241 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross profit |
3,148 | 18,720 | 43,381 | 24,858 | 27,949 | |||||||||||||||
Research and development expenses |
6,487 | 14,970 | 23,312 | 12,848 | 11,498 | |||||||||||||||
Sales and marketing expenses |
3,813 | 12,332 | 20,580 | 8,607 | 9,656 | |||||||||||||||
General and administrative expenses |
3,024 | 10,603 | 14,052 | 7,946 | 9,361 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total operating expenses |
13,324 | 37,905 | 57,944 | 29,401 | 30,515 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating loss |
(10,176 | ) | (19,185 | ) | (14,563 | ) | (4,543 | ) | (2,566 | ) | ||||||||||
Net interest expense |
108 | 61 | 383 | 25 | 1,107 | |||||||||||||||
Foreign exchange loss (gain) |
(21 | ) | 1,182 | (529 | ) | 871 | 2,644 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loss before income tax expense |
(10,263 | ) | (20,428 | ) | (14,417 | ) | (5,439 | ) | (6,317 | ) | ||||||||||
Income tax expense |
131 | 1,330 | 1,152 | 211 | 1,618 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net loss |
$ | (10,394 | ) | $ | (21,758 | ) | $ | (15,569 | ) | $ | (5,650 | ) | $ | (7,935 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net loss per share attributable to common shareholders (basic and diluted) |
$ | (1.35 | ) | $ | (2.69 | ) | $ | (1.73 | ) | $ | (0.65 | ) | $ | (0.85 | ) | |||||
Weighted average common shares outstanding (basic and diluted) |
7,726 | 8,092 | 9,016 | 8,752 | 9,376 | |||||||||||||||
As adjusted net loss per share(1) |
$ | (0.11 | ) | $ | (0.18 | ) | $ | (0.13 | ) | $ | (0.05 | ) | $ | (0.06 | ) | |||||
As adjusted weighted-average shares outstanding used to compute net loss per share(1) |
91,008 | 123,259 | 124,183 | 123,919 | 124,543 | |||||||||||||||
Non-GAAP Financial Measure: |
||||||||||||||||||||
Adjusted EBITDA(2) |
$ | (9,298 | ) | $ | (14,938 | ) | $ | (10,224 | ) | $ | (2,753 | ) | $ | (472 | ) |
46
(1) | As adjusted amounts give effect to the automatic conversion of all outstanding shares of our redeemable convertible preferred stock into 115,167,418 shares of our common stock immediately prior to the completion of this offering. |
(2) | We include adjusted earnings before interest, tax, depreciation and amortization and certain other expenses, or adjusted EBITDA, because it is a measure that our management uses to evaluate our operating results. We calculate adjusted EBITDA as our net loss, adding back net interest expense, income tax expense, depreciation and amortization, stock-based compensation expense and certain acquisition-related expenses. We present adjusted EBITDA as a supplemental performance measure because our management believes that it facilitates operating performance comparisons from period to period by excluding potential differences caused by variations in capital structures (affecting net interest expense), the amortization of intangibles (affecting amortization expense), tax positions (such as the impact on periods of changes in effective tax rates), the depreciation of assets (affecting depreciation expense), stock-based compensation expenses and acquisition-related expenses. Adjusted EBITDA is not a measurement of our financial performance under generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income (loss), operating income (loss) or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operations as a measure of our profitability or liquidity. We understand that although adjusted EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are: |
| adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; |
| adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
| adjusted EBITDA does not reflect changes in our effective tax rates; |
| although depreciation is a non-cash charge, the assets being depreciated will often have to be replaced in the future, and adjusted EBITDA does not reflect any cash requirements for such replacements; and |
| other companies in our industry may calculate adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. |
The following table reconciles net loss to adjusted EBITDA for the periods presented:
Year Ended December 31, | Six months ended June 30, | |||||||||||||||||||
2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||
(unaudited) | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Net loss |
$ | (10,394 | ) | $ | (21,758 | ) | $ | (15,569 | ) | $ | (5,650 | ) | $ | (7,935 | ) | |||||
Net interest expense |
108 | 61 | 383 | 25 | 1,107 | |||||||||||||||
Income tax expense |
131 | 1,330 | 1,152 | 211 | 1,600 | |||||||||||||||
Depreciation and amortization |
807 | 2,933 | 4,048 | 1,685 | 1,794 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
EBITDA |
(9,348 | ) | (17,434 | ) | (9,986 | ) | (3,729 | ) | (3,416 | ) | ||||||||||
Stock-based compensation expense |
71 | 138 | 291 | 105 | 300 | |||||||||||||||
Foreign exchange loss (gain) |
(21 | ) | 1,182 | (529 | ) | 871 | 2,644 | |||||||||||||
Other acquisition-related expenses including: |
||||||||||||||||||||
Acquisition-related restructuring costs |
| 514 | | | | |||||||||||||||
Transaction costs |
| 662 | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Adjusted EBITDA |
$ | (9,298 | ) | $ | (14,938 | ) | $ | (10,224 | ) | $ | (2,753 | ) | $ | (472 | ) | |||||
|
|
|
|
|
|
|
|
|
|
47
Consolidated Balance Sheet Data:
As of December 31, | As of June 30, |
As Further Adjusted | ||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | As Adjusted | ||||||||||||||||||
(in thousands) | (unaudited) | |||||||||||||||||||||
Cash and cash equivalents |
$ | 5,425 | $ | 19,466 | $ | 7,402 | $ | 20,453 | $ | 20,453 | ||||||||||||
Working capital |
5,812 | 15,728 | 13,228 | 31,420 | 31,420 | |||||||||||||||||
Total assets |
16,797 | 60,387 | 60,481 | 79,999 | 79,999 | |||||||||||||||||
Long-term debt, net of current portion |
| | 14,700 | 38,153 | 38,153 | |||||||||||||||||
Total liabilities |
9,682 | 34,131 | 48,718 | 74,328 | 74,328 | |||||||||||||||||
Total redeemable convertible preferred stock |
64,558 | 104,558 | 104,558 | 104,558 | | |||||||||||||||||
Total shareholders equity (deficit) |
(57,443 | ) | (78,302 | ) | (92,795 | ) | (98,887 | ) | 5,671 |
(1) | The as adjusted column reflects the automatic conversion of all outstanding shares of our redeemable convertible preferred stock into 115,167,418 shares of our common stock immediately prior to the completion of this offering. |
(2) | The as further adjusted column reflects the conversion described in footnote (1) above, as well as the estimated net proceeds of $ million from our sale of shares of common stock that we are offering, based upon the initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting underwriting discounts and estimated offering costs payable by us. |
Each $1.00 increase or decrease in the assumed initial public offering price would increase or decrease, as applicable, our cash and cash equivalents, working capital, total assets and total shareholders equity by approximately $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and assuming no exercise of the underwriters option to purchase additional shares, and after deducting the estimated underwriting discounts and estimated offering costs payable by us.
48
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in Risk Factors.
Overview
We are a leading provider of software-based telecommunications networking solutions that enable mobile service providers to deliver internet protocol (IP)-based voice, video, rich communications and enhanced messaging services to their subscribers globally. Our solutions deliver Rich Communication Services (RCS), which enable enhanced mobile communications, such as group text messaging, multi-party voice or video calling and live video streaming as well as the exchange of files or images, over existing 2G and 3G networks and next generation 4G Long Term Evolution (LTE) networks. Our solutions also deliver voice services over LTE technology and wireless (Wi-Fi) networks, known respectively as Voice over LTE (VoLTE) and Voice over Wi-Fi (VoWi-Fi). We enable mobile service providers to offer services that generate increased revenue and improve subscriber satisfaction and retention, while allowing them to improve time-to-market of new services and reduce network costs. Our mOne® Convergence Platform has enabled leading mobile service providers to introduce the industrys first live network deployment of VoLTE and the industrys first live deployment of next-generation RCS 5.
We sell our solutions principally to wireless mobile service providers globally through our direct sales force or strategic third-party reseller partners. In 2012 and 2011, approximately 54% and 49%, respectively, of our revenue came from outside of the United States, whereas only 1% of revenue in 2010 came from outside of the United States. For the six months ended June 30, 2013, 59% of our revenue came from outside of the United States.
Revenue from our solutions is generated from the sale of software products and maintenance and support. Software products revenues consist of software licenses, hardware and professional services fees from software customizations, feature development and training for customers. Maintenance revenue includes support, annual software maintenance agreements and extended hardware warranty arrangements.
We were founded in 2005 and began generating revenue in 2007. Since inception, we have raised approximately $105 million in proceeds through the issuance of preferred stock. With the funds raised from these offerings and other loan arrangements, we have invested significantly in product and market development activities. Partially as a result of these ongoing investments, our operating income, net income and cash flows have been negative to date.
In our competitive industry, it is critical that we provide high-quality solutions at pricing levels that are attractive to our customers. This is especially true for new customers, given that we are less well-established than some of our larger competitors. When we acquire a new customer, we generally initiate our relationship with the customer by providing our solutions on off-the-shelf, industry-standard third-party hardware. The hardware we sell initially serves as a high-capacity platform to enable highly scalable implementation of additional Mavenir solutions.
Since the solutions we sell represent innovative technology, in some cases the first of its kind installed in the marketplace, it is also important that we provide considerable on-site support to the initial deployments of our solutions by our mobile service provider customers as they test, trial and implement our solutions. As a result, we have incurred, and expect to continue to incur over the near-term, significant costs to provide support for our initial solution deployments.
49
As our existing mobile service provider customers experience that our products reliably deliver the solutions purchased, we expect those customers to deploy our solutions across broader portions of their subscriber bases. We also anticipate that mobile service provider customers who purchase certain solutions of ours will purchase additional solutions from us for deployment in their networks. As our customers networks mature, we also expect that they will purchase ongoing support and maintenance services from us. We expect that our cost to provide these incremental expansions will be lower than the cost of our initial deployments to these customers. Additionally, as our customer relationships deepen, we expect that our customer base will become more heavily-weighted toward existing customers as compared to new customers. We believe that a combination of these factors will improve our profitability.
As our sales grow, it will be critical that we attract highly-qualified employees and successfully develop and streamline business processes in order to support our global customer base and grow profitably. It will also be critical that we accurately foresee the direction of mobile technology deployments and develop solutions that address the demands of mobile service providers. In addition, in order to be successful we will have to compete effectively for customers with incumbent providers of core network solutions. Many of these incumbents have greater financial, technical, marketing and other resources than we do and also have, in many cases, pre-existing relationships with our customers and potential customers.
We have included the results of operations of Airwide Solutions from the date of acquisition, May 27, 2011. Our revenue increased 500% from $8.3 million in 2010 to $49.5 million in 2011. The increase was driven primarily by the addition of revenues from Airwide Solutions in 2011 that were not present in 2010 before the acquisition. Excluding revenue attributable to Airwide Solutions, our revenue increased 227% from $8.3 million in 2010 to $27.1 million in 2011. Our revenue increased 49% from $49.5 million in 2011 to $73.8 million in 2012. Part of this increase is attributable to the fact that we owned Airwide Solutions for seven months in 2011 compared to owning Airwide Solutions for all of 2012. By the end of 2011, we had fully integrated the Airwide Solutions business and as such, the financial results for 2012 include, and do not present separately, the full impact of the Airwide Solutions business. Our revenues increased 21% from $39.9 million for the six months ended June 30, 2012 to $48.2 million for the six months ended June 30, 2013.
We had net losses of $(10.4) million, $(21.8) million, $(15.6) million, $(5.7) million and $(7.9) million in 2010, 2011, 2012, and for the six months ended June 30, 2012 and 2013, respectively. The results of operations below describe the impact of our acquisition of Airwide Solutions on revenue, cost of revenue and gross profit.
Key Operating and Financial Performance Metrics
As part of the management of the company, we monitor and evaluate the key operating and financial performance metrics noted below to help us establish our budgets, measure our business operating performance, assess trends and evaluate our performance as compared to that of our competitors. We discuss revenue, gross profit margin and operating results below under Components of Operating Results. We discuss cash and cash equivalents and cash flows from operations below under Liquidity and Capital Resources.
Year Ended December 31, | Six Months Ended June 30, |
|||||||||||||||||||
2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||
(unaudited) | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Revenues |
$ | 8,251 | $ | 49,504 | $ | 73,840 | $ | 39,949 | $ | 48,190 | ||||||||||
Gross Profit Margin |
38.2 | % | 37.8 | % | 58.8 | % | 62.2 | % | 58.0 | % | ||||||||||
Operating Loss |
(10,176 | ) | (19,185 | ) | (14,563 | ) | (4,543 | ) | (2,566 | ) | ||||||||||
Cash and Cash Equivalents |
5,425 | 19,466 | 7,402 | 12,182 | 20,453 | |||||||||||||||
Cash used in Operations |
(5,322 | ) | (8,097 | ) | (22,387 | ) | (8,268 | ) | (10,175 | ) |
50
Components of Operating Results
Revenue
Revenue from our solutions is generated from the sale of software products and maintenance and support. Software products revenues consist of software licenses, hardware and professional services fees from software customizations, feature development and training for customers. Maintenance revenue includes support, annual software maintenance agreements and extended hardware warranty arrangements.
We report two classifications of revenue:
| Software products revenue includes revenue arrangements that consist of tangible products with essential software elements, perpetual right-to-use (RTU) software licenses and sales of industry standard hardware. Software products revenue is supported by customer contracts that generally outline terms and conditions, including those that relate to acceptance of the product. Software products revenue also includes software customizations and feature development for individual customers and training of customers. |
| Maintenance revenue includes support, annual software maintenance agreements and extended hardware warranty arrangements. Revenue from these services is recognized ratably over the service delivery period. |
Revenue is recognized as outlined in Critical Accounting Policies Revenue Recognition elsewhere in this section.
Cost of Revenue
Our cost of software products revenue consists of payroll-related costs of service personnel, third-party hardware and third-party software licenses and the shipping and installation costs to any of our customers. The costs associated with our RTU software licenses are expensed as incurred in operating costs under research and development.
Our cost of maintenance revenue includes salaries, employee benefits, stock-based compensation and other related expenses. Additionally, hardware and third-party software licenses and services are included. Amortization of certain intangible assets related to the Airwide Solutions acquisition is also included.
Gross Profit and Gross Profit Margin
Gross profit is the calculation of total revenue minus total cost of revenue. Our gross profit margin is our gross profit expressed as a percentage of revenue. Our gross profit margin has been and will continue to be affected by a variety of factors, including the mix of customers and types of revenue, cost fluctuations and reduction activities, including technological changes. Additionally, changes in foreign exchange rates may impact gross profit and gross profit margin.
Operating Expenses
Operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Salaries and personnel costs are the most significant component of each of these expense categories.
Research and Development Expenses. Research and development expenses primarily consist of salaries and personnel costs for research and development employees, including stock-based compensation and bonuses. Additional expenses include costs related to development, quality assurance and testing of new software and enhancement of existing software, consulting, travel and other related overhead such as facility costs.
Additionally, we supplement our own research and development resources with third-party international and domestic subcontractors for software development, documentation, quality assurance and software support. We
51
believe continuing to invest in research and development efforts is essential to maintaining our competitive position. We expect research and development expenses to increase in the foreseeable future as we continue to broaden our product portfolio.
Sales and Marketing Expenses. Sales and marketing expenses consist primarily of salaries and personnel costs for our sales and marketing employees, including stock-based compensation, commissions and bonuses. Additional expenses include attendance at trade shows, marketing programs, consulting, travel and other related overhead. We expect our sales and marketing expenses to increase in the foreseeable future as we further increase the number of our sales and marketing professionals as we continue our geographic expansion and continue to grow our business.
General and Administrative Expenses. General and administrative expenses primarily consist of salary and personnel costs for administration, finance and accounting, legal, information systems and human resources employees, including stock-based compensation and bonuses. Additional expenses include consulting and professional fees, travel, insurance and other corporate expenses and gain or loss on disposal of assets. Expenses related to the acquisition of Airwide Solutions, including the amortization of intangible assets relating to customer relationships and technology, are included.
Operating Results
Operating results are the result of subtracting our total operating expenses from our gross profits. We use operating results to analyze the profitability of our operations without the effects of non-operating income and expenses.
Stock-Based Compensation
We include stock-based compensation as part of cost of revenue and operating expenses in connection with the grant or modification of stock options and other equity awards to our independent directors, employees and consultants. We apply the fair value method in accordance with authoritative guidance for determining the cost of stock-based compensation. The total cost of the grant or modification is measured based on the estimated fair value of the award at the date of grant. The fair value is then recognized as stock-based compensation expense over the vesting period of the award. We recorded stock-based compensation expense of $0.1 million, $0.1 million and $0.3 million for the years ended December 31, 2010, 2011 and 2012, respectively. For the six months ended June 30, 2012 and 2013, we recorded $0.1 million and $0.3 million of stock-based compensation expense.
At June 30, 2013, there was $1.2 million of total unrecognized cost related to stock options granted under our amended and restated 2013 Stock Plan, which cost is expected to be recognized over a weighted average period of 1.7 years.
Net Interest Expense
Net interest expense consists of the difference between interest income and interest expense. Interest income represents interest received on our cash and cash equivalents. Interest expense is due to commercial loans. See Liquidity and Capital Resources elsewhere in this section.
Income Tax Expense
Income tax expense consists of U.S. federal, state and non-U.S. income taxes. As of June 30, 2013, we had U.S. net operating loss carryforwards of $73.0 million ($25.6 million tax-affected), which are scheduled to begin expiring in 2024. We acquired approximately $0.8 million (tax-affected and after consideration of limitations under relevant U.S. tax rules) of these net operating loss carryforwards in 2011 as a result of the acquisition of
52
Airwide Solutions U.S. operations. Our net deferred tax asset is offset by a valuation allowance since such amounts are not considered realizable on a more-likely-than-not basis. We have not accrued a provision for income taxes on undistributed earnings of approximately $10.3 million of certain non-U.S. subsidiaries, as of June 30, 2013 since such earnings are likely to be reinvested indefinitely. If the earnings were distributed, we would be subject to U.S. federal income and foreign withholding taxes. Determination of an unrecognized deferred income tax liability with respect to such earnings is not practicable.
Results of Operations Summary
Year Ended December 31, | Six Months Ended June 30, |
|||||||||||||||||||
2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||
(unaudited) | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Revenues |
||||||||||||||||||||
Software products |
$ | 7,009 | $ | 38,264 | $ | 52,409 | $ | 29,333 | $ | 37,264 | ||||||||||
Maintenance |
1,242 | 11,240 | 21,431 | 10,616 | 10,926 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Revenue |
8,251 | 49,504 | 73,840 | 39,949 | 48,190 | |||||||||||||||
Gross profit |
3,148 | 18,720 | 43,381 | 24,858 | 27,949 | |||||||||||||||
Gross Profit Margin |
38.2 | % | 37.8 | % | 58.8 | % | 62.2 | % | 58.0 | % | ||||||||||
Operating expenses: |
||||||||||||||||||||
Research and development |
6,487 | 14,970 | 23,312 | 12,848 | 11,498 | |||||||||||||||
Sales and marketing |
3,813 | 12,332 | 20,580 | 8,607 | 9,656 | |||||||||||||||
General and administrative |
3,024 | 10,603 | 14,052 | 7,946 | 9,361 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total operating expenses |
13,324 | 37,905 | 57,944 | 29,401 | 30,515 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating loss |
(10,176 | ) | (19,185 | ) | (14,563 | ) | (4,543 | ) | (2,566 | ) | ||||||||||
Other expense (income): |
||||||||||||||||||||
Net Interest Expense |
108 | 61 | 383 | 25 | 1,107 | |||||||||||||||
Foreign exchange loss (gain) |
(21 | ) | 1,182 | (529 | ) | 871 | 2,644 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total other expense (income), net |
87 | 1,243 | (146 | ) | 896 | 3,751 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loss before income tax |
(10,263 | ) | (20,428 | ) | (14,417 | ) | (5,439 | ) | (6,317 | ) | ||||||||||
Income tax expense |
131 | 1,330 | 1,152 | 211 | 1,618 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net loss |
$ | (10,394 | ) | $ | (21,758 | ) | $ | (15,569 | ) | $ | (5,650 | ) | $ | (7,935 | ) | |||||
|
|
|
|
|
|
|
|
|
|
53
Comparison For the Six Months Ended June 30, 2012 and 2013
Revenue
Six Months Ended June 30, | Change | |||||||||||||||||||||||
2012 | % of Revenue |
2013 | % of Revenue |
Amount | % | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Revenue by type: |
||||||||||||||||||||||||
Software products |
$ | 29,333 | 73.4 | % | $ | 37,264 | 77.3 | % | $ | 7,931 | 27.0 | % | ||||||||||||
Maintenance |
10,616 | 26.6 | % | 10,926 | 22.7 | % | 310 | 2.9 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues |
$ | 39,949 | 100.0 | % | $ | 48,190 | 100.0 | % | $ | 8,241 | 20.6 | % | ||||||||||||
Revenue by Geographic Area: |
||||||||||||||||||||||||
Americas |
$ | 20,284 | 50.8 | % | $ | 21,363 | 44.3 | % | $ | 1,079 | 5.3 | % | ||||||||||||
Europe, Middle East and Africa |
12,485 | 31.2 | % | 17,669 | 36.7 | % | 5,184 | 41.5 | % | |||||||||||||||
Asia-Pacific |
7,180 | 18.0 | % | 9,158 | 19.0 | % | 1,978 | 27.5 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues |
$ | 39,949 | 100.0 | % | $ | 48,190 | 100.0 | % | $ | 8,241 | 20.6 | % | ||||||||||||
Revenue by Product Group: |
||||||||||||||||||||||||
Enhanced Messaging |
$ | 28,265 | 70.8 | % | $ | 32,847 | 68.2 | % | $ | 4,582 | 16.2 | % | ||||||||||||
Voice & Video |
11,684 | 29.2 | % | 15,343 | 31.8 | % | 3,659 | 31.3 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues |
$ | 39,949 | 100.0 | % | $ | 48,190 | 100.0 | % | $ | 8,241 | 20.6 | % |
Revenue increased $8.2 million, or 20.6%, from $39.9 million for the six months ended June 30, 2012 to $48.2 million for the same period in 2013. Our revenue growth was driven primarily by our expansion of existing customer relationships, in particular additional sales opportunities for our solutions generated by successful product launches. Most of this growth consisted of growth in software products revenue, which grew $7.9 million, or 27.0%, from $29.3 million in the six months ended June 30, 2012 to $37.3 million for the same period in 2013. The increased revenues did not reflect any increases in the pricing of our solutions. Maintenance revenues remained consistent from period to period, as growth in this revenue type lags behind the increase in software revenues.
Total revenue from the Americas region grew by $1.1 million, or 5.3%, from $20.3 million for the six months ended June 30, 2012 to $21.4 million for same period in 2013. Revenues in the EMEA region increased $5.2 million, or 41.5%, from $12.5 million for the six months ended June 30, 2012 to $17.7 million for same period in 2013. Revenues in the Asia-Pacific region increased $2.0 million, or 27.5%, from $7.2 million for the six months ended June 30, 2012 to $9.2 million for same period in 2013. Revenues in EMEA and APAC increased at a greater percentage than the Americas due to increased overall acceptance of our products, resulting in additional sales in these areas.
Revenues from Enhanced Messaging products increased by $4.6 million, or 16.2%, from $28.3 million for the six months ended June 30, 2012 to $32.8 million for same period in 2013. Revenue from the Voice and Video product group grew by $3.7 million, or 31.3%, from $11.7 million for the six months ended June 30, 2012 to $15.3 million for same period in 2013. Revenues in both product groups increased, as we generated additional sales opportunities for our next-generation solutions through successful product launches with existing customers and our existing customers rolled out our solutions to larger numbers of subscribers.
54
Cost of Revenue and Gross Profit
Six Months Ended June 30, | Change | |||||||||||||||||||||||
2012 | % of Related Revenue |
2013 | % of Related Revenue |
Amount | % | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Cost of Revenue |
||||||||||||||||||||||||
Software products |
$ | 11,247 | 38.3 | % | $ | 17,414 | 46.7 | % | $ | 6,167 | 54.8 | % | ||||||||||||
Maintenance |
3,844 | 36.2 | % | 2,827 | 25.9 | % | (1,017 | ) | (26.5 | )% | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Total |
$ | 15,091 | 37.8 | % | $ | 20,241 | 42.0 | % | $ | 5,150 | 34.1 | % | ||||||||||||
Gross Profit |
||||||||||||||||||||||||
Software products |
$ | 18,086 | 61.7 | % | $ | 19,850 | 53.3 | % | $ | 1,764 | 9.8 | % | ||||||||||||
Maintenance |
6,772 | 63.8 | % | 8,099 | 74.1 | % | 1,327 | 19.6 | % | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Total |
$ | 24,858 | 62.2 | % | $ | 27,949 | 58.0 | % | $ | 3,091 | 12.4 | % |
Our cost of revenue increased $5.2 million, or 34.1%, from $15.1 million for the six months ended June 30, 2012 to $20.2 million for the same period in 2013. Cost of revenue increased due to an increase in our sales volumes, offset by a decrease in costs primarily due to our strategic move to relocate certain functions to lower-cost regions.
Total gross profit increased $3.1 million, or 12.4%, from $24.9 million for the six months ended June 30, 2012 to $27.9 million for same period in 2013. Gross profit margin decreased from 62.2% for the six months ended June 30, 2012 to 58.0% for same period in 2013. The decrease was primarily due to the mix of revenue projects recognized in the six months ended June 30, 2013 versus the same period in 2012.
Operating Expenses
Six Months Ended June 30, | Change | |||||||||||||||||||||||
2012 | % of Revenue |
2013 | % of Revenue |
Amount | % | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Research and Development |
$ | 12,848 | 32.2 | % | $ | 11,498 | 23.9 | % | $ | (1,350 | ) | (10.5 | )% | |||||||||||
Sales and Marketing |
8,607 | 21.5 | % | 9,656 | 20.0 | % | 1,049 | 12.2 | % | |||||||||||||||
General and Administrative |
7,946 | 19.9 | % | 9,361 | 19.4 | % | 1,415 | 17.8 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 29,401 | 73.6 | % | $ | 30,515 | 63.3 | % | $ | 1,114 | 3.7 | % |
Operating expenses increased by $1.1 million, or 3.7%, from $29.4 million for the six months ended June 30, 2012 to $30.5 million for the same period in 2013 as sales growth drove direct and operational expenses higher. Research and development expenses decreased by $1.4 million, or 10.5%, from $12.9 million for the six months ended June 30, 2012 to $11.5 million for the same period in 2013 as we shifted this function to lower-cost regions. Sales and marketing expenses increased by $1.0 million, or 12.2%, from $8.6 million for the six months ended June 30, 2012 to $9.6 million for the same period in 2013, as we hired additional sales executives to further enhance direct selling opportunities and to support sales growth into additional geographic areas. General and administrative expenses increased by $1.4 million, or 17.8%, from $7.9 million for the six months ended June 30, 2012 to $9.3 million for same period in 2013 as we expanded headcount to support current and future sales growth and implement increased controls.
55
Operating Loss
Our operating loss decreased by $2.0 million for the six months ended June 30, 2013 compared to the same period in 2012, which was primarily the result of a increased gross profit, offset by an increase in operating expenses.
Net Interest Expense
Six Months Ended June 30, | Change | |||||||||||||||||||||||
2012 | % of Revenue |
2013 | % of Revenue |
Amount | % | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Interest Income |
$ | (4 | ) | 0.0 | % | $ | (8 | ) | 0.0 | % | $ | (4 | ) | 100.0 | % | |||||||||
Interest Expense |
29 | 0.1 | % | 1,115 | 2.3 | % | 1,086 | 3,744.8 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 25 | 0.1 | % | $ | 1,107 | 2.3 | % | $ | 1,082 | 4,328.0 | % |
Net interest expense increased by $1.1 million, from $0.03 million for the six months ended June 30, 2012 to $1.1 million for the same period in 2013. The change was primarily attributable to an increase in interest expense due to an increase in our outstanding debt in the second half of 2012 and during 2013.
Foreign exchange
Foreign exchange loss increased by $1.8 million, or 203.6%, from $0.9 million for the six months ended June 30, 2012 to $2.6 million for the same period in 2013. This is due to changes in transactional currencies compared to the functional currencies during the respective periods.
Income Tax Expense
Income tax expense was $0.2 million and $1.6 million for the six months ended June 30, 2012 and 2013, respectively. The income tax expense is comprised of approximately $0.7 million of taxes related to non-US income producing entities and approximately $0.9 million of non-U.S. withholding taxes.
Net Loss
The net loss of $(5.7) million for six months ended June 30, 2012 increased by $2.3 million, or 40.4%, to a $(7.9) million net loss in the same period in 2013. This was primarily due to higher interest expense and foreign exchange loss.
56
Comparison For the Years Ended December 31, 2011 and 2012
Revenue
Year Ended December 31, | Change Between Years Ended December 31, 2011 and 2012 |
|||||||||||||||||||||||
2011 | 2012 | Amount | % | |||||||||||||||||||||
Amount | %
of Total Revenue |
Amount | %
of Total Revenue |
|||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Revenue by type: |
||||||||||||||||||||||||
Software Products |
$ | 38,264 | 77.3 | % | $ | 52,409 | 71.0 | % | $ | 14,145 | 37.0 | % | ||||||||||||
Maintenance |
11,240 | 23.7 | % | 21,431 | 29.0 | % | 10,191 | 90.7 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total Revenue |
$ | 49,504 | 100.0 | % | $ | 73,840 | 100.0 | % | $ | 24,336 | 49.2 | % | ||||||||||||
Revenue by Geographic Area: |
||||||||||||||||||||||||
Americas |
$ | 26,820 | 54.2 | % | $ | 37,314 | 50.5 | % | $ | 10,494 | 39.1 | % | ||||||||||||
Europe, Middle East and Africa |
13,665 | 27.6 | % | 20,547 | 27.8 | % | 6,882 | 50.4 | % | |||||||||||||||
Asia-Pacific |
9,019 | 18.2 | % | 15,979 | 21.7 | % | 6,960 | 77.2 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total Revenue |
$ | 49,504 | 100.0 | % | $ | 73,840 | 100.0 | % | $ | 24,336 | 49.2 | % | ||||||||||||
Revenue by Product Group |
||||||||||||||||||||||||
Enhanced Messaging |
$ | 32,674 | 66.0 | % | $ | 50,834 | 68.8 | % | $ | 18,160 | 55.6 | % | ||||||||||||
Voice & Video |
16,830 | 34.0 | % | 23,006 | 31.2 | % | 6,176 | 36.7 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total Revenue |
$ | 49,504 | 100.0 | % | $ | 73,840 | 100.0 | % | $ | 24,336 | 49.2 | % |
We completed the acquisition of Airwide Solutions on May 27, 2011. The impact of the acquisition is not included in the financial results before that date.
Revenue increased $24.3 million, or 49.2%, from $49.5 million for the year ended December 31, 2011 to $73.8 million for the year ended December 31, 2012. Our revenue growth in 2012 over 2011 resulted from our expansion of existing customer relationships, in particular additional sales opportunities for our solutions generated by successful product launches, which represented $14.4 million, or 59%, of our revenue increase in 2012, as well as our ownership of Airwide Solutions for the full year of 2012 as compared to approximately seven months of the year for 2011, which represented $9.9 million, or 41%, of our revenue increase in 2012. Software products revenue grew $14.1 million, or 37.0%, from $38.3 million in 2011 to $52.4 million in 2012. The increased revenues did not reflect any increases in the pricing of our solutions. Maintenance revenue grew $10.2 million, or 90.7%, from $11.2 million in 2011 to $21.4 million in 2012, reflecting the first full year of our ownership of Airwide Solutions and access to its customer base.
Revenues in each of our geographic areas increased in 2012 from 2011 due to our ownership of Airwide Solutions for the full year of 2012 as well as customer expansion projects. Total revenue from the Americas region grew by $10.5 million, or 39.1%, from $26.8 million for the year ended December 31, 2011 to $37.3 million for the year ended December 31, 2012. Revenues in the EMEA region increased $6.8 million, or 50.4%, from $13.7 million in 2011 to $20.5 million in 2012. Revenues in the Asia-Pacific region increased $7.0 million, or 77.2%, from $9.0 million in 2011 to $16.0 million in 2012.
Revenues from Enhanced Messaging products grew by $18.1 million, or 55.6%, from $32.7 million in 2011 to $50.8 million in 2012, as we generated additional sales opportunities for our next-generation solutions through successful product launches with existing customers and our existing customers rolled out our solutions to larger numbers of subscribers. Revenue from the Voice and Video product group grew by $6.2 million, or 36.7%, from $16.8 million in 2011 to $23.0 million in 2012.
57
Cost of Revenue and Gross Profit
Year Ended December 31, | Change Between Years Ended December 31, 2011 and 2012 |
|||||||||||||||||||||||
2011 | 2012 | Amount | % | |||||||||||||||||||||
Amount | %
of Related Revenue |
Amount | %
of Related Revenue |
|||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Cost of Revenue |
||||||||||||||||||||||||
Software Products |
$ | 26,200 | 68.5 | % | $ | 23,891 | 45.6 | % | $ | (2,309 | ) | (8.8 | )% | |||||||||||
Maintenance |
4,584 | 40.8 | % | 6,568 | 30.6 | % | 1,984 | 43.3 | % | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Total |
$ | 30,784 | 62.2 | % | $ | 30,459 | 41.4 | % | $ | (325 | ) | (1.1 | )% | |||||||||||
Gross Profit |
||||||||||||||||||||||||
Software Products |
$ | 12,064 | 31.5 | % | $ | 28,518 | 54.4 | % | $ | 16,454 | 136.4 | % | ||||||||||||
Maintenance |
6,656 | 59.2 | % | 14,863 | 69.4 | % | 8,207 | 123.3 | % | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Total |
$ | 18,720 | 37.8 | % | $ | 43,381 | 58.8 | % | $ | 24,661 | 131.7 | % |
Our cost of revenue remained essentially unchanged from the year ended December 31, 2011 to the year ended December 31, 2012. Cost of revenue increased due to an increase in our sales volumes, offset by a decrease in costs primarily due to our strategic move to relocate certain functions to lower cost regions.
Total gross profit increased $24.7 million, or 131.7%, from $18.7 million for the year ended December 31, 2011 to $43.4 million for the year ended December 31, 2012. Gross profit margin increased from 37.8% for the year ended December 31, 2011 to 58.8% for the year ended December 31, 2012. Gross profit margin improved by 21 percentage points for the year ended December 31, 2012 compared to the year ended December 31, 2011 primarily due to operational efficiencies and lower costs from vendors.
Operating Expenses
Year Ended December 31, | Change Between Years Ended December 31, 2011 and 2012 |
|||||||||||||||||||||||
2011 | 2012 | Amount | % | |||||||||||||||||||||
Amount | % of Revenue |
Amount | % of Revenue |
|||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Research and Development |
$ | 14,970 | 30.2 | % | $ | 23,312 | 31.6 | % | $ | 8,342 | 55.7 | % | ||||||||||||
Sales and Marketing |
12,332 | 24.9 | % | 20,580 | 27.9 | % | 8,248 | 66.9 | % | |||||||||||||||
General and Administrative |
10,603 | 21.4 | % | 14,052 | 19.0 | % | 3,449 | 32.5 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 37,905 | 76.5 | % | $ | 57,944 | 78.5 | % | $ | 20,039 | 52.9 | % |
Operating expenses increased by $20.0 million, or 52.9%, from $37.9 million for the year ended December 31, 2011 to $57.9 million for the year ended December 31, 2012 as sales growth drove direct and operational expenses higher, as well as increased expenses from our first full year of ownership of Airwide Solutions. Research and development expenses increased by $8.3 million, or 55.7%, from $14.9 million for the year ended December 31, 2011 to $23.3 million for the year ended December 31, 2012 as we increased research and development headcount to enhance existing products and develop future product capability and new customer solutions. Sales and marketing expenses increased by $8.2 million, or 66.9%, from $12.3 million for the year ended December 31, 2011 to $20.6 million for the year ended December 31, 2012, as we hired additional sales executives to further enhance direct selling opportunities and to support sales growth into additional geographic areas. General and administrative expenses increased by $3.4 million, or 32.5%, from $10.6 million
58
for the year ended December 31, 2011 to $14.1 million for the year ended December 31, 2012 as we expanded headcount to support current and future sales growth and implement increased controls.
Operating Loss
We incurred operating losses of $(19.2) million and $(14.6) million for the years ended December 31, 2011 and 2012, respectively. Our operating loss decreased by $4.6 million for the year ended December 31, 2012, which was primarily the result of a $24.7 million increase in gross profit partially offset by the $20.0 million increase in total operating expenses described above.
Net Interest Expense
Year Ended December 31, | Change Between Year Ended December 31, 2011 and 2012 |
|||||||||||||||||||||||
2011 | 2012 | Amount | % | |||||||||||||||||||||
Amount | % of Revenue |
Amount | % of Revenue |
|||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Interest Income |
$ | (246 | ) | (0.5 | )% | $ | (10 | ) | | % | $ | 236 | (95.9 | )% | ||||||||||
Interest Expense |
307 | 0.6 | % | 393 | 0.5 | % | 86 | 28.0 | % | |||||||||||||||
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|
|
|
|
|
|||||||||||||||
Total Net Interest Expense |
$ | 61 | 0.1 | % | $ | 383 | 0.5 | % | $ | 322 | 527.9 | % |
Net interest expense increased by $0.3 million, or 527.9%, from $0.1 million for the year ended December 31, 2011 to $0.4 million for the year ended December 31, 2012. The change was primarily attributable to lower cash balances generating lower interest income and an increase in interest expense. Interest expense increased due to an increase in our average outstanding debt in 2012.
Foreign exchange
Foreign exchange (gain) loss decreased by $1.7 million, or 144.8%, from $1.2 million for the year ended December 31, 2011 to $(0.5) million for the year ended December 31, 2012. The change was attributable to foreign currency exchange movements.
Income Tax Expense
Income tax expense was $1.3 million and $1.2 million for the years ended December 31, 2011 and 2012, respectively. The income tax expense relates primarily to non-U.S. taxes.
Net Loss
The net loss of $(21.8) million for the year ended December 31, 2011 improved by $6.2 million, or 28.4%, to a $(15.6) million net loss in the corresponding period in 2012. This was primarily due to expanding gross margins from higher software expansions that generated stronger gross profits, partially offset by an increase in operating expenses.
59
Comparison For the Years Ended December 31, 2010 and 2011
Revenue
Year Ended December 31, | Change
Between Years Ended December 31, 2010 and 2011 |
|||||||||||||||||||||||
2010 | 2011 | |||||||||||||||||||||||
Amount | % of Total Revenue |
Amount | % of Total Revenue |
Amount | % | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Revenue by Type: |
||||||||||||||||||||||||
Software Products |
$ | 7,009 | 84.9 | % | $ | 38,264 | 77.3 | % | $ | 31,255 | 445.9 | % | ||||||||||||
Maintenance |
1,242 | 15.1 | % | 11,240 | 22.7 | % | 9,998 | 805.0 | % | |||||||||||||||
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|
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|
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|
|||||||||||||||
Total Revenue |
$ | 8,251 | 100.0 | % | $ | 49,504 | 100.0 | % | $ | 41,253 | 500.0 | % | ||||||||||||
Revenue by Geographic Area: |
||||||||||||||||||||||||
Americas |
$ | 8,142 | 98.7 | % | $ | 26,820 | 54.2 | % | $ | 18,678 | 229.4 | % | ||||||||||||
Europe, Middle East and Africa |
| | 13,665 | 27.6 | % | 13,665 | N/A | |||||||||||||||||
Asia-Pacific |
109 | 1.3 | % | 9,019 | 18.2 | % | 8,910 | 8,174.3 | % | |||||||||||||||
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|
|||||||||||||||
Total Revenue |
$ | 8,251 | 100.0 | % | $ | 49,504 | 100.0 | % | $ | 41,253 | 500.0 | % | ||||||||||||
Revenue by Product Groups: |
||||||||||||||||||||||||
Enhanced Messaging |
$ | 4,652 | 56.4 | % | $ | 32,674 | 66.0 | % | $ | 28,022 | 602.4 | % | ||||||||||||
Voice & Video |
3,599 | 43.6 | % | 16,830 | 34.0 | % | 13,231 | 367.6 | % | |||||||||||||||
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|
|
|
|||||||||||||||
Total Revenue |
$ | 8,251 | 100.0 | % | $ | 49,504 | 100.0 | % | $ | 41,253 | 500.0 | % |
We completed the acquisition of Airwide Solutions on May 27, 2011. The impact of the acquisition is not included in the financial results before that date.
Our revenue increased $41.2 million, or 500.0%, from $8.3 million in 2010 to $49.5 million in 2011. Excluding revenue attributable to Airwide Solutions, revenue increased $18.8 million, or 227%, from $8.3 million in 2010 to $27.1 million in 2011, of which $11.2 million resulted from our expansion of existing customer relationships and $7.6 million reflected revenue from new customers. Customers that we obtained through our acquisition of Airwide Solutions accounted for $22.4 million of our growth in revenue. Software products revenue increased $31.3 million, or 445.9%. The increased revenues did not reflect any increases in pricing of our solutions. Excluding revenue attributable to Airwide Solutions, software products revenue increased $18.7 million, or 267%, from $7.0 million in 2010 to $25.7 million in 2011. Customers that we obtained through our acquisition of Airwide Solutions accounted for $13.0 million of our growth in software products revenue. Maintenance revenue increased $10.0 million, or 805.0%, primarily due to a larger installed base of customer deployments supported in the acquired Airwide Solutions business, compared to the relatively smaller installed base of customer deployments of the mOne® Convergence Platform. Excluding revenue attributable to Airwide Solutions, maintenance revenue increased $0.2 million, or 17%, from $1.2 million in 2010 to $1.4 million in 2011. Customers that we obtained through our acquisition of Airwide Solutions accounted for $9.4 million of our growth in maintenance revenue.
Our acquisition of Airwide Solutions in 2011 added approximately 110 customers worldwide to our base of customers, which had previously numbered less than ten customers. Management anticipates that future period deployments of new and existing Enhanced Messaging and Voice and Video products to this larger existing customer base will become a significant contributor to revenue growth.
Revenues in each geographic area also increased in 2011 from 2010 as our customer base grew. Revenues increased significantly across all geographic areas as we won new business from Voice and Video as well as Enhanced Messaging products. Total revenue from the Americas region grew by $18.7 million, or 229.4%, from $8.1 million in 2010 to $26.8 million in 2011. Excluding those sales attributable to the Airwide Solutions business, sales in the Americas region grew by $14.9 million, or 184%, from $8.1 million in 2010 to $23.0 million in 2011. Customers that we obtained through our acquisition of Airwide Solutions accounted for $3.8 million of our growth in sales in the Americas region. We expanded operations into the Europe, Middle East and Africa (EMEA) region, with revenues in
60
that region growing from zero in 2010 to $13.7 million in 2011. Excluding revenues from the Airwide Solutions business, revenues in the EMEA region grew from zero in 2010 to $2.4 million in 2011. Customers that we obtained through our acquisition of Airwide Solutions accounted for $11.3 million of our growth in sales in the EMEA region. Revenues in the Asia-Pacific region increased by $8.9 million, or 8,174.3%, from $0.1 million in 2010 to $9.0 million in 2011. Excluding sales from the Airwide Solutions business, sales in the Asia-Pacific region grew 1,700%, from $0.1 million in 2010 to $1.8 million in 2011. Customers that we obtained through our acquisition of Airwide Solutions accounted for $7.3 million of our growth in sales in the Asia-Pacific region.
Revenues from sales of Enhanced Messaging products grew by $28.0 million, or 602.4%, as the existing customer base increased subscriber levels and we obtained new customers as well. Excluding the impact from the acquired Airwide Solutions business, Enhanced Messaging revenues increased by 183% from $4.7 million in 2010 to $13.3 million in 2011. Customers that we obtained through our acquisition of Airwide Solutions accounted for $19.4 million of our growth in Enhanced Messaging revenues. Revenue from the Voice and Video product group grew by $13.2 million, or 367.6%, from $3.6 million in 2010 to $16.8 million in 2011. Excluding revenues attributable to the acquired Airwide Solutions business, Voice and Video revenues increased by $10.2 million, or 283%, growing from $3.6 million in 2010 to $13.8 million in 2011. Customers that we obtained through our acquisition of Airwide Solutions accounted for $3.0 million of our growth in Voice and Video revenues.
Revenues from sales of Enhanced Messaging products grew by 602.4% in 2011 compared to 2010, or almost twice as fast as revenues from sales of Voice and Video products, which grew 367.6% in 2011 compared to 2010. This difference is mainly a result of the Airwide Solutions acquisition. The Airwide Solutions acquisition contributed more revenue from sales of Enhanced Messaging products than revenue from sales of Voice and Video products, and this resulted in more rapid growth in 2011 in revenues from sales of Enhanced Messaging products compared to revenues from sales of Voice and Video products.
Cost of Revenue and Gross Profit
Year Ended December 31, | Change Between Years Ended December 31, 2010 and 2011 |
|||||||||||||||||||||||
2010 | 2011 | |||||||||||||||||||||||
Amount | %
of Related Revenue |
Amount | %
of Related Revenue |
Amount | % | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Cost of Revenue |
||||||||||||||||||||||||
Software Products |
$ | 4,537 | 64.7 | % | $ | 26,200 | 68.5 | % | $ | 21,663 | 477.5 | % | ||||||||||||
Maintenance |
566 | 45.6 | % | 4,584 | 40.8 | % | 4,018 | 709.9 | % | |||||||||||||||
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|
|
|||||||||||||||||||
Total |
$ | 5,103 | 61.8 | % | $ | 30,784 | 62.2 | % | $ | 25,681 | 503.3 | % | ||||||||||||
Gross Profit |
||||||||||||||||||||||||
Software Products |
$ | 2,472 | 35.3 | % | $ | 12,064 | 31.5 | % | $ | 9,592 | 388.0 | % | ||||||||||||
Maintenance |
676 | 54.4 | % | 6,656 | 59.2 | % | 5,980 | 884.6 | % | |||||||||||||||
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|
|
|
|
|||||||||||||||||||
Total |
$ | 3,148 | 38.2 | % | $ | 18,720 | 37.8 | % | $ | 15,572 | 494.7 | % |
Cost of revenue increased 503.3% from $5.1 million in 2010 to $30.8 million in 2011, which was primarily attributable to growth in revenue and additional costs incurred as a result of the acquisition of Airwide Solutions. Excluding costs of revenue attributable to the acquisition of Airwide Solutions, cost of revenue increased 256% from $5.1 million in 2010 to $18.4 million in 2011, driven primarily by increased success in sales during that period.
Total gross profit increased $15.6 million, or 494.7%, from $3.1 million in 2010 to $18.7 million in 2011. As a result of total gross profit increases and actions taken to improve gross margins, gross profit margin was unchanged at 38% in 2010 and 2011.
61
Operating Expenses
Year Ended December 31, | Change Between Years Ended December 31, 2010 and 2011 |
|||||||||||||||||||||||
2010 | 2011 | |||||||||||||||||||||||
Amount | % of Revenue |
Amount | % of Revenue |
Amount | % | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Research and Development |
$ | 6,487 | 78.6 | % | $ | 14,970 | 30.2 | % | $ | 8,483 | 130.8 | % | ||||||||||||
Sales and Marketing |
3,813 | 46.2 | % | 12,332 | 24.9 | % | 8,519 | 223.4 | % | |||||||||||||||
General and Administrative |
3,024 | 36.7 | % | 10,603 | 21.4 | % | 7,579 | 250.6 | % | |||||||||||||||
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|
|
|
|
|
|
|||||||||||||||
Total |
$ | 13,324 | 161.5 | % | $ | 37,905 | 76.5 | % | $ | 24,581 | 184.5 | % |
Operating expenses increased 184.5% from $13.3 million in 2010 to $37.9 million in 2011, in line with expectations and in order to support rising revenue growth. Research and development expenses increased by $8.5 million, or 130.8%, from $6.5 million in 2010 to $15.0 million in 2011 as we increased research and development headcount to enhance existing products and develop future product capability and new customer solutions. Sales and marketing expenses increased by $8.5 million, or 223.4%, from $3.8 million in 2010 to $12.3 million in 2011, as we hired additional sales executives to further enhance direct selling opportunities and to increase regional resources to more effectively engage customers and prospective customers outside of the Americas region. General and administrative expenses increased by $7.6 million, or 250.6%, from $3.0 million in 2010 to $10.6 million in 2011 as we expanded headcount to support current and future sales growth and implement increased controls.
Operating Loss
Our operating loss increased by $9.0 million, or 88.5%, from $(10.2) million in 2010 to $(19.2) million in 2011, which was primarily the result of the $15.6 million increase in gross profit being more than offset by the $24.6 million increase in total operating expenses described above.
Net Interest Expense
Year Ended December 31, | Change Between Years Ended December 31, 2010 and 2011 |
|||||||||||||||||||||||
2010 | 2011 | |||||||||||||||||||||||
Amount | % of Revenue |
Amount | % of Revenue |
Amount | % | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Interest Income |
$ | (4 | ) | | $ | (246 | ) | (0.5 | )% | $ | (242 | ) | 6,050.0 | % | ||||||||||
Interest Expense |
112 | 1.4 | % | 307 | 0.6 | % | 195 | 174.1 | % | |||||||||||||||
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|
|
|
|
|
|
|
|||||||||||||||
Total Net Interest Expense |
$ | 108 | 1.4 | % | $ | 61 | 0.1 | $ | (47 | ) | (43.5 | )% |
Net interest expense improved by 43.5% from $0.1 million in 2010 to $0.06 million in 2011, primarily due to higher interest income as a result of higher cash balances, partially offset by higher interest expense associated with a higher average balance outstanding on bank lines in 2011 compared to 2010.
Foreign exchange
Foreign exchange (gain) loss increased by $1.2 million, or 5,728.6%, from a $(0.02) million gain for the year ended December 31, 2010 to $1.2 million loss for the year ended December 31, 2011. The change was attributable to the increased exposure to foreign currency exchange movements with the Airwide Solutions acquisition.
62
Income Tax Expense
Income tax expense increased from $0.1 million in 2010 to $1.3 million in 2011. The increase in income tax expense relates primarily to our non-U.S. subsidiaries that were acquired on May 27, 2011 as part of the Airwide Solutions acquisition that had net taxable income in seven jurisdictions.
Net Loss
Our net loss in 2010 was $(10.4) million as compared to $(21.8) million in 2011, a difference of 109.3%. The change was primarily due to higher operating expenses in 2011, which outpaced gross profit expansion.
Quarterly Results of Operations
The tables below show our unaudited consolidated quarterly results of operations for each of our eight most recently completed quarters, as well as the percentage of total revenue (or, for cost of revenue line items only, the percentage of the related revenue type) for each line item shown. This information has been derived from our unaudited condensed consolidated financial statements, which, in the opinion of management, have been prepared on the same basis as our audited consolidated financial statements and include all adjustments, consisting of normal recurring adjustments and accruals, necessary for the fair presentation of the financial information for the quarters presented. This information should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this prospectus.
Three Months Ended, | ||||||||||||||||||||||||||||||||
Sep. 30, 2011 |
Dec. 31, 2011 |
Mar. 31, 2012 |
June 30, 2012 |
Sep. 30, 2012 |
Dec. 31, 2012 |
Mar. 31, 2013 |
June 30, 2013 |
|||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Statements of Operations Data: |
||||||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||||||
Software products |
$ | 7,145 | $ | 19,396 | $ | 15,601 | $ | 13,732 | $ | 11,848 | $ | 11,228 | $ | 17,727 | $ | 19,537 | ||||||||||||||||
Maintenance |
4,727 | 4,741 | 5,321 | 5,295 | 5,260 | 5,555 | 4,711 | 6,215 | ||||||||||||||||||||||||
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|
|||||||||||||||||
Total Revenues |
11,872 | 24,137 | 20,922 | 19,027 | 17,108 | 16,783 | 22,438 | 25,752 | ||||||||||||||||||||||||
Cost of revenues |
||||||||||||||||||||||||||||||||
Software products |
5,039 | 13,956 | 6,118 | 5,129 | 6,068 | 6,576 | 6,651 | 10,763 | ||||||||||||||||||||||||
Maintenance |
1,998 | 1,130 | 1,722 | 2,122 | 1,900 | 824 | 1,330 | 1,497 | ||||||||||||||||||||||||
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|
|
|||||||||||||||||
Total Cost of Revenues |
7,037 | 15,086 | 7,840 | 7,251 | 7,968 | 7,400 | 7,981 | 12,260 | ||||||||||||||||||||||||
Gross profit |
4,835 | 9,051 | 13,082 | 11,776 | 9,140 | 9,383 | 14,457 | 13,492 | ||||||||||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||||||||||
Research and development |
5,408 | 4,213 | 6,987 | 5,861 | 5,552 | 4,912 | 6,122 | 5,376 | ||||||||||||||||||||||||
Sales and marketing |
3,445 | 5,508 | 4,326 | 4,281 | 4,025 | 7,948 | 5,041 | 4,615 | ||||||||||||||||||||||||
General and administrative |
3,279 | 3,856 | 4,182 | 3,764 | 3,995 | 2,111 | 4,991 | 4,370 | ||||||||||||||||||||||||
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|
|
|||||||||||||||||
Total operating expenses |
12,132 | 13,577 | 15,495 | 13,906 | 13,572 | 14,971 | 16,154 | 14,361 | ||||||||||||||||||||||||
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|
|
|||||||||||||||||
Operating loss |
(7,297 | ) | (4,526 | ) | (2,413 | ) | (2,130 | ) | (4,432 | ) | (5,588 | ) | (1,697 | ) | (869 | ) |
63
Three Months Ended, | ||||||||||||||||||||||||||||||||
Sep. 30, 2011 |
Dec. 31, 2011 |
Mar. 31, 2012 |
June 30, 2012 |
Sep. 30, 2012 |
Dec. 31, 2012 |
Mar. 31, 2013 |
June 30, 2013 |
|||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Other expense (income): |
||||||||||||||||||||||||||||||||
Interest income |
(104 | ) | (96 | ) | (2 | ) | (2 | ) | (6 | ) | | (5 | ) | (3 | ) | |||||||||||||||||
Interest expense |
119 | 125 | 10 | 19 | 44 | 320 | 450 | 665 | ||||||||||||||||||||||||
Foreign exchange loss (gain) |
703 | 1,091 | (366 | ) | 1,237 | (1,095 | ) | (305 | ) | 1,732 | 912 | |||||||||||||||||||||
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|
|||||||||||||||||
Total other expense (income), net |
718 | 1,120 | (358 | ) | 1,254 | (1,057 | ) | 15 | 2,177 | 1,574 | ||||||||||||||||||||||
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|
|
|||||||||||||||||
Loss before income tax |
(8,015 | ) | (5,646 | ) | (2,055 | ) | (3,384 | ) | (3,375 | ) | (5,603 | ) | (3,874 | ) | (2,443 | ) | ||||||||||||||||
Income tax expense |
728 | 398 | 78 | 133 | 43 | 898 | 420 | 1,198 | ||||||||||||||||||||||||
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|
|||||||||||||||||
Net loss |
$ | (8,743 | ) | $ | (6,044 | ) | $ | (2,133 | ) | $ | (3,517 | ) | $ | (3,418 | ) | $ | (6,501 | ) | $ | (4,294 | ) | $ | (3,641 | ) | ||||||||
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|
Three Months Ended, | ||||||||||||||||||||||||||||||||
Sep. 30, 2011 |
Dec. 31, 2011 |
Mar. 31, 2012 |
June 30, 2012 |
Sep. 30, 2012 |
Dec. 31, 2012 |
Mar. 31, 2013 |
June 30, 2013 |
|||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Statements of Operations Data: |
||||||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||||||
Software products |
60 | % | 80 | % | 75 | % | 72 | % | 69 | % | 67 | % | 79 | % | 76 | % | ||||||||||||||||
Maintenance |
40 | % | 20 | % | 25 | % | 28 | % | 31 | % | 33 | % | 21 | % | 24 | % | ||||||||||||||||
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|||||||||||||||||
Total Revenues |
100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||||||
Cost of revenues |
||||||||||||||||||||||||||||||||
Software products |
42 | % | 58 | % | 29 | % | 27 | % | 35 | % | 39 | % | 30 | % | 42 | % | ||||||||||||||||
Maintenance |
17 | % | 5 | % | 8 | % | 11 | % | 11 | % | 5 | % | 6 | % | 6 | % | ||||||||||||||||
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Total Cost of Revenues |
59 | % | 63 | % | 37 | % | 38 | % | 47 | % | 44 | % | 36 | % | 48 | % | ||||||||||||||||
Gross profit |
41 | % | 37 | % | 63 | % | 62 | % | 53 | % | 56 | % | 64 | % | 52 | % | ||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||||||||||
Research and development |
46 | % | 17 | % | 33 | % | 31 | % | 32 | % | 29 | % | 27 | % | 21 | % | ||||||||||||||||
Sales and marketing |
29 | % | 23 | % | 21 | % | 22 | % | 24 | % | 47 | % | 22 | % | 18 | % | ||||||||||||||||
General and administrative |
28 | % | 16 | % | 20 | % | 20 | % | 23 | % | 13 | % | 22 | % | 17 | % | ||||||||||||||||
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|
|||||||||||||||||
Total operating expenses |
102 | % | 56 | % | 74 | % | 73 | % | 79 | % | 89 | % | 72 | % | 56 | % | ||||||||||||||||
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|
|||||||||||||||||
Operating loss |
(61 | )% | (19 | )% | (12 | )% | (11 | )% | (26 | )% | (33 | )% | (8 | )% | (3 | )% | ||||||||||||||||
Other expense (income): |
||||||||||||||||||||||||||||||||
Interest income |
(1 | )% | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||||||||||
Interest expense |
1 | % | 1 | % | 0 | % | 0 | % | 0 | % | 2 | % | 2 | % | 3 | % | ||||||||||||||||
Foreign exchange loss (gain) |
6 | % | 5 | % | (2 | )% | 7 | % | (6 | )% | (2 | )% | 8 | % | 4 | % | ||||||||||||||||
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|||||||||||||||||
Total other expense (income), net |
6 | % | 5 | % | (2 | )% | 7 | % | (6 | )% | 0 | % | 10 | % | 7 | % | ||||||||||||||||
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|
|||||||||||||||||
Loss before income tax |
(68 | )% | (23 | )% | (10 | )% | (18 | )% | (20 | )% | (33 | )% | (18 | )% | (10 | )% | ||||||||||||||||
Income tax expense |
6 | % | 2 | % | 0 | % | 1 | % | 0 | % | 5 | % | 2 | % | 5 | % | ||||||||||||||||
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|
|
|||||||||||||||||
Net loss |
(74 | )% | (25 | )% | (10 | )% | (18 | )% | (20 | )% | (39 | )% | (20 | )% | (15 | )% | ||||||||||||||||
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|
Variability in Quarterly Results
Our quarterly results vary significantly as a result of many factors, many of which are outside our control. These factors include customer ordering practices and deployment cycles, the impact of deferred revenue and general economic conditions. Results of operations during the second, third and fourth quarters of 2011 were
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impacted by the acquisition of Airwide. Our historical results should not be considered a reliable indicator of our future results of operations.
Critical Accounting Policies and Significant Judgments and Estimates
Our managements discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported period. In accordance with U.S. GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are more fully described in Note 1 to our consolidated financial statements appearing elsewhere in this prospectus, we believe the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our consolidated financial statements.
Revenue Recognition
We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sale price is fixed or determinable and collectability is reasonably assured. We recognize revenue in accordance with either the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 985-605, Software Revenue Recognition, as amended, or with ASC 605-025 Multiple Element Arrangements (MEAs), with consideration to ASC 605-035 Construction-Type and Production-Type Contracts.
We first determine whether our products consist of tangible products that contain essential software elements and as such, are excluded from the software revenue recognition method of accounting.
Our products and services are sold through distribution partners and directly through our sales force. We typically do not offer contractual rights of return, stock balancing or price protection to our distribution partners, however, our Reseller OEM Agreement with Cisco Systems does provide for certain price protection, as described in more detail in Certain Relationships and Related Person Transactions Reseller Agreement with Cisco Systems, actual product returns from them have been insignificant to date. As a result, we do not currently maintain allowances for product returns and related services.
Judgment is required in the determination of company-specific objective evidence of fair value, which may impact the timing and amount of revenue recognized depending on whether company-specific objective evidence of fair value can be demonstrated for the undelivered elements of a software arrangement and the approaches used to demonstrate company-specific objective evidence of fair value.
The percentage-of-completion method requires us to make estimates about total revenue, total cost to complete the project and the stage of completion. The assumptions, estimates and uncertainties inherent in determining the stage of completion affect the timing and amounts of revenue recognized and expenses reported. If we do not have a sufficient basis to measure the progress of completion or to estimate the total contract revenue and costs, revenue recognition is limited to the amount of contract costs incurred. The determination of whether a sufficient basis to measure the progress of completion exists is judgmental. Changes in estimates of progress towards completion and of contract revenue and contract costs are accounted for as cumulative catch-up adjustments to the reported revenue for the applicable contract.
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Software Related Revenue Recognition
Certain of our software products are delivered under contracts, which generally require significant integration within a customers production and business system environment. As our agreements generally require significant production, modification or customization of the software, we account for these agreements under the percentage-of-completion method on the basis of hours incurred to date compared to total hours expected under the contract. Therefore, management must also make key judgments in areas such as the percentage-of-completion, estimates of project revenue, costs and margin, estimates of total and remaining project hours and liquidated damages assessments. Changes in job performance, job conditions, estimated profitability, final contract settlements and resolution of claims may result in a revision to job costs and income amount that are different than amounts originally estimated. At the time a loss on a contract is known, the entire amount of the estimated loss is accrued.
In certain situations, we sell software that does not require significant modification of services considered essential to the softwares functionality. Such software, generally consisting of capacity license upgrades, is recognized upon delivery if the other revenue recognition criteria are met.
For multiple element software arrangements (MESs), each element of the arrangement is analyzed and allocated a portion of the total arrangement fee to the elements based on the fair value of the element using vendor-specific objective evidence (VSOE) of fair value, regardless of any separate prices stated within the contract for each element. Fair value is considered the price a customer would be required to pay if the element were sold separately based on our historical experience of stand-alone sales of these elements to third parties. For post contract support such as maintenance (PCS), we use renewal rates for continued support arrangements to determine fair value. For software services, we use the fair value we charge our customers when those services are sold separately. We monitor our transactions at least annually to ensure we maintain and periodically revise VSOE to reflect fair value.
Tangible Product Containing Essential Software
Certain of our software products are delivered under contracts, which generally require hardware, in which we customize and then install software and integrate within a customers production and business system environment. The first deliverable is the hardware and software essential to the functionality of the hardware device delivered at the time of sale and the second deliverable is the PCS. Recognition of substantially all of the hardware and software revenue elements occur upon delivery and customer acceptance, with PCS recognized ratably over the service period of generally twelve months. Revenue from arrangements for the sale of tangible products containing both software and non-software components that function together to deliver the products essential functionality requires allocation of the arrangement consideration to the separate deliverables using the relative selling price method (RSP) of each unit of accounting based first on VSOE if it exists, second on third-party evidence (TPE) if it exists, and on estimated selling price (ESP) if neither VSOE nor TPE exist. We use ESP when allocating arrangement consideration to each separate deliverable as we do not have VSOE or TPE of selling price for our various applicable tangible products containing essential software products and services.
The related costs associated with the delivered product which does not yet meet the criteria to be recognized as revenue is deferred. The cost of such products is charged to cost of revenue on a proportionate basis similar to the manner in which the related revenue is recognized. Deferred cost represents the cost of direct and incremental items purchased for contracts not yet delivered to customers. Costs of revenue principally consist of the costs of third-party hardware, payroll-related costs for service personnel and third-party licenses.
In cases where final acceptance has occurred but we have not as yet invoiced the customer, we have accounted for the amount to be invoiced as unbilled revenue. Customers are billed in accordance with specific contract terms, which may differ from the rate at which revenue is earned. Amounts received from customers pursuant to the terms specified in contracts, but for which revenue has not yet been recognized, are recorded as deferred revenue.
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Our process for determining ESPs involves managements judgment and considers multiple factors that may vary over time depending upon the unique facts and circumstances related to each deliverable. If the facts and circumstances underlying the factors considered change, our ESPs and the future rate of related maintenance could change.
Maintenance
Maintenance consists of PCS agreements and our customers generally enter into PCS agreements when they purchase our products. Our PCS agreements range from one to three years and are typically renewable on an annual basis, thereafter, at the option of the customer. Revenue allocated to PCS is recognized ratably on a straight-line basis over the period the PCS is provided, assuming all other criteria for revenue recognition has been met. All significant costs and expenses associated with PCS are expensed as incurred. For our software products, we have established VSOE of fair value for the PCS. Rates for maintenance, including subsequent renewal rates, are typically established based upon a specific percentage of the products provided, as set forth in the arrangement with the customer. For our tangible products (which all contain essential software), our customers generally enter into PCS arrangements when they purchase these tangible products. Fair value for the maintenance and support obligations for tangible products is based upon the ESP.
Software Development Costs
Software development costs incurred prior to the establishment of technological feasibility are expensed as incurred as research and development expense. Software development costs incurred subsequent to the establishment of technological feasibility, if any, are capitalized until the software is available for general release to customers. For each software release, judgment is required to evaluate when technological feasibility has occurred. Historically, we have determined that technological feasibility has been established at approximately the same time as our general release of such software to customers. Therefore, to date, we have not capitalized any software development costs.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are stated at realizable value, net of an allowance for doubtful accounts that is maintained for estimated losses that would result from the inability of some customers to make payments as they become due. The allowance is based on an analysis of past due amounts and ongoing credit evaluations. Customers are generally evaluated for creditworthiness through a credit review process at the time of each order. Our collection experience has been consistent with our estimates.
Business Combinations
We account for business combinations under the acquisition method of accounting, which requires the assets acquired and liabilities assumed to be recorded at their respective fair values as of the acquisition date in our consolidated financial statements.
Intangible Assets and Goodwill
Our business acquisitions typically result in the creation of goodwill and other intangible asset balances, and these balances affect the amount and timing of future period amortization expense, as well as expense we could possibly incur as a result of an impairment charge. The cost of acquired companies is allocated to identifiable tangible and intangible assets based on estimated fair value, with the excess allocated to goodwill. Accordingly, we have a significant balance of acquisition date intangible assets, including, customer-related intangibles, technology and goodwill. These intangible assets (other than goodwill) are amortized over their estimated useful lives. We currently have no intangible assets with indefinite lives other than goodwill.
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We evaluate goodwill for impairment annually as of October 1, or more frequently if impairment indicators arise. We perform a two-step impairment test on goodwill. In the first step, we compare the fair value of each reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not considered impaired and we are not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step of the impairment test in order to determine the implied fair value of the reporting units goodwill. If the carrying value of a reporting units goodwill exceeds the assets implied fair value, then we would record an impairment loss equal to the difference. The fair values calculated in our impairment tests are determined using discounted cash flow models involving several assumptions. These assumptions include, but are not limited to, anticipated operating income growth rates, our long-term anticipated operating income growth rate and the discount rate. Our cash flow forecasts are based on assumptions that are consistent with the plans and estimates we are using to manage the underlying businesses. The assumptions that are used are based upon what we believe a hypothetical marketplace participant would use in estimating fair value. Assets, liabilities and goodwill have been assigned to reporting units based on assets acquired and liabilities assumed as of the date of acquisition. We evaluate the reasonableness of the fair value calculations of our reporting units by comparing the total of the fair value of all of our reporting units to our total enterprise valuation. We base our fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Our annual goodwill impairment analysis, which we performed during the fourth quarter of 2012, did not result in an impairment charge.
All intangible assets with definite lives are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of other intangible assets is measured by comparison of the carrying amount to estimated undiscounted future cash flows. The assessment of recoverability or of the estimated useful life for amortization purposes will be affected if the timing or the amount of estimated future operating cash flows is not achieved. Such indicators may include, among others: a significant decline in expected future cash flows; a sustained, significant decline in stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; and reductions in growth rates. In addition, products, capabilities, or technologies developed by others may render our software products obsolete or non-competitive. Any adverse change in these factors could have a significant impact on the recoverability of goodwill or other intangible assets. During 2011, we did not identify any triggering events which would require an update to our annual impairment review of intangible assets.
The weighted estimated useful lives used in computing amortization of intangible assets are as follows:
Technology |
72 months | |
Customer Relationships |
72 months | |
Certification |
36 months | |
Contractual Backlog |
7 months |
Stock-Based Compensation
Stock-based compensation represents the cost related to stock-based awards granted to employees. We measure stock-based compensation cost at the grant date, based on the estimated fair value of the award and recognize the cost as an expense on a straight-line basis over the employee requisite service period, which is generally the vesting period.
Historically, the amount of stock-based compensation expense we have recognized has not been material to our results of operations. We expect that we will make more stock awards following this offering and the amount of stock-based compensation may increase.
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Determination of the fair value of stock-based compensation grants
We estimate the fair value of stock options without market-based performance conditions using the Black-Scholes valuation model using a number of assumptions, including the risk-free interest rate, expected dividend yield, expected term and expected volatility.
The expense is recorded in general and administrative in the consolidated statement of operations and comprehensive income. We record deferred tax assets for awards that result in deductions on our income tax returns, based on the amount of compensation cost recognized and our statutory tax rate in the jurisdiction in which the award will receive a deduction. Differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deductions reported on our income tax returns are recorded as additional paid-in capital (if the tax deduction exceeds the deferred tax asset) or in the consolidated statement of operations and comprehensive loss (if the deferred tax asset exceeds the tax deduction and no additional paid-in capital exists from previous awards).
The following summarizes the assumptions used for estimating the fair value of stock options granted for the periods indicated:
Year Ended December 31, | Six Months Ended June 30, | |||||||
2010 | 2011 | 2012 | 2013 | |||||
(unaudited) | ||||||||
Expected dividends |
0% | 0% | 0% | 0% | ||||
Risk-free interest rate (U.S. Treasury) |
2.8% | 2.1% | 1.7% | 2.0% | ||||
Expected term |
6.1 years | 6.2 years | 6.3 years | 6.3 years | ||||
Expected volatility |
47.0% | 60.0% | 62.0% | 58.0% |
We have assumed no dividend yield because we do not expect to pay dividends in the near future, which is consistent with our history of not paying dividends. The risk-free interest rate assumption is based upon observed interest rates for constant maturity U.S. Treasury securities consistent with the term of our employee stock options. The expected life of a stock option is derived from the average of the vesting period and the expiration period from the date of issue of the award. Expected volatility is based on the historical volatility of comparable public companies, including public communications software and telecommunications companies. In 2011, as a result of the continued evolution and ongoing development of new solutions, including those obtained through our acquisition of Airwide Solutions in May 2011, we began basing expected volatility on a different peer group of public companies than we had used previously. We have used the same peer group of public companies for the valuation obtained in June 2011 and later valuations. We selected this group of companies because their mix of businesses and financial characteristics are reasonably similar to ours, but there are differences between us and these companies. For example, the public companies included in our peer group have a larger revenue scale than us and have achieved profitability, whereas we have yet to do so. Additionally, some of the public companies in our peer group sell their products to a broader group of customers that includes enterprise customers, wireline service providers and wireless service providers, whereas we only sell to wireless service providers at this time. Finally, some of these companies manufacture their own hardware platforms to accompany their software solutions, whereas we provide our solutions via third-party hardware platforms.
The following table summarizes by grant date the number of shares of common stock subject to stock options granted by our Board of Directors from January 1, 2010 through June 30, 2013, as well as associated per share exercise price and the estimated fair value per share of our common stock on the grant date. The exercise prices of options granted from January 1, 2010 through June 30, 2013 are equal to the estimated fair value per share of our common stock on the grant date. On August 7, 2013, our Board of Directors approved the grant of options to purchase 750,000 shares of our common stock with an exercise price equal to the initial public offering price set forth on the cover page of this prospectus.
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Grant Date |
Number of Shares Underlying Options Granted |
Exercise Price Per Share |
Estimated Fair Value Per Share |
|||||||||
Jan. 26, 2010 to Apr. 21, 2010 |
2,911,438 | $ | 0.09 | $ | 0.09 | |||||||
Oct. 14, 2010 to Apr. 20, 2011 |
2,181,216 | $ | 0.11 | $ | 0.11 | |||||||
Dec. 13, 2011 to Jan. 25, 2012 |
7,086,667 | $ | 0.30 | $ | 0.30 | |||||||
Sept. 11, 2012 |
2,511,275 | $ | 0.73 | $ | 0.73 | |||||||
Oct. 30, 2012 |
520,750 | $ | 0.73 | $ | 0.73 | |||||||
January 23, 2013 |
768,168 | $ | 1.11 | $ | 1.11 | |||||||
March 19, 2013 |
182,300 | $ | 1.20 | $ | 1.20 | |||||||
May 8, 2013 |
209,250 | $ | 1.20 | $ | 1.20 | |||||||
June 17, 2013 |
609,250 | $ | 1.20 | $ | 1.20 | |||||||
June 25, 2013 |
25,000 | $ | 1.20 | $ | 1.20 |
As described above, we recognize stock-based compensation cost as an expense on a straight-line basis over the employee requisite service period, which is generally the vesting period.
Determination of the Fair Value of Common Stock on Grant or Modification Dates
We are a private company with no active public market for our common stock. Therefore, in response to Section 409A of the Internal Revenue Code of 1986, as amended, or the Code, and related regulations issued by the IRS, we have periodically obtained contemporaneous valuations consistent with the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, or the Practice Aid, prepared by an unrelated third-party valuation firm in order to assist us in determining the fair value of our common stock. More recently, we obtained valuations from third parties that also based analysis on fair value under FASB ASC Topic 718, CompensationStock Compensation. For the purposes of Section 409A of the Code, such contemporaneous third-party valuations may be used for up to one year so long as no significant business event occurs after the date of the valuation. In conducting these valuations, each unrelated third-party valuation firm considered all objective and subjective factors that it believed to be relevant in each valuation conducted, including managements best estimate of our business condition, prospects and operating performance at each valuation date. Our Board of Directors has considered these reports when determining the fair value of our common stock and related exercise prices of option awards on the date such awards were granted. These third-party valuations were also used for purposes of determining the Black-Scholes fair value of our stock option awards and related stock-based compensation expense. When determining the fair market value of our common stock, our Board of Directors gives the greatest consideration to the valuation analyses prepared by an unrelated third-party valuation firm as described above; however, other factors considered include the following:
| the fact that we are a private technology company lacking an active public market for our common stock and preferred stock; |
| our historical operating results; |
| our discounted future cash flows, based on our projected operating results; |
| valuations of comparable public companies; |
| the potential impact on common stock of liquidation preference and participating preference rights of preferred stock for certain valuation scenarios; |
| the relative rights, preferences and privileges of our preferred stock relative to our common stock; |
| our stage of development and business strategy; |
| the likelihood of achieving a liquidity event for shares of our common stock, such as an IPO or sale of our company, given prevailing market conditions; and |
| the state of the IPO market for similarly situated privately-held technology companies. |
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The additional factors considered when determining changes in fair value during the grant periods described above included the prices paid in transactions in which we sold our securities to existing and new third-party investors. While we sold restricted securities in private transactions, we believe our securities were acquired by active, sophisticated investors with experience in valuing and acquiring illiquid securities of private companies. We believe that the prices paid by our investors in these transactions represented the fair value of the securities sold, based on several factors related to the transactions, including the relatively large size of the transactions, our efforts in approaching multiple institutional investors to determine investment interest, the sophistication of our institutional investors and the fact that these transactions were negotiated at arms-length. The transactions that we considered in assessing the fair value of our shares of common stock were our sales of our redeemable convertible preferred stock to venture capital and other investors in April 2006, March 2007, October 2008, June 2010, and May and July of 2011.
For grants made from January 26, 2010 to April 21, 2010, our Board of Directors considered objective and subjective factors including the most recent contemporaneous valuations of our common stock on May 22, 2009 and December 31, 2009. Additionally, our Board of Directors considered:
| the successful beta testing of our Enhanced Messaging Solutions, Voice Solutions and IMS Solution; |
| the then-expectation that we would continue to operate at a loss for several years; |
| the conclusion that a liquidity event was unlikely in the short term, given prevailing market conditions; |
| a discount rate applied of approximately 34.6% based on the weighted average cost of capital; |
| a lack of marketability discount determined to be 30.16%; and |
| the per share value of $0.95 at which we sold Series C Redeemable Convertible Preferred Stock in our October 2008 venture capital financing. |
For grants made from October 14, 2010 to April 20, 2011, our Board of Directors considered objective and subjective factors including the most recent contemporaneous valuation of our common stock on July 15, 2010. The July 15, 2010 estimated fair value was higher than the December 31, 2009 estimated fair value due to an increase in business enterprise value to $43.0 million. The business enterprise value was calculated using discounted cash flow projections as of July 15, 2010. To develop the discounted cash flow projections, our Board of Directors utilized our 2010 forecasted financial performance through 2013. Beyond 2013, we assumed sales would grow at a stabilizing rate for two years and then assumed a terminal growth rate beyond 2015. We calculated the discretionary cash flows for each of those years and discounted them using a weighted average cost of capital discount rate that is typical of venture capital return rates. We then applied an exit multiple based on industry data to the discounted cash flows in order to determine a business enterprise value of $43.0 million. Additionally, our Board of Directors considered the following factors in determining business enterprise value:
| the continued growth of our business and revenues, including the fact that we had won new customers and additional business from existing customers, which resulted in an increase in projected revenues; |
| the fact that we continued, and expected to continue, to operate at a loss in the near term; |
| a discount rate applied of approximately 37.5% based on the weighted average cost of capital; |
| a lack of marketability discount determined to be approximately 44%; and |
| the per share value of $1.12 at which we sold Series D Redeemable Convertible Preferred Stock in our June 2010 venture capital financing. |
For grants made from December 13, 2011 to January 25, 2012, our Board of Directors considered objective and subjective factors including the most recent contemporaneous valuation of our common stock on June 1, 2011. We did not experience any significant business events between June 1, 2011 and January 25, 2012. Additionally, our Board of Directors reviewed the business assumptions used in the June 1, 2011 valuation and determined that the actual business results were materially consistent with the business plan in place as of June 1,
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2011. As a result, our Board of Directors determined that the June 1, 2011 valuation provided an accurate fair value of our common stock on December 13, 2011 and January 25, 2012. The June 1, 2011 estimated fair value was higher than the July 15, 2010 estimated fair value due to an increase in business enterprise value to $97.0 million. Because the sale of our Series E Redeemable Convertible Preferred Stock was led by a new outside investor and occurred at the same time as our valuation, we considered such sale as a contemporaneous arms length transaction. Accordingly, the sale of our Series E Redeemable Convertible Preferred Stock had a significant impact on the determination of our business enterprise value. We used an application of the Black-Scholes option pricing model, known as the backsolve method, to infer our business enterprise value. The backsolve method specifically considers the rights and preferences of each class of equity and solves for the total equity value that is consistent with a recent transaction in the companys own securities, considering the allocation of that total equity value to the specific classes of equity based on their respective rights and preferences. Because the sale of our Series E Redeemable Convertible Preferred Stock represented a recent transaction, we were able to solve for the total enterprise value that resulted in a price per share of the Series E Redeemable Convertible Preferred Stock equal to the transaction price. Additionally, because the backsolve method is an application of the Black-Scholes option-pricing model, it is affected by a number of assumptions, including an expected volatility of options of 60%, a risk-free interest rate of 1.17% and an expected dividend yield of zero. This resulted in a business enterprise value of $97.0 million. This business enterprise value was then allocated among our specific classes of equity using the option pricing method, which utilizes the specific liquidation and participation rights of each class of equity. As a result, $89.8 million was allocated to our redeemable convertible preferred stock (including securities convertible into our redeemable convertible preferred stock) and $7.2 million was allocated to our common stock (including outstanding options exercisable for our common stock). Additionally, our Board of Directors considered the following factors in determining business enterprise value:
| the continued growth of our business and revenues, including the international expansion of our business as a result of the acquisition of Airwide Solutions and continued growth in new customers and of sales to existing customers; |
| the fact that we continued, and expected to continue, to operate at a loss in the near term, partially as a result of an increase in investment in new product development; |
| prior third-party valuations of our common stock; |
| a discount rate applied of approximately 36.5% based on the weighted average cost of capital; |
| a lack of marketability discount determined to be 29%; |
| the per share value of $1.25 at which we sold Series E Redeemable Convertible Preferred Stock in our May/July 2011 venture capital financing; and |
| the acquisition of Airwide Solutions in May 2011. |
In assigning value to the various classes of stock, commencing in September 2012 we chose the Probability Weighted Expected Return Method, one of the three methods described in the AICPA Practice Aid : Valuation of Privately Held Company Equity Securities. Using this method, the value of our common stock is estimated based upon an analysis of future values. As part of this analysis, we consider scenarios whereby we remain a private company and whereby we complete an initial public offering. In each scenario, we valued our stock separately and then assigned a probability of each event relative to each other. In the scenario in which we remain a private company, we used an option pricing method that considers the liquidation preferences of each class of stock in allocating enterprise value to the classes of stock. In the scenario in which we complete an initial public offering, we determined the enterprise value of the company using a model based on our core public group market multiples and assumed all classes of equity are converted to common stock and then divided this into the enterprise value of the company.
We applied the income approach to calculate a business enterprise value by using our then current internal financial forecasts. We discounted the expected cash flows in our financial forecasts using a weighted average
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cost of capital discount rate that is typical of venture capital return rates. We then applied an exit multiple based on industry data to the discounted cash flows in order to determine a business enterprise value based on our discounted cash flow projections.
We used a market approach to compare the trading multiples of publicly-traded companies that we deemed to be comparable to us. These multiples are calculated by determining the value of each comparable publicly traded company based on revenue and EBITDA metrics. These multiples are then applied to our corresponding financial metrics in order to produce a business enterprise value.
For grants made September 11, 2012, our Board of Directors considered objective and subjective factors including the most recent contemporaneous valuation of our common stock on August 24, 2012. The August 24, 2012 estimated fair value was higher than the June 1, 2011 estimated fair value due to an increase in business enterprise value to $157.8 million. The business enterprise value was calculated using discounted cash flow projections as of August 24, 2012. To develop the discounted cash flow projections, our Board of Directors utilized our 2012 forecasted financial performance through 2015. Beyond 2015, we assumed sales would grow at a stabilizing rate for two years and then assumed a terminal growth rate beyond 2017. We then weighted the valuations resulting from the discounted cash flow projections and the market approach, assigning nominal weight to the market approach because of our difference in development stage relative to comparable public companies. This resulted in a determination that our business enterprise value was $157.8 million. Additionally, our Board of Directors considered the following factors in determining business enterprise value:
| the continued growth of our business and revenues, including the international expansion of our business, including the fact that we had won new customers and additional business from existing customers which resulted in an increase in projected revenues; |
| the fact that we continued to operate at a loss; |
| prior third-party valuations of our common stock; |
| our decision to pursue an initial public offering, which we estimated had a 60% probability of being completed within a year; |
| a discount rate applied of approximately 30% based on the weighted average cost of capital; |
| a lack of marketability discount determined to be 16.2%; |
| an exit multiple of 10.5 applied to the discounted cash flows; and |
| a trading multiple of 8.3 based on comparable publicly traded companies, which was applied to our forecasted financial results. |
For grants made October 30, 2012, our Board of Directors considered objective and subjective factors including the most recent contemporaneous valuation of our common stock on October 12, 2012. Although the contemporaneous third-party valuation of our common stock on October 12, 2012 was lower due to a decrease in business enterprise value to $122.3 million, the Board determined that the October 30, 2012 grants should have an exercise price of $0.73 per share. This was determined to be equal to the estimated fair value of our common stock. The business enterprise value was calculated using discounted cash flow projections as of October 12, 2012. To develop the discounted cash flow projections, our Board of Directors utilized our 2012 forecasted financial performance through 2015. Beyond 2015, we assumed sales would grow at a declining rate for two years and then assumed a terminal growth rate beyond 2017. We weighted the valuations resulting from the discounted cash flow projections and the market approach, assigning nominal weight to the market approach because of our difference in development stage relative to comparable public companies. This resulted in a determination that our business enterprise value was $122.3 million. Additionally, our Board of Directors considered the following factors in determining business enterprise value:
| the continued growth of our business and revenues, including the international expansion of our business, although we experienced a delay in certain expected orders, which had an adverse impact on the rate of our revenue growth; |
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| the fact that we continued to operate at a loss, partially as a result of our continued investment in new product development and customer support; |
| prior third-party valuations of our common stock; |
| our continued progress towards an initial public offering, which we estimated had a 65% probability of being completed within a year; |
| a discount rate applied of approximately 30% based on the weighted average cost of capital; |
| a lack of marketability discount determined to be 15.6%; |
| an exit multiple of 10.8 applied to the discounted cash flows; |
| our internal financial forecasts remained consistent with our prior forecasts; and |
| a trading multiple of 6.5 based on comparable publicly traded companies, which was applied to our forecasted financial results. |
For grants made January 23, 2013, our Board of Directors considered objective and subjective factors including the most recent contemporaneous valuation of our common stock on December 10, 2012. The December 10, 2012 estimated fair value was higher than the October 12, 2012 estimated fair value due to an increase in business enterprise value to $191.0 million. The business enterprise value was calculated using discounted cash flow projections as of December 10, 2012. To develop the discounted cash flow projections, our Board of Directors utilized our 2012 forecasted financial performance through 2015. Beyond 2015, we assumed sales would grow at a declining rate for two years and then assumed a terminal growth rate beyond 2017. We weighted the valuations resulting from the discounted cash flow projections and the market approach, assigning nominal weight to the market approach because of our difference in development stage relative to comparable public companies. Additionally, our Board of Directors considered the following factors in determining business enterprise value:
| the continued growth of our business and revenues, including the international expansion of our business, including the fact that we had won new customers; |
| the fact that we continued to operate at a loss; |
| prior third-party valuations of our common stock; |
| our continued progress towards an initial public offering, which we estimated had a 75% probability of being completed within a year; |
| a discount rate applied of approximately 26.5% based on the weighted average cost of capital; |
| a lack of marketability discount determined to be 11.5%; |
| an exit multiple of 11.1 applied to the discounted cash flows; |
| our internal financial forecasts remained consistent with our prior forecasts; and |
| a trading multiple of 3.7 based on comparable publicly traded companies, which was applied to our forecasted financial results. |
For grants made March 19, 2013 and May 8, 2013, our Board of Directors considered objective and subjective factors including the most recent contemporaneous valuation of our common stock on March 8, 2013. The March 8, 2013 estimated fair value was higher than the December 10, 2012 estimated fair value due to an increase in business enterprise value to $198.0 million. The business enterprise value was calculated using discounted cash flow projections as of March 8, 2013. To develop the discounted cash flow projections, our Board of Directors utilized our 2013 forecasted financial performance through 2016. Beyond 2016, we assumed sales would grow at a stabilizing rate for two years and then assumed a terminal growth rate beyond 2018. We weighted the valuations resulting from the discounted cash flow projections and the market approach, assigning nominal
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weight to the market approach because of our difference in development stage relative to comparable public companies. Additionally, our Board of Directors considered the following factors in determining business enterprise value:
| the continued growth of our business and revenues, including the international expansion of our business, although we experienced a delay in certain expected orders, which had an adverse impact on the rate of our revenue growth; |
| the fact that we continued to operate at a loss, partially as a result of our continued investment in new product development and customer support; |
| prior third-party valuations of our common stock; |
| our continued progress towards an initial public offering, which we estimated had a 75% probability of being completed within a year; |
| a discount rate applied of approximately 23% based on the weighted average cost of capital; |
| a lack of marketability discount determined to be 10.2%; |
| an exit multiple of 11.4 applied to the discounted cash flows; |
| our internal financial forecasts remained consistent with our prior forecasts; and |
| a trading multiple of 4.5 based on comparable publicly traded companies, which was applied to our forecasted financial results. |
For grants made June 17, 2013 and June 25, 2013, our Board of Directors considered objective and subjective factors including the most recent contemporaneous valuation of our common stock on June 7, 2013. The June 7, 2013 estimated fair value was equal to the March 8, 2012 estimated fair value. The business enterprise value decreased to $188.0 million. The business enterprise value was calculated using discounted cash flow projections as of June 7, 2013. To develop the discounted cash flow projections, our Board of Directors utilized our 2013 forecasted financial performance through 2016. Beyond 2016, we assumed sales would grow at a stabilizing rate for two years and then assumed a terminal growth rate beyond 2018. We weighted the valuations resulting from the discounted cash flow projections and the market approach, assigning nominal weight to the market approach because of our difference in development stage relative to comparable public companies. Additionally, our Board of Directors considered the following factors in determining business enterprise value:
| the continued growth of our business and revenues, including the international expansion of our business, although we experienced a delay in certain expected orders, which had an adverse impact on the rate of our revenue growth; |
| the fact that we continued to operate at a loss, partially as a result of our continued investment in new product development and customer support; |
| prior third-party valuations of our common stock; |
| our continued progress towards an initial public offering, which we estimated had a 75% probability of being completed within a year; |
| a discount rate applied of approximately 23% based on the weighted average cost of capital; |
| a lack of marketability discount determined to be 10.75%; |
| an exit multiple of 11.4 applied to the discounted cash flows; |
| our internal financial forecasts remained consistent with our prior forecasts; and |
| a trading multiple of 5 based on comparable publicly traded companies, which was applied to our forecasted financial results. |
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On August 7, 2013, our Board of Directors approved the grant of options to purchase 750,000 shares of our common stock with an exercise price equal to the initial public offering price set forth on the cover page of this prospectus. Options to purchase 650,000 of these shares were granted to Pardeep Kohli, our President and Chief Executive Officer and are described in Executive Compensation Outstanding Equity Awards at Fiscal Year End.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized and represent the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We record a valuation allowance when it is more likely than not, that some of our net deferred tax assets will not be realized. In determining the need for valuation allowances, we consider our projected future taxable income and the availability of tax planning strategies. In the case of our net operating loss carryforwards, we have provided full valuation allowances. If, in the future we determine that we will be able to realize more of the related net deferred tax assets, we will make an adjustment to the allowance, which would increase our income in the period that such a determination is made.
As a result of our operations in many non-U.S. countries, our global tax rate is derived from a combination of applicable tax rates in the various jurisdictions in which we operate. We intend to indefinitely reinvest non-U.S. undistributed earnings. We base our estimate of an annual effective tax rate at any given point in time on a calculated mix of the tax rates applicable to our company and to estimates of the amount of income to be derived in any given jurisdiction.
We recognize and measure benefits for uncertain tax positions using a two-step approach. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained upon audit, including resolution of any related appeals or litigation processes. For tax positions that are more likely than not to be sustained upon audit, the second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon settlement. Significant judgment is required to evaluate uncertain tax positions.
We file our tax returns based on our understanding of the appropriate tax rules and regulations. However, complexities in the tax rules and our operations, as well as positions taken publicly by the taxing authorities, may lead us to conclude that accruals for uncertain tax positions are required. In accordance with U.S. GAAP, we maintain accruals for uncertain tax positions until examination of the tax year is completed by the taxing authority, available review periods expire or additional facts and circumstances cause us to change our assessment of the appropriate accrual amount. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Changes in facts and circumstances could have a material impact on our effective tax rate and results of operations.
Implications of Being an Emerging Growth Company
As an emerging growth company, as defined under the Jumpstart Our Business Startups Act of 2012 (JOBS Act), we will be subject to certain reduced reporting requirements as a public company. For example, until we are no longer an emerging growth company, we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act and we will be exempt from any rules that may be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotations or a supplement to the independent registered public accounting firms report on financial statements. For more information on these and other exemptions available to us as an emerging growth company, see Risk Factors
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Risks Related to Our Common Stock and this Offering We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
Although we are eligible under the JOBS Act to delay adoption of new or revised financial accounting standards until they are applicable to private companies, we have elected not to avail ourselves of this exclusion. This election by us is irrevocable.
Internal Controls and Procedures
Prior to the completion of this offering, we were a private entity, with limited accounting personnel to adequately execute our accounting processes and limited other supervisory resources with which to address our internal control over financial reporting. In connection with the audit of the consolidated financial statements of Mavenir Systems, Inc. for the years ended December 31, 2012 and 2011, management and our independent registered public accounting firm identified a material weakness relating to the failure to record certain entries and adjustments during the year-end closing and consolidation process. Additionally, during the preparation of our financial statements for the six months ended June 30, 2013, management, along with our independent registered public accounting firm, identified a material weakness in our processes and procedures over system implementations. Specifically, our implementation of a revenue application during the first half of 2013 was not properly documented or tested, resulting in additional time to close and numerous adjustments. As such, we have failed to maintain an effective control environment to ensure that the design and execution of our controls have consistently resulted in effective and timely review of our financial statements and supervision by appropriate individuals.
Under standards established by the Public Company Accounting Oversight Board, a material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis.
We have begun taking numerous steps and plan to take additional steps to remediate the underlying causes of the material weaknesses identified and to implement recommendations, primarily through the hiring of additional accounting and finance personnel. Additionally, we have introduced a formal close system that identifies specific tasks, as well as the preparer and reviewer. This process will continue to be evaluated and refined, as necessary. We are also exploring the automation of certain functions, specifically our consolidation. The actions that we are taking ultimately will be subject to ongoing review by our senior management and oversight by the audit committee of our Board of Directors. Although we plan to complete this remediation process as quickly as possible, we cannot, at this time, estimate how long it will take, and our initiatives ultimately may not prove to be successful in remediating the material weaknesses described above.
Since March 2012, we have added several experienced accounting personnel, both full-time employees and contractors, in response to our identification of gaps in our skills base and expertise of the staff required to meet the financial reporting requirements of a public company. However, our evaluation of internal control over financial reporting is not complete and we expect remediation to continue.
While we have begun the process of evaluating our internal control over financial reporting, we are in the early phases of our review and cannot predict the completion and outcome of our review at this time. During the course of the review, we may identify additional control deficiencies, which represent significant deficiencies and other material weaknesses, in addition to the material weakness previously identified, that require remediation by us. Our remediation efforts may not enable us to remedy or avoid material weaknesses or significant deficiencies in the future.
We are not currently required to comply with the SECs rules implementing Section 404 of the Sarbanes Oxley Act of 2002, and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required
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to comply with the SECs rules implementing Section 302 of the Sarbanes-Oxley Act of 2002, which will require our management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting. We will not be required to make our first assessment of our internal control over financial reporting until the year following our first annual report required to be filed with the SEC. To comply with the requirements of being a public company, we will need to implement additional financial and management controls, reporting systems and procedures and hire additional accounting and finance staff.
Further, our independent registered public accounting firm is not yet required to formally attest to the effectiveness of our internal controls over financial reporting, and will not be required to do so for as long as we are an emerging growth company pursuant to the provisions of the JOBS Act.
Liquidity and Capital Resources
Resources
We funded our operations from 2005 through June 30, 2013 primarily with approximately $105 million of net proceeds from issuances of preferred stock and, to a lesser extent, borrowings under credit facilities. Cash continues to be used in operations and we expect that our current loan agreements with Silicon Valley Bank and Silver Lake Waterman Fund and the net proceeds of this offering will provide cash to fund operations for at least the next twelve months.
Cash, Cash Equivalents and Working Capital
The following table presents a summary of our cash and cash equivalents, accounts receivable and working capital for the periods indicated.
December 31, | June 30, | |||||||||||
2011 | 2012 | 2013 | ||||||||||
(unaudited) | ||||||||||||
Cash and Cash Equivalents |
$ | 19,466 | $ | 7,402 | $ | 20,453 | ||||||
Trade Accounts Receivable (Net) |
$ | 16,112 | $ | 15,159 | $ | 19,292 | ||||||
Working Capital |
$ | 15,728 | $ | 13,228 | $ | 31,420 |
Cash and cash equivalents are held for working capital purposes and were invested primarily in demand deposit accounts or money market funds. We do not enter into investments for trading or speculative purposes.
As of June 30, 2013, we held $2.5 million of our $20.5 million of cash and cash equivalents in accounts of our subsidiaries outside of the United States. We currently plan to use this cash to fund our ongoing non-U.S. operations. However, if we were to attempt to repatriate those amounts to meet future U.S. cash needs, we may incur tax liabilities that could limit our ability to fund our U.S. operations or obligations using cash and cash equivalents held outside the United States.
Sources and Uses of Funds
Years Ended December 31, | Six Months ended June 30, | |||||||||||||||||||
2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||
(unaudited) |
||||||||||||||||||||
Cash Provided by (Used in) |
||||||||||||||||||||
Operations |
$ | (5,322 | ) | $ | (8,097 | ) | $ | (22,387 | ) | $ | (8,268 | ) | $ | (10,175 | ) | |||||
Investing |
$ | (937 | ) | $ | (18,526 | ) | $ | (5,217 | ) | $ | (1,671 | ) | $ | (1,413 | ) | |||||
Financing |
$ | 9,626 | $ | 40,176 | $ | 14,259 | $ | 3,053 | $ | 25,007 |
Operating Activities. Cash flows from operating activities are an additional measure of our overall business performance, as it enables us to analyze our financial performance without the effects of certain non-cash items such as depreciation, amortization and stock-based compensation expense.
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Cash flow used in operating activities during the six months ended June 30, 2013 primarily consisted of a net loss of $(7.9) million as well as working capital requirements and other activities of $(2.3) million as business activity accelerated. The increase in cash used from operating activities during the six months ended June 30, 2013 compared to the same period in 2012 was mainly due to an increase in net loss as adjusted for non-cash items such as depreciation, amortization, and share-based compensation.
For the year ended December 31, 2012, operating activities used $22.4 million in cash, primarily as a result of a net loss of $(15.6) million as well as working capital requirements and other activities of $(6.8) million as business activity accelerated.
For the year ended December 31, 2011, operating activities used $8.1 million in cash, primarily as a result of a net loss of $(21.8) million that was partially offset by a $13.7 million reduction in working capital and other activities. The working capital reduction was primarily due to $10.2 million in deferred revenue from high billings in the fourth quarter of 2011 and increases in accounts payable and accrued liabilities from business growth.
For the year ended December 31, 2010, operating activities used $5.3 million in cash as a result of a net loss of $(10.4) million partially offset by a $5.1 million reduction in working capital and other activities. The working capital reduction was mainly due to a $4.1 million reduction in accounts receivable driven from strong collections.
Investing Activities. Our investing activities have consisted primarily of business combinations as well as purchases of equipment, including software.
For the six months ended June 30, 2013, net cash used for investing activities was $1.4 million, mainly from capital expenditures.
For the year ended December 31, 2012, net cash used for investing activities was $5.2 million, mainly from capital expenditures.
For the year ended December 31, 2011, net cash used in investing activities was $18.5 million consisting primarily of $14.5 million net cash for the acquisition of Airwide Solutions and $4.0 million for capital expenditures.
For the year ended December 31, 2010, net cash used in investment activities was $0.9 million, consisting primarily of capital expenditures.
Financing Activities. Our financing activities have consisted primarily of the issuances of preferred stock and the incurrence and repayment of indebtedness under loan arrangements.
For the six months ended June 30, 2013, net cash provided by financing activities was $25.0 million, consisting primarily of proceeds from borrowings on debt. The increase in cash provided by financing activities during the six months ended June 30, 2013 compared to the same period in 2012 was mainly due to an increase in borrowings to help fund the working capital requirements of the business.
For the year ended December 31, 2012, net cash provided by financing activities was $14.3 million, consisting primarily of proceeds from borrowings on debt.
For the year ended December 31, 2011, net cash provided by financing activities was $40.1 million, consisting primarily of $40.0 million raised from the sale of 31,885,207 shares of our Series E preferred stock at a price of $1.2545 per share.
For the year ended December 31, 2010, net cash provided by financing activities was $9.6 million, consisting primarily $13.6 million raised from the sale of 12,100,007 shares of our Series D preferred stock at a price of $1.1219 per share and reduced borrowings under our previous line of credit.
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Silicon Valley Bank Loans. On October 18, 2012 we entered into loan agreements with Silicon Valley Bank for loan facilities aggregating $32.5 million. Under the agreements, we have two loans totaling $32.5 million. One loan, the senior loan, is a $22.5 million facility and is secured by substantially all of our assets, including our intellectual property. The senior loan has a three-year term at a floating rate of 1% above the U.S. prime rate, subject to a minimum interest rate of 4.25%. Under the terms of the senior loan agreement, we may draw up to 80% of eligible domestic trade receivables and 70% of foreign trade receivables up to $15.0 million, with the remaining $7.5 million generally available for working capital and cash management purposes. A second loan, the subordinated loan, is for a term loan of up to $10.0 million and is also secured by substantially all of our assets, including our intellectual property, but is subordinated to the senior loan. The subordinated loan has a three-year term at a fixed rate of 11%. Both loans require the payment of interest only on the outstanding balance through the term of the loan with all principal payable in October 2015. Both the senior loan and the subordinated loan may be prepaid at any time without penalty.
The loan agreements contain various restrictive covenants that limit our ability to, among other things, incur liens on our assets or incur additional debt, pay dividends, make investments or engage in acquisitions, and that prevent dissolution, liquidation, merger or a sale of our assets without the prior consent of Silicon Valley Bank. The senior loan agreement also requires us to maintain a minimum tangible net worth at all times.
In February 2013, we amended our senior and subordinated loan agreements with Silicon Valley Bank to join certain of our subsidiaries, including our non-U.S. subsidiaries, as co-borrowers. We also amended our minimum tangible net worth covenant. We had previously been in technical default under this covenant and, as a result of the amendment, we are in compliance with this financial covenant and other covenants applicable to us under the loan agreements. The agreements also contain usual and customary events of default, the occurrence of which may result in all outstanding amounts under the loan agreements becoming due and payable immediately, and they also impose an interest penalty of an additional 5% above the otherwise applicable interest rate at any time when an event of default is continuing.
In connection with these loans, we issued warrants to purchase a total of 900,000 shares of our common stock at an exercise price of $0.73 per share.
Silver Lake Waterman Growth Capital Loan. On June 4, 2013, we entered into a growth capital loan agreement with Silver Lake Waterman Fund, L.P. for a $15 million subordinated term loan. This term loan is subordinated to our senior and subordinated loans with Silicon Valley Bank described above, and is secured by substantially all of our assets. This subordinated term loan matures on June 30, 2017 and bears interest at 12% annually. The accrued interest on the loan is payable monthly, with the principal amount due and payable on the loans maturity on June 30, 2017. The subordinated term loan includes a prepayment penalty of 5% for prepayment in the first year, 4% in the second year, 3% in the third year and 2% thereafter, except that if we choose to repay this subordinated term loan with the proceeds of this offering the prepayment penalty will not apply.
The subordinated term loan agreement with Silver Lake Waterman Fund contains restrictive covenants. One such covenant provides that we must use substantially all of the proceeds of the loan for our United States operations and may not use them for non-U.S. operations. Other covenants limit our ability to, among other things, incur liens on our assets, pay dividends, make investments or engage in acquisitions, and prevent dissolution, liquidation, merger or a sale of our assets outside of the ordinary course of business without the prior consent of the lender. The agreement also contains customary events of default, the occurrence of which may result in all outstanding amounts under the loan agreements with Silver Lake Waterman Fund and Silicon Valley Bank becoming due and payable immediately, and they also impose an interest penalty of an additional 5% above the otherwise applicable interest rate at any time when an event of default is continuing.
In connection with this loan, we issued warrants to purchase a total of 1,362,858 shares of our common stock at an exercise price of $0.001 per share.
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Operating and Capital Expenditure Requirements
We believe the net proceeds from this offering, together with the Silicon Valley Bank and Silver Lake Waterman loans and cash generated from operations, our cash balances and interest income we earn on these balances, will be sufficient to meet our anticipated cash requirements through at least the next twelve months. In the future, we expect our operating and capital expenditures to increase as we increase headcount, expand our business activities, grow our customer base, implement and enhance our information technology and enterprise resource planning system and operate as a public company. As revenues increase, we expect our accounts receivable balance to increase. Any such increase in accounts receivable may not be completely offset by increases in accounts payable and accrued expenses, which would likely result in greater working capital requirements.
If our available cash balances and net proceeds from this offering are insufficient to satisfy our liquidity requirements, we may seek to sell equity or convertible debt securities or enter into additional credit facilities. The sale of equity and convertible debt securities may result in dilution to our stockholders and those securities may have rights senior to those of our common shares. If we raise additional funds through the issuance of convertible debt securities, these securities could contain covenants that would restrict our operations. We may require additional capital beyond our currently anticipated amounts. Additional capital may not be available on reasonable terms, or at all.
Our estimates of the period of time through which our financial resources will be adequate to support our operations and the costs to support research and development and our sales and marketing activities are forward-looking statements and involve risks and uncertainties and actual results could vary materially and negatively as a result of a number of factors, including the factors discussed in the section Risk Factors of this prospectus. We have based our estimates on assumptions that may prove to be wrong and we could utilize our available capital resources sooner than we currently expect.
Our short- and long-term capital requirements will depend on many factors, including the following:
| our development of new products; |
| market acceptance of our products and our competitive position in the marketplace; |
| our ability to generate cash from operations; |
| our ability to control our costs; |
| the emergence of competing or complementary technological developments; |
| the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights or participating in litigation-related activities; and |
| the acquisition of businesses, products and technologies. |
Contractual Obligations
We have contractual obligations relating to our office lease as well as loans from commercial banks.
The following table discloses aggregate information about our contractual obligations and periods in which payments are due as of December 31, 2012:
Payments Due By Period | ||||||||||||||||||||
Total | Less Than 1 Year |
1-3 Years |
3-5 Years |
More Than 5 Years |
||||||||||||||||
Operating Leases |
$ | 6,259 | $ | 1,701 | $ | 2,699 | $ | 1,315 | $ | 544 | ||||||||||
Silicon Valley Bank senior loan (1) |
10,000 | | 10,000 | | | |||||||||||||||
Silicon Valley Bank subordinated loan (2) |
5,000 | | 5,000 | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 21,259 | $ | 1,701 | $ | 17,699 | $ | 1,315 | $ | 544 | ||||||||||
|
|
|
|
|
|
|
|
|
|
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(1) | The Silicon Valley Bank senior loan matures in October 2015. The interest is payable at a floating rate of 1% above the U.S prime rate, subject to a minimum interest rate of 4.25%. |
(2) | The Silicon Valley Bank subordinated loan matures in October 2015. The interest is payable at a fixed rate of 11%. |
On June 4, 2013, we entered into a growth capital loan agreement with Silver Lake Waterman Fund, L.P., for a $15 million subordinated term loan described above in Liquidity and Capital Resources Sources and Uses of Funds Silver Lake Waterman Growth Capital Loan.
Operating leases relate to our office leases for various locations across the globe. We have several office leases expiring at different times through 2019. Our principal office leases are in Richardson, Texas, Reading, UK, and Bangalore, India.
Off-Balance Sheet Arrangements
As of June 30, 2013, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
Quantitative and Qualitative Disclosure About Market Risk
We are exposed to market risk related to inflation, changes in interest rates and foreign currency exchange rates. We do not use derivative financial instruments for speculative, hedging or trading purposes, although in the future we may enter into interest rate or exchange rate hedging arrangements to manage the risks described below.
Inflation Risk
We may be exposed to inflation risk in that some of our international operations, particularly in developing countries, may be subject to increased costs as a result of higher inflation. Because we compete with other solutions providers on a global basis, our customers would not expect, and may not be willing, to pay for any cost increases from inflation. Therefore, our future margins could be impacted. Where competitively possible we attempt to offset some of this risk with contracted price adjustments.
Interest Rate Risk
Cash held in our operating business units is generally available for local operations. Most of our cash is retained by our U.S. business. The majority of these funds are in low to zero interest bank accounts. Our borrowings under our senior loan with Silicon Valley Bank are at variable rates based on the U.S. prime rate and, as a result, increases in interest rates would generally result in increased interest expense on outstanding borrowings. A one-percent increase above the minimum floor calculation would increase our interest expense by as much as $0.2 million if the entire facility were drawn throughout the year.
Foreign Currency Exchange Risk
We have significant international operations with subsidiaries and operations in eight countries outside of the U.S. and as such we face exposure to adverse movements in foreign currency exchange rates. While these exposures may change over time as business practices evolve, adverse movements in foreign currency exchange rates may have a material adverse impact on our financial results. Our primary exposures have been related to non-U.S. dollar-denominated net operating income or net operating losses. As a consequence, our results of operations would generally be adversely affected by an increase in the value of the U.S. dollar relative to the currencies of the countries in which we are profitable and a decrease in the value of the U.S. dollar relative to the currencies of the countries in which we are not profitable. However, based on the locations of our international operations and the amount of our operating results denominated in foreign currencies, we would not expect a
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10% change in the value of the U.S. dollar from rates as of June 30, 2013, to have a material effect on our financial position or results of operations. If and when our international business grows substantially, relative to our U.S. business, the net exposure is likely to increase as will the impact of foreign exchange rate movements.
The functional currency for each of our non-U.S. subsidiaries is the applicable local currency. Assets and liabilities of a non-U.S. subsidiary are translated to U.S. dollars at period end exchange rates. Income and expense items are translated at the rates of exchange prevailing during the year. The adjustments resulting from translating the financial statements of the non-U.S. subsidiary are reflected in comprehensive income or loss.
Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.
We recorded $0.02 million of net translation gains for 2010, $1.2 million of net translation losses for 2011 and $0.5 million of net translation gains for 2012.
We recorded $0.9 million and $2.6 million of net translation losses for the six months ended June 30, 2012 and 2013, respectively.
Recent Accounting Pronouncements
In July 2012, the FASB issued ASU 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, allowing entities the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test. If the qualitative assessment indicates it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, the quantitative impairment test is required. Otherwise, no testing is required. This ASU is effective for us in the period beginning January 1, 2013. The adoption of this guidance did not affect our financial position, results of operations or cash flows.
In October 2012, the FASB issued ASU 2012-04, Technical Corrections and Improvements (ASU 2012-04). These amendments are presented in two sectionsTechnical Corrections and Improvements (Section A) and Conforming Amendments Related to Fair Value Measurements (Section B). The amendments in this update represent changes to clarify the Codification, correct unintended application of guidance, or make minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. Additionally, the amendments will make the Codification easier to understand and the fair value measurement guidance easier to apply by eliminating inconsistencies and providing needed clarifications. This update is not intended to significantly change U.S. GAAP. We do not expect the adoption of this update to have a material effect on our consolidated financial statements.
In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02). ASU 2013-02 requires registrants to provide information about the amounts reclassified out of accumulated other comprehensive income/(loss) (AOCL) by component. In addition, an entity is required to present significant amounts reclassified out of AOCL by the respective line items of net income. ASU 2013-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2012. We will reflect the impact of these amendments beginning with our first periodic report required to be filed under the Securities Exchange Act of 1934, as amended, following the completion of this offering. As the new standard does not change the current requirements for reporting net income or other comprehensive income in the financial statements, our financial position, results of operations or cash flows were not impacted.
In March 2013, the FASB issued ASU No. 2013-05, Parents Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (ASU 2013-05). ASU 2013-05 provides guidance on releasing Cumulative
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Translation Adjustments when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. In addition, these amendments provide guidance on the release of Cumulative Translation Adjustment in partial sales of equity method investments and in step acquisitions. For public entities, the amendments are effective on a prospective basis for fiscal years and interim reporting periods within those years, beginning after December 15, 2013. The amendments must be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted. Early adoption is permitted. The adoption of ASU No. 2013-05 is not expected to have a material impact on our consolidated financial statements.
In May 2013, the FASB issued ASU No. 2013-07, Liquidation Basis of Accounting (ASU 2013-07). ASU 2013-07 requires an entity to prepare its financial statements using the liquidation basis of accounting (LBA) when liquidation is imminent. Among the requirements of LBA financial statements is that they present relevant information about an entitys expected resources in liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation; include in its presentation of assets any items not previously recognized under U.S. GAAP but that it expects to either sell in liquidation or use in settling liabilities; recognize and measure an entitys liabilities in accordance with U.S. GAAP that otherwise applies to those liabilities; and disclose an entitys plan for liquidation, the methods and significant assumptions used to measure assets and liabilities, the type and amount of costs and income accrued, and the expected duration of the liquidation process. These amendments are effective for public entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. Entitles should apply the requirements prospectively from the day that liquidation becomes imminent. Early adoption is permitted. The adoption of ASU No. 2013-07 is not expected to have a material impact on our consolidated financial statements.
In June 2013, the FASBs Emerging Issues Task Force (EITF) issued Issue 13-C, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward of Tax Credit Carryforward Exists (EITF Issue 13-C), which requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in deferred tax asset for a net operation loss carryforward or a tax credit carryforward. However, to the extent that a net operating loss carryforward or tax credit carryforwards at the reporting date is not available under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, the unrecognized tax benefit is to be presented in the statement of financial position as a liability. The amendment is effective for public entities for annual periods beginning after December 15, 2013 and interim periods therein. We are still evaluating the impact this guidance.
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Overview
We are a leading provider of software-based telecommunications networking solutions that enable mobile service providers to deliver internet protocol (IP)-based voice, video, rich communications and enhanced messaging services to their subscribers globally. Our solutions deliver Rich Communication Services (RCS), which enable enhanced mobile communications, such as group text messaging, multi-party voice or video calling and live video streaming as well as the exchange of files or images, over existing 2G and 3G networks as well as next generation 4G Long Term Evolution (LTE) networks. Our solutions also deliver voice services over LTE technology and wireless (Wi-Fi) networks, known respectively as Voice over LTE (VoLTE) and Voice over Wi-Fi (VoWi-Fi). We enable mobile service providers to offer services that generate increased revenue and improve subscriber satisfaction and retention, while allowing them to improve time-to-market of new services and reduce network costs. Our mOne® Convergence Platform has enabled leading mobile service providers to introduce the industrys first live network deployment of VoLTE and the industrys first live deployment of next-generation RCS 5.
The capabilities of smartphones and tablets have caused consumers to shift their communication preferences from traditional voice service to a combination of voice, video and messaging services, which are offered by rich communication services. Additionally, many consumers are using their mobile devices to browse the internet, run software applications, access cloud-based services and consume, create and share rich multimedia and user-generated content. These trends have placed substantial capacity constraints on the existing networks of mobile service providers. According to the February 2013 Cisco Visual Networking Index report, the average smartphone and tablet generate 50 and 120 times more data traffic, respectively, than the average basic-feature cell phone. As a result, mobile data traffic is projected to continue to increase exponentially, driven by the rapid adoption of smartphones and tablets and the demand for enhanced and high-bandwidth mobile services such as video. In order to alleviate the resulting spectrum and network capacity challenges, mobile service providers are making significant investments to transition their networks to the 4G LTE Long Term Evolution (4G LTE) standard for voice and data transmission over mobile networks, as that standard enables higher data speeds and allows more efficient use of the frequency spectrum. In a September 2013 report, Gartner estimated that annual spending on LTE mobile infrastructure would grow from $5.9 billion in 2012 to $33.9 billion by 2017, representing a compound annual growth rate (CAGR) of 42%. (Source: Gartner, Forecast: Carrier Network Infrastructure, Worldwide, 2010-2017 3Q13 Update, September 2013.)
Because our solutions are interoperable across network generations, we enable mobile service providers to leverage their existing investments in 2G and 3G networks while offering a seamless, cost-effective migration path to 4G LTE networks. We provide our solutions to over 120 mobile networks globally, including three of the top five mobile service providers in the United States and four of the top five pan-European mobile service providers in Western Europe, as measured by number of mobile device connections as of June 2013. Our end customers include AT&T, MetroPCS (now part of T-Mobile), T-Mobile USA, Vodafone and Telstra. Our customers include the first mobile service providers to deploy VoLTE and RCS 5 services to their subscribers, which services were deployed utilizing our technology. Our solutions can be deployed on-premise within the mobile service providers network or hosted in a mobile cloud environment. Our solutions enable mobile service providers to generate additional revenues by providing their subscribers with rich communications and cloud-based services, including:
| carrier-grade (at least 99.999% reliable), integrated communication services, including voice calling, video calling and messaging; |
| a rich communications experience, which includes integrated one-to-one and group voice chat, video chat, messaging and sharing of content such as videos, images, links or locations; |
| a single identity across multiple devices and services, based on a subscribers mobile phone number, that allows seamless delivery of mobile services and applications globally; |
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| interworking with legacy short message service (SMS), which is an older technology used to convey short text messages, multimedia messaging service (MMS), which is an existing technology allowing delivery of images in a relatively low-resolution format, and social networks; and |
| cloud-based delivery of next-generation mobile communications, including voice, video, enhanced messaging, which includes voice and video mail and interworking with social media platforms, and storage of mobile subscriber content and media. |
We commenced operations in 2005 and began product sales in 2007. Our unaudited pro forma 2011 revenue, which assumes a full-year contribution from Airwide Solutions, a business we acquired in May 2011, was $66.8 million. For the year ended December 31, 2011, our reported revenue was $49.5 million, compared with $8.3 million for the year ended December 31, 2010. For the year ended December 31, 2012, our revenue was $73.8 million representing 49% year-over-year growth. In addition, our operating loss was $(14.6) million, $(19.2) million and $(10.2) million for the years ended December 31, 2012, 2011 and 2010, respectively. For the six months ended June 30, 2013 and 2012, our reported revenue was $48.2 million and $39.9 million, respectively, and operating loss was $(2.6) million and $(4.5) million, respectively. We are headquartered in Richardson, Texas and had approximately 670 full-time employees worldwide as of June 30, 2013.
Industry Background
The market for mobile communications services is evolving rapidly, characterized by the following trends:
Proliferation of Smartphones and Tablets. Global adoption of smartphones and tablets is in its early stages, and future growth is expected to accelerate as mobile subscribers increasingly rely on these powerful devices. A June 2013 IDC report estimates that there were 723 million smartphones shipped globally in 2012, and forecasts that number to increase to 1.6 billion in 2017, representing a CAGR of 17%. Furthermore, a May 2013 IDC report estimates that there were 145 million tablets in use globally in 2012, and forecasts that number to increase to 410 million in 2017, representing a CAGR of 23%. Despite the rapid increase in the number of smartphones being shipped, a June 2013 Ericsson publication estimated that smartphones accounted for only 19% of total global mobile subscriptions, highlighting the potential for growth in smartphone usage.
Increased Use of Mobile Applications, Mobile Media and Cloud-Based Services. Powerful smartphones and tablets are rapidly replacing desktop computers and laptops as the primary computing platform used for browsing the internet, running software applications, accessing cloud-based services, and consuming media content such as streaming video and internet radio. IDC estimates that the number of mobile application downloads will grow from 47.2 billion in 2012 to 187.0 billion in 2017, representing a CAGR of 32%. Many consumers are increasingly creating, sharing and accessing user-generated content, such as photos and videos, on their mobile devices through online services such as Facebook and YouTube. In addition, cloud-based storage is growing significantly as consumers purchase content from media services, such as Amazon, Apple and Google, and utilize online storage services to access their purchased content from multiple mobile device types. Furthermore, mobile subscribers are increasingly seeking more rich communication services, such as video chat, to enhance the communications experience on their mobile devices. These trends in consumer behavior related to mobile device usage are driving a substantial increase in the amount of mobile data traffic. The February 2013 Cisco report projects that monthly global mobile data traffic will increase 13 times between 2012 and 2017, representing a CAGR of 66%.
Mobile Service Provider Challenges
Proliferation of smartphones and tablets as well as increased use of mobile applications and cloud-based services by subscribers present the following challenges for mobile service providers:
Strain on Existing Network Resources. Faced with increased subscriber demand for bandwidth-consuming mobile applications and cloud-based services, mobile service providers are facing spectrum and capacity constraints. During times of peak usage, mobile service providers are often unable to deliver the expected level of service subscribers demand, which results in subscriber dissatisfaction and increased subscriber turnover.
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Competition from Over-The-Top / Web Services. Over-The-Top (OTT) applications compete with services that are, or could be, offered by mobile service providers, reducing revenue sources that traditionally have gone to mobile service providers. For example, OTT services such as Skype, Apple Facetime, Facebook Chat and Blackberry Messenger, allow consumers to engage in rich communications experiences in a simple, easy-to-use interface. These OTT services provide free and feature-rich alternatives that compete with traditional voice and SMS services offered by mobile service providers. A September 2012 Ovum study estimated that the use of over-the-top services led to a loss of $23.2 billion in revenues for mobile service providers in 2012.
Need to Offer Subscribers Enhanced Services. As mobile voice service access has become commoditized, and average voice revenue per subscriber has decreased, mobile service providers are seeking to offer their subscribers new, differentiated services that increase revenue per subscriber, enhance customer satisfaction and reduce subscriber turnover. According to Infonetics, over the last five years, the average revenue per user for voice services in North America has declined 12% annually, while the average revenue per user for data services has increased nearly 16% annually. The result has been a decline in overall subscriber average revenue per user of 2% annually. To make up for the declining voice and text revenue, and to optimize the transition to data revenue, mobile service providers need to offer new services to provide enhanced communication experiences, including a converged communication experience across multiple mobile devices, to their subscribers, capitalizing on their inherent ability to provide a unique and unified communications experience.
Migration Path to 4G LTE. As mobile service providers migrate to 4G LTE, they will look to minimize capital expenditures and operational costs, while maximizing subscriber usage of their network. Mobile service providers are seeking a common solution platform that can address existing 2G and 3G network requirements without requiring additional investments and that can also be utilized for next-generation 4G LTE network introductions. We believe that mobile service providers want to avoid a complete replacement of their network elements but, at the same time, do not want to invest in disparate systems to support existing and 4G LTE networks. With the growth and adoption of 4G LTE, competition among mobile service providers will continue to intensify as subscribers seek an increasing number of high-quality services.
Benefits of 4G LTE
The next generation of mobile technology, broadly defined as 4G, includes Long Term Evolution (LTE), Worldwide Interoperability Microwave Access (WiMAX) and Evolved High Speed Packet Access (HSPA+) and can be extended to include Wi-Fi. 4G LTE has been developed to handle mobile data more efficiently and allows for faster, more reliable and more secure mobile service than existing 2G and 3G networks. The faster data transfer capabilities of 4G LTE networks enable mobile subscribers to use a wide variety of bandwidth-intensive software applications and cloud-based services with a rich mobile computing experience.
In addition to the benefits for mobile subscribers, 4G LTE technology is inherently more efficient and cost-effective, resulting in a better network infrastructure for mobile service providers. 4G LTE uses wireless spectrum more efficiently than existing 2G and 3G technology, creating more available bandwidth to expand network capacity and enabling mobile service providers to simultaneously offer higher speed data service and enhanced mobile communication services to their subscribers from a single, consolidated next generation network.
4G LTE offers the opportunity to fundamentally lower the cost of network operational centers by leveraging technologies widely used in the IT industry, such as Network Functions Virtualization (NFV), which refers to the deployment of telecommunications application software on virtualized hardware platforms often referred to as private clouds, and Software-Defined Networking (SDN), which simplifies network administration through the use of software. Both of these technologies drive down network cost and complexity and increase network flexibility and responsiveness.
4G LTE is a new architecture that enables mobile service providers to offer a wide range of new and innovative services across their networks. Mobile service providers can deliver device independent services over
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4G LTE networks and offer a cloud-based subscriber experience that is comparable to communication services providers such as Apple, Google and Skype. Mobile service providers will be able to offer a platform that third-party application developers can leverage to integrate new and innovative services through open network standards.
Market Opportunity
The development of 4G LTE is a generational change in technology for the mobile industry, a level of change that occurs approximately every ten years on average. Every generational change spurs a new investment cycle as mobile service providers seek to invest in equipment upgrades to support new standards. In the transition of communication services from 2G and 3G to 4G LTE, a complete change of infrastructure to deliver new services is required. Unlike 3G, migration to the next-generation 4G LTE standard is no longer an option, but rather a time-critical business priority for many mobile service providers.
According to May 2013 data from Informa Telecoms and Media, by the end of 2012, 2G subscribers accounted for 75% of global wireless subscribers, but that proportion is projected to decline over the next five years as 3G and 4G LTE subscribers gain share. 4G LTE subscribers are forecasted to grow at a 69% CAGR between 2012 and 2017 according to the same source. As consumer demand for data and next-generation services continues to grow, we expect strong 4G LTE subscriber growth rates to continue beyond 2015.
Many mobile service providers are currently making the needed infrastructure investments to accommodate the growing subscriber demand for next-generation mobile communication services. A September 2013 Gartner report estimates that next-generation 4G LTE mobile infrastructure spending was $5.9 billion in 2012 and is forecast to reach $33.9 billion by 2017, representing a 42% CAGR. (Source: Gartner, Forecast: Carrier Network Infrastructure, Worldwide, 20102017 3Q13 Update, September 2013.) We believe 4G LTE network investments will accelerate as mobile service providers seek to meet growing subscriber demand.
Our Solutions
Our solutions, based on our mOne® Convergence Platform, enable mobile service providers to deliver voice, video, rich communications and enhanced messaging services over their existing 2G and 3G networks and next-generation 4G LTE networks. IP-based communication services, which involve the transmission of voice and text data using the more efficient internet protocol that underlies the internet, rather than through traditional and less efficient circuit-switched phone networks, are being developed and deployed today. These services are faster, more efficient and demand less spectrum than the circuit-based communication methods employed by existing 2G and 3G networks.
Our solutions are focused on delivering a seamless and intuitive communications experience to mobile subscribers and an integrated, flexible, differentiated platform for mobile service providers. We enable mobile service providers to capitalize on their IP-based network investments by efficiently and cost-effectively offering a broad range of services.
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Our mOne® Convergence Platform offers our customers the following key benefits:
Comprehensive, Highly Configurable and Converged Communication Solution. The mOne® Convergence Platform enables mobile service providers to deploy any or all of a wide range of services. Some of these services include:
| carrier-grade, integrated communication services, including voice calling, video calling and messaging over the same networks and devices; |
| a rich communications experience, with integrated one-to-one and group voice chat, video chat, messaging and sharing of content such as videos, images, links or locations; |
| a single identity across multiple devices and services, based on a subscribers mobile phone number, that allows seamless delivery of mobile services and applications globally; and |
| interworking with legacy SMS/MMS and social networks. |
Cloud-based Implementation. The design of our software products enables mobile service providers to use private cloud implementations to deliver next generation mobile communications, including voice, video, enhanced messaging and storage of mobile subscriber content and media. These solutions allow our customers to share capacity in a cloud deployment with commercial off-the-shelf servers for all services rather than deploying dedicated, proprietary hardware for each service. The key benefits of utilizing private clouds include more agile use of the network infrastructure, the ability to deploy and prove-in new services rapidly using commercially available off-the-shelf hardware available from major manufacturers, combined with our software, without large up-front infrastructure costs, and avoiding the network upgrade costs associated with obsolescence of proprietary hardware. For example, one of the largest pan-European mobile service providers has commercially launched our virtualized Rich Communication Services to provide joyn® an industry initiative that enables one-on-one and group chat services and the enhancement of voice calls through the sharing of multi-media content such as videos, pictures and music on its own single common hardware platform for nine different national networks across the continent, thereby deploying its own mobile cloud environment. Although we offer to host our solutions in our own cloud-computing center for mobile service providers, we do not currently have any contracts to provide cloud-based hosting services.
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Seamless Migration Path to 4G LTE. Historically, mobile service providers have made substantial investments in their existing networks, and these networks will continue to deliver communications and data services for many years into the future. Therefore, mobile service providers are looking for 4G LTE networking solutions that integrate with existing network standards to enable them to transition seamlessly to 4G LTE and cost-effectively optimize their infrastructure investments. Our solutions offer mobile service providers a cost-effective migration path to 4G LTE by supporting existing 2G and 3G networks and next-generation 4G LTE networks, eliminating the need to prematurely retire existing investments. Our platform features a comprehensive, standards-based set of interfaces to ensure a seamless integration into existing infrastructure that includes technology from multiple vendors, and can be deployed over a wide range of network types including 2G, 3G, LTE, WiMAX, HSPA+ and Wi-Fi.
Ability to Improve Subscriber Experience and Deliver Revenue-Generating Services. Mobile service provider competition continues to exert downward pressure on the prices and profits associated with traditional voice, SMS and data services. To counteract this trend, mobile service providers can leverage our solutions to offer differentiated next-generation services that build customer loyalty, improve subscriber retention and generate additional revenues. When a mobile service provider offers a rich communications platform with multiple high-value services, its subscribers will be more likely to pay for these services, either by direct subscription or through increased data revenue, and less likely to switch providers.
Scalable Architecture and Carrier-Grade Reliability. Mobile service providers require networking solutions that enable deployment of networks covering large geographic areas and support millions of simultaneous end users with the traditional mobile telecommunications requirement of 99.999% availability. Additionally, mobile service providers need the flexibility to add capacity to support subscriber growth and increased network traffic as new, high-bandwidth services are introduced. Our solutions form a highly scalable carrier-grade platform that provides subscribers with high-quality service, as measured by the breadth of services offered and reliability, or lack of downtime. Our platform is fully compatible with the mobile industrys standards and interoperability framework, allowing full compatibility across mobile service providers and geographies. Unlike OTT service providers, who cannot control quality or reliability of service because they do not own or control underlying access networks, mobile service providers using our solutions over their networks can deliver high-quality and consistent service to all subscribers.
Open Platform and Social Interworking. Our standards-based open solution architecture and APIs (Application Programming Interfaces) allow mobile service providers to develop or incorporate third-party enhanced, for example, by embedding messaging or voice calling capabilities within consumer applications such as shopping or banking applications. We enable mobile service providers to interconnect various OTT applications and social networking services so that a subscriber can engage in voice, video and rich messaging communications with anyone, anywhere, on any device or in any communications ecosystem. A subscriber can communicate with another subscriber through one central identity based on the subscribers mobile phone number, rather than having to worry about what specific application to use to connect with that other subscriber. Mobile service providers can leverage this neutral position and technology to bring more users into their networks.
Our Competitive Strengths
We are a leading provider of software-based telecommunications networking solutions that transform mobile networks to deliver enhanced new services to their subscribers globally. Because we have been first to market with solutions that enable many enhanced subscriber services, we have a broad customer base and we have a history of successfully competing for business with some of the largest solutions providers in the mobile industry. Our competitive strengths include the following:
First-Mover Advantage. Since our inception, we have developed significant expertise around solving the key challenges that mobile service providers face as they deploy next-generation networks and we have been first to market with solutions that enable many enhanced subscriber services. Decisions and deployments of network
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infrastructure and solutions require significant lead time, typically 12 to 24 months. Our past large-scale deployments for existing customers have increased our brand awareness and provided us with customer validations that serve as a significant competitive advantage as additional mobile service providers evaluate their next-generation communications solutions needs. Based on our deployments and contracts to date, we believe we have delivered significant industry firsts, such as the first commercial deployment of VoLTE, and plan to continue to be a first mover.
Singular Focus on Next-Generation Communication Solutions. We are focused on developing and selling next-generation IP-based voice, video, rich communications and enhanced messaging services to mobile service providers. Unlike many of our competitors, we are not encumbered by a product portfolio full of legacy solutions and an installed customer base that generates significant revenue and cash flow streams from legacy solutions. Rather, we can focus on selling transformational solutions to mobile service providers that enable them to take advantage of the inherent benefits of 4G LTE and offer services that increase revenue, improve subscriber satisfaction and reduce customer turnover.
Modular Platform for Next-Generation Communication Solutions. Our mOne® Convergence Platform is based on a flexible software architecture that enables mobile service providers to provide IP-based voice, video, rich communications and advanced messaging applications to their subscribers. We have worked closely with many of our mobile service provider customers to understand their unique requirements and have developed a platform with the specific product features that are most relevant to help them achieve their strategic priorities. Our modular platform approach allows mobile service providers to selectively deploy the services they want for their subscribers, with the ability to add additional services and scale as needed. We believe that our ability to provide mobile service providers with customized deployment strategies, which allow them to gradually add services, gives us a significant competitive advantage.
Interoperability across Network Generations. Seamless and cost-effective migration of subscribers and services from 2G and 3G networks to 4G LTE networks can be achieved by bridging disparate technologies, while preserving existing investments, through intelligent gateways and interworking software. Our industry standards-based products support fully-integrated legacy interfaces, that enable mobile service providers to continue to use much of their existing core network infrastructure which is the centralized network of switches, routers and application services that deliver consumer services and includes elements such as subscriber databases, billing systems and intelligent network systems, without costly upgrades or replacements. Our ability to interoperate across traditional network boundaries mitigates the cost and complexity of deploying 4G LTE networks and accelerates time-to-market.
Technology Team. We believe our management team and the depth and diversity of our engineering and operations talent provide us with a competitive advantage. The extensive domain expertise of our engineering team is derived from its members combined experience in different areas of technology, including voice technology, software development, cellular/mobility applications, internet protocol networking, social networking and communications networks. Our solutions require expertise in the convergence of voice and data networking as well as the evolution of 2G and 3G technology to 4G LTE networks. Our expertise includes developing market-defining telecommunications products, implementing our solutions in small- and large-scale network environments, and supporting our global customer base from within our customers regional geographies.
Our Strategy
Our goal is to establish our position as the leading global provider of 4G LTE solutions. Initially we have incurred and will continue to incur significant sales and marketing expenses to capture new product opportunities principally from our existing customer base. Additionally, as we win these new product sales we expect to incur considerable product and employee related expenses for technology trials, market trials, initial testing and deployment of our solutions. As we expand our product footprint within our customers we expect significant expansion of business with these individual customers with considerably lower ongoing expenses. The resulting
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increased sales and improving margins driven by relative cost efficiencies are expected to drive improvement in our overall profitability. Key elements of our strategy include:
Leverage First-Mover Advantage to Increase Sales to Existing Customers and to Grow Our Customer Base. We have the advantage of being a first-mover with innovative solutions that enable operators to efficiently address network challenges, with several major global mobile service providers having already chosen our solutions for their 4G LTE network needs. We are currently supplying 2G, 3G or next-generation 4G LTE solutions to nine of the top twenty global mobile service providers, as measured by number of mobile device connections as of June 2013, and are in trials with one additional top twenty customer. For example, our VoLTE solution allowed a U.S. mobile service provider in August 2012 to become the first in the world to launch a commercial VoLTE service. Additionally, with our mOne® Convergence Platform deployed for VoLTE, the customer was positioned to quickly launch new value-added RCS 5 services over 4G LTE, which it did less than three months later in October 2012, becoming the first mobile service provider in the world to launch RCS 5, which is an advanced set of standards enabling the delivery of mobile communications services such as group text messaging, multi-party voice or video calling and live video sharing as well as the exchanging of files or images. We believe that the experience and detailed technical knowledge that our employees obtained during the course of enabling a mobile service provider to launch these first-to-market services will be directly applicable to expanding existing customer networks, as well as new customer networks, with our next-generation solutions. We intend to further capitalize on our early market success in deploying next-generation 4G LTE solutions and the strong relationships we have with mobile service providers to supply our existing customers with new product offerings as well as to gain new customers. For example, we provided legacy messaging solutions to one mobile service provider initially and expanded the solutions we provide to that customer to include voice and messaging over LTE. In order to continue to increase our global presence, we intend to continue to expand our sales, marketing and design teams to generate demand for our solutions and further leverage our channel relationships to increase our global reach. For example, we have a channel partner relationship with Cisco Systems that enables us to leverage Cisco Systems global sales force to market and sell our full suite of voice, video and messaging solutions to mobile service providers globally.
Extend our Technology Advantage Through Continued Innovation. We have a track record of providing differentiated solutions across both voice and messaging service domains. For example, our solutions enabled the first network with voice and messaging on LTE. Also, we enabled an early market deployment of LTE circuit switch fallback, which enables support for voice and messaging services to LTE smartphones over mixed 2G, 3G and 4G LTE environments and therefore enables the early introduction of LTE smartphones onto mobile service provider networks. We will utilize the valuable insight into product and performance requirements that we have gained in our early market achievements in the transition from 2G and 3G to 4G LTE to continue to deliver market-leading solutions focused on 4G LTE services, with the ability to deliver operator-specific customizations and solutions and to deliver a full suite of integrated mobile communications that can be deployed through a cloud-based implementation. We believe our collaborative engagements with mobile service providers as they undergo the transition from 2G and 3G to 4G LTE have provided us with valuable insight into product and performance requirements in the past and have helped us stay ahead of our competition by enabling us to offer highly differentiated products, thereby extending our technology advantage.
Simplify Mobile Service Providers Transition to 4G LTE. Our solutions give mobile service providers the ability to deliver next-generation services over existing networks, which positions them to cost-effectively optimize the useful lives of their existing networks. Mobile service providers can then focus their investments on a seamless, cost-effective path from existing 2G and 3G networks to next-generation 4G LTE networks. We believe we are well-positioned to provide more efficient solutions that will lead to new revenue opportunities for mobile service providers as they refresh legacy equipment. Our solution works within existing 2G and 3G networks as well as next-generation 4G LTE networks, which allows us to capture rich communications business from mobile service providers using 2G and 3G networks today, and then to cost-effectively transition them to 4G LTE in the future.
Leverage Virtualization Technology to Enable Cloud Computing and Service Deployment Flexibility. We believe that virtualization technology can be leveraged to build 4G LTE core networks on standard cloud computing
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platforms, significantly lowering the cost for network infrastructure equipment. As many of the largest mobile service providers pursue strategies to implement their own private cloud infrastructures, we intend to continue pioneering solutions for virtualized cloud-based environments. Virtualization also allows more agile use of network infrastructure and is an ideal approach to providing hosted services, which we can deliver for both small and large mobile service providers. For example, one of the largest pan-European mobile service providers has commercially launched our virtualized Rich Communication Services to provide joyn® an industry initiative that enables one-on-one and group chat services and the enhancement of voice calls through the sharing of multi-media content such as videos, pictures and music on a single common hardware platform for nine different national networks across the continent, therefore deploying its own mobile cloud environment. Other virtualization benefits include the ability to rapidly deploy and test new services without large up-front infrastructure investments, as well as the flexibility to bundle application software together onto common hardware, thus lowering entry costs for smaller, regional mobile service providers. Although we offer to host our solutions in a cloud-computing center for mobile service providers, we do not currently have any contracts to provide hosted services.
Selectively Pursue Strategic Acquisitions. We intend to continue to expand our product portfolio through opportunistic business acquisitions and intellectual property transactions. For example, we acquired Airwide Solutions in May 2011 to strengthen our mobile messaging solutions portfolio and expand our global market presence with additional locations in Europe, the Middle East and Africa (EMEA) and the Asia-Pacific region, in addition to significantly expanding our employee and talent base.
Expand into Adjacent Market Segments. As access networks converge towards all-IP, mobile service providers with solutions across wireless, wireline and enterprise see an opportunity for significant savings by consolidating infrastructure equipment into a single converged 4G LTE network. Given the technical complexities associated with mobile networks, and the standardization of solutions such as VoLTE and RCS, we believe that mobile service providers will ultimately choose to converge wireline, and to a lesser degree, enterprise onto the wireless 4G LTE network. With our expertise and first-mover advantage in VoLTE and RCS, we intend to provide converged solutions for adjacent market segments such as residential wireline, mobile center office exchange service (centrex) and enterprise.
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Our Products
Our products support services in two broad categories Voice and Video and Enhanced Messaging as shown in the illustration below. The products can be sold individually or packaged together as fully integrated solutions that we deliver to our customers. The functions provided by our products are described below.
Voice and Video
Telephony Application Server, or TAS:
Our Telephony Application Server (TAS) is a standards-based highly scalable product that provides voice, video and supplementary services over broadband IP networks. Based on its unique convergence capabilities and flexible software packaging, TAS is designed to enable service parity and consistency with the legacy circuit-switched (CS) mobile network, as well as simplify and accelerate 4G LTE network deployments. Our TAS enables advanced mobile functionalities in 4G LTE networks and provides the seamless mobility needed while roaming across networks of different generations and access topologies.
TAS supports a rich suite of advanced IP services, such as HD audio, video conferencing, multi-device and multi-access, that mobile service providers can use to create a differentiated and compelling service offering for their subscribers. Mobile service providers can use TAS to provide the following services: VoLTE, VoWi-Fi, Fixed Mobile Convergence (FMC), Mobile Video Calling, Mobile Enterprise and Fixed Residential. TAS is essential to the roll out of next-generation voice and video services. For example, our TAS solution enabled the first-to-market launch of VoLTE by MetroPCS (now part of T-Mobile) in August 2012.
Voice over LTE Interworking Function, or VoLTE IWF:
Our Voice over LTE Interworking Function (VoLTE IWF) product is deployed as a simple, cost-effective overlay to legacy (circuit-switched) networks, enabling voice and SMS services across next-generation LTE
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networks. VoLTE IWF is a framework that removes dependencies and alleviates costly upgrades to legacy networks through support for two applications: Circuit-Switched Fallback (CSFB) enabling the early introduction of LTE smartphones using legacy networks and Single Radio Voice Call Continuity (SR-VCC) enabling VoLTE call continuity in the event a subscriber roams out of LTE coverage. Mobile service providers can implement CSFB as an interim solution to start offering LTE services right away, and later perform a software upgrade to enable SR-VCC functionality as a final solution for VoLTE, thereby avoiding any costly upgrades. Our VoLTE IWF framework also allows mobile service providers to address evolving LTE standards through software upgrades.
Media Resource Function, or MRF:
Our Media Resource Function (MRF) is a media processing engine that is deployed along with our TAS to provide real-time voice and mobile video services. The MRF provides intelligent video and audio transcoding to optimize service delivery, which becomes an essential capability when interconnecting voice and video services between the mobile service provider network and OTT applications. The MRF also performs adaptive policy-driven traffic shaping based on network conditions and device capabilities to manage the subscribers Quality of Experience (QoE), which OTT service providers cannot offer.
Mobility Application Server, or MAS:
Our Mobility Application Server (MAS) is a standards-based application server that provides service continuity as mobile devices roam in or out of cellular coverage areas. MAS can be deployed as a stand-alone product or can be fully integrated with TAS. MAS supports multimedia session continuity between different networks, such as Wi-Fi and cellular.
Call Session Control Function, or CSCF:
Our Call Session Control Function (CSCF) provides subscriber and session management services to the core network, including authentication functions and service orchestration, routing and delivery. Our CSCF framework is designed with the scalability, reliability and performance density needed for the significantly larger number of devices in wireless networks compared to wireline networks. Our CSCF is designed for deployment in multi-vendor networks with support for both open standard interfaces and the flexibility to work around non-standard third-party implementations, thus ensuring successful interoperability and rapid deployment of services.
Equipment Identity Register, or EIR:
Our Equipment Identity Register (EIR) allows operators to control access to mobile networks, deterring device theft and fraud, and enables provisioning of optimized services, such as transcoding and ringtones, based on device type. EIR has advanced administrative and customer management capabilities that allow mobile operators to block any blacklisted mobile equipment and to lock subsidized handsets to specific SIM cards to enforce subscriber contract agreements. Our EIR solution allows mobile service providers in North America to comply with a recently announced Federal Communications Commission mandate requiring mobile service providers to expeditiously disable mobile devices that are reported stolen. Our unified EIR solution allows global mobile service providers to support all 2G, 3G and 4G LTE devices on their networks using a single solution.
Unified Access Gateway, or UAG:
Our Unified Access Gateway (UAG) is a multi-application solution that is used to authenticate end-user access to the converged services network. Our UAG includes Session Border Controller (SBC) and other gateway functions that are needed to extend mobile operator services to a variety of IP devices and web browsers. The UAG supports all the requisite 4G LTE functional components needed to support mobility and roaming,
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while accessing VoLTE and RCS services. UAG is deployed at the edge of the mobile service provider network to secure service access, including traffic from other provider networks, and is a security gateway that supports key data encryption methods to ensure data integrity and protects the network against malicious attacks, such as denial of service.
Enhanced Messaging
Rich Messaging Server, or RMS:
Our Rich Messaging Server (RMS) is a flexible IP messaging application server with intelligent routing, policy-driven services and multiple domain delivery capabilities that provides a complete suite of text, picture and instant messaging services on a single consolidated platform. RMS allows mobile service providers to seamlessly migrate legacy messaging services such as SMS and MMS to 4G, as well as offer new multimedia messaging services that are competitive with OTT messaging service providers.
RMS can be used by mobile service providers to provide the following services: LTE Messaging, Web Messaging, Converged IP Messaging (CPM), RCS and RCS. With support for programmable interfaces, RMS allows operators to open up their messaging infrastructure to third-party application developers and introduce innovative new services at a rapid pace. Through the use of open APIs, RMS messaging services can be interworked to social networks to extend the reachability of the mobile service providers messaging services to include OTT communities.
Messaging Routers and Gateways:
Our portfolio of Messaging Routers and Gateways is based on a proven set of SMS and MMS messaging products that can be easily and rapidly deployed, and gives mobile service providers a comprehensive messaging solution for all of their messaging needs. Our Universal Messaging Repository (UMR) solution is a flexible, modular SMS messaging platform that provides intelligent, optimized routing features and policy-driven subscriber service profiles. The modularity of our UMR solution allows mobile service providers to deploy high-performance message routing, personalized SMS services and in-line security services such as content filtering. Our Messaging Router is an optimized routing solution for the growing machine-to-machine SMS market segment. Other products of ours, such as Messaging Firewall, Personal, Store and Rapid Service, protect mobile service provider infrastructures from security threats and provide differentiated messaging capabilities needed for high-value services such as mobile banking and client relationship management (CRM) systems. Our Messaging Gateway product is a multimedia messaging gateway that controls access to the network from third-party content providers for delivery of high-value SMS and MMS messaging services and content.
Presence and Resource List Server, or PRS:
Our Presence and Resource List Service (PRS) supports a rich suite of presence features that are optimized for deployment in mobile service provider networks. Presence features allow a user to share information, such as availability, pictures, or away messages, with authorized contacts in the users address book. PRS is designed with all the requisite features and functionality to support the RCS, providing both social presence and device capabilities discovery, and thus ensuring an optimum user experience for mobile subscribers.
PRS accepts, stores and distributes presence information, manages buddy and group lists, performs subscription authorization and enforces privacy rules. More importantly, PRS is scalable to cost-effectively support presence service for the mobile mass market through our network optimization capabilities.
XML Document Management System, or XDMS:
Our XML Document Management System (XDMS) is a high-performance and reliable database system that supports the management and storage of user-generated content such as icons, pictures and taglines, for social
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presence sharing and is used to store pre-defined group contact lists, such as a subscribers friends and family. Additionally, XDMS can also be used as a next-generation Network Address Book (NAB) that manages and stores a subscribers contacts, which can then be accessed from multiple devices, thereby enabling a cloud-based service model.
Technology and Architecture
Our technology has been designed to meet the challenges that mobile service providers face to evolve their networks to support next-generation services and devices. Our ability to interwork new technologies, such as 4G LTE, with the existing 2G and 3G core network infrastructure lowers investment cost for mobile service providers through continued use of legacy equipment, accelerates time-to-market by minimizing impacts on the surrounding network infrastructure and enables service parity across 2G, 3G and 4G LTE networks. Also, our ability to interwork 4G LTE with social networks and the support we provide for open APIs enables collaboration with OTT service providers, encourages new business models and extends the reach of the mobile providers services.
Our differentiated capability for service interworking is based on our mOne® Convergence Platform. The mOne® Convergence Platform is a carrier-grade software platform that enables rapid service development and service delivery across multiple network domains, including circuit-switch, IP, OTT and web-based access. The platform is comprised of three software layers an applications and services layer, a functional layer and an interface abstraction layer. The applications and services layer provides application- or service-specific logic needed to support standards-based solutions such as VoLTE, RCS and CPM. The functional layer consists of discrete functional modules that are common to the various applications or services, such as billing, subscriber management, call preservation and routing. Finally, the interface abstraction layer provides the flexibility to connect any application or service to any multi-vendor network element over different types of network protocols, thereby providing convergence across disparate service domains.
Our ability to package multiple services and solutions across voice, video, messaging and presence on a single common platform reduces the cost and complexity of deploying 4G LTE-based networks. The mOne®
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Convergence Platform supports a wide range of applications and functionalities to deliver services over 2G, 3G and 4G LTE networks such as VoLTE, LTE Messaging, Mobile Video, RCS and CPM all on a single common platform and all with common management.
The mOne® Convergence Platform complies with all leading industry standards from key standards development organizations including the 3rd Generation Partnership Project (commonly known as 3GPP), the Internet Engineering Task Force (commonly known as IETF) and the Open Mobile Alliance (commonly known as OMA) and supports industry-standard open interfaces to connect with existing mobile access and core networks.
The mOne® Convergence Platform is a software-based platform that can be deployed on different types of commercial off-the-shelf (COTS) hardware platforms, including Advanced Telecommunications Computing Architecture (ATCA) hardware platforms, industry standard IT server and blade server hardware platforms and virtualized cloud environments, giving mobile service providers the flexibility to choose the solution that best suits their needs. Our technology makes use of Network Functions Virtualization (NFV) and enables mobile service providers to transition from telecommunications-specific purpose-built hardware platforms onto widely-available industry-standard general computing platforms, thereby significantly lowering costs.
Our technology is based on the following design principles:
| Openness: Our products and solutions are based on leading industry standards and designed to be fully interoperable with third-party vendor equipment. |
| Flexibility: Our software is highly modular and can easily adapt to interwork with the wide variety of equipment typically found across different mobile service provider networks. |
| Innovation: Our unique convergence capabilities enable solutions that address deployment challenges and accelerate time-to-market. |
| Scalability: Our platform is designed to seamlessly scale to meet traffic growth requirements with minimal impact on network design and provisioning. |
| High Availability: Our platform is designed against any single point of failure, meeting or exceeding the traditional mobile telecommunications industry requirements for 99.999% availability. In addition, our solutions are designed for geographical redundancy which maintains network and service availability. |
Customers
Our primary customers are mobile service providers that are deploying or seeking to deploy next-generation converged communications services, such as VoLTE and RCS, over 4G LTE networks. We sell our products directly and through channel partners and system integrators.
Our customer base consists of many of the worlds leading mobile service providers. Our solutions have been deployed in over 120 mobile networks globally. Our end customers include nine out of the top twenty mobile service providers globally, as measured by the number of mobile device connections as of June 2013; these nine customers have a combined total of 1.7 billion mobile device connections or approximately 24% of total global mobile device connections.
The following is a partial listing of our mobile service provider customers, including those who acquired our software through our channel partners, as of June 2013:
Americas |
Europe |
Asia and Australia | ||
AT&T | Vodafone | Vodafone Australia | ||
MetroPCS (now part of T-Mobile) | Tele2 |
Telstra | ||
T-Mobile USA | Deutsche Telekom |
|||
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We serve AT&T, T-Mobile USA and Vodafone exclusively through our channel partners.
Revenue from customers located outside the United States represented 1% of our total revenue in 2010, 49% of our total revenue in 2011, 54% of our total revenue in 2012 and 59% of our total revenue for the six months ended June 30, 2013.
In 2010, T-Mobile USA and MetroPCS (now part of T-Mobile) accounted for 70% and 27%, respectively, of our total revenue. In 2011, T-Mobile USA, AT&T and Vodafone accounted for 24%, 14% and 11%, respectively, of our total revenue. In 2012, AT&T, MetroPCS (now part of T-Mobile), T-Mobile USA and Vodafone accounted for 21%, 13%, 11% and 10%, respectively, of our total revenue. In the six months ended June 30, 2013, T-Mobile USA, Vodafone, AT&T, and Deutsche Telekom accounted for approximately 21%, 15%, 13%, and 12%, respectively, of our total revenue. No other end customer accounted for more than 10% of our revenue in those respective periods.
Customer Case Studies
The following customer case studies, all of which are commercially deployed, illustrate how our customers use and benefit from our solutions.
Western European Mobile Service Provider
Problem: A major multinational mobile service provider was deploying a 4G LTE LTE network and sought a cost-effective and timely solution to introduce LTE smartphones quickly without having to perform time-consuming, costly and risky upgrades to the existing live network.
Solution and Benefits: The customer chose us because of our innovative solution because of our ability to offer an accelerated time-to-market in order to launch LTE smartphones with CSFB service in March 2012, allowing for IP services to be offered across existing networks. Our solution overlays the customers existing network rather than the conventional and more costly network upgrading approach, which allowed the customer to realize significant savings in capital investment by avoiding costly network upgrades. The mOne® Convergence Platform now enables this customer to quickly launch other new 4G LTE services such as VoLTE and RCS.
U.S. Mobile Service Provider
Problem: A mobile service provider was constrained by a lack of sufficient spectrum and sought a better network to address subscriber traffic growth and offer new and improved services. This customer deployed 4G LTE as a more spectrally efficient access network on its limited spectrum and sought to increase capacity by moving subscribers and voice services from the existing voice network to the new LTE network, implementing VoLTE.
Solution and Benefits: The customer chose our VoLTE solution because we developed an innovative and differentiated capability that we estimate allowed the customer to launch six to nine months earlier than the timeframe offered by competitor solutions. Given the spectrum limitation issues facing this mobile service provider, speed-to-market was critical. The customer also chose us as the systems integrator, which entailed working with multiple third-party vendors to validate proper interworking between all components of the overall solution, as well as working with device manufacturers to verify handset interoperability. With our VoLTE solution and our professional services, the customer became the first in the world to launch commercial VoLTE service in August 2012 and was able to begin migrating voice service to its 4G LTE network. Additionally, with our mOne® Convergence Platform deployed for VoLTE, the customer was positioned to quickly launch new value-added RCS 5 services over 4G LTE, which they did less than three months later in October 2012, becoming the first service provider in the world to launch RCS 5.
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Western European Mobile Service Provider
Problem: A major pan-European mobile service provider planned the introduction of RCS services across its pan-European properties and sought a cheaper network solution by using virtualized carrier network technologies to harmonize its service delivery infrastructure and host services centrally in its home market.
Solution and Benefits: The customer chose our Converged Messaging solution based on the mOne® Convergence Platform for both RCS and LTE messaging applications. Our ability to fully integrate these messaging applications and implement them in a virtualized environment created two benefits for the customer. First, investment in disparate messaging applications (instant versus text messaging) is minimized since they are implemented on a common platform. Second, virtualization enables a cloud computing approach to hosting and provides significant cost savings. Another benefit to our Converged Messaging solution is that we are able to also integrate legacy SMS and MMS applications onto the same platform as well. We are already working with the customer to consolidate all messaging services onto a single platform and plan the replacement of legacy messaging equipment as it reaches end of life, thus enabling both network and vendor consolidation.
U.S. Mobile Service Provider
Problem: A major mobile service provider deploying a 4G LTE network sought an innovative network solution to more effectively compete with services from Apple, Google and Skype. The customer sought a solution that provided device- and domain-independent service delivery across multiple market segments, such as mobile and fixed.
Solution and Benefits: The customer chose our mOne® Convergence Platform and our suite of enhanced messaging applications because of our ability to support multiple disparate messaging services on a single, converged platform. Our Converged IP Messaging (CPM) solution supports text, picture and instant messaging services and provides the intelligence in the network to ensure seamless interworking between subscribers on 2G, 3G and 4G LTE networks. With our solution, the customer is able to store messages in the networks, which enables their subscribers to access their message archive, photo galleries and message conversation histories from any device over any of their supported access networks.
Customer Support and Services
We provide critical and hands-on support and services to our customers to define, deploy and operate the products and solutions we sell, which we believe is a critical component of our overall platform offering. Our support and services effort covers pre-sales technical consultation, specification and solution design, solution testing and certification, operation, post-sales maintenance and training.
The provision of a broad range of professional support services is an integral part of our business model. We offer services designed to deliver comprehensive support to our mobile service provider customers and channel partners through every stage of product deployment.
The services we provide to our customers include:
Customer Service and Technical Support. Our support organization provides 24-hour, 7 days a week, 365 days a year operational support to our customers. The support team and resources are strategically located within our customers geographical regions in order to deliver personalized and high-quality engineering and support capabilities. Our service and support team is dedicated to providing high quality and responsive support to ensure that our customers successfully deliver IP-based voice, video, rich communications and enhanced messaging services to their subscribers.
Professional Services. We offer a range of professional services to support every step of the deployment and use of our solutions: pre-installation services, installation, network monitoring and training. Our professional services group provides pre-installation services, such as service and architecture definition and pre-sales support, to help our customers identify the relevant set of services and the associated use cases that they require
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and better understand their customer-specific requirements. Our installation services include network design, project management, physical installation and commissioning. We integrate our solutions with other network components and back office management systems. Our expertise in all of these steps is critical to the successful launch of new services on 4G LTE, and we have differentiated experience based on the commercial launch of the first VoWi-Fi network and first VoLTE network. We also offer network monitoring services to assess network health and we provide recommendations for network expansions, upgrades, optimization and evolution. Finally, we provide detailed product documentation and training that are adapted to the specific network deployment of each customer.
Sales and Marketing
As of June 30, 2013, we had a total sales and marketing staff of 56 employees, with 22 located in the Americas, 21 located in Europe, the Middle East and Africa (EMEA) and 13 in the Asia-Pacific region. Our sales and marketing expenses were $9.7 million and $8.6 million for the six months ended June 30, 2013 and 2012, respectively. Our sales and marketing expenses were $20.6 million, $12.3 million and $3.8 million in the years ended December 31, 2012, 2011 and 2010, respectively.
We market and sell our solutions directly to our customers through our sales force and indirectly through channel partner relationships.
Direct Sales. Our direct sales organization focuses on selling to leading mobile service providers throughout the world. The typical selling cycle begins with mobile service providers requesting information either informally or formally through a request for information (RFI) and/or request for proposal (RFP). In many instances, mobile service providers will first issue an open-ended RFI, then a more detailed and specific RFP. The RFP process includes assessment of responses as well as, in most cases, lab testing and potentially field testing of the service to be deployed. Our relationships with leading mobile service providers and experience in their labs have given us significant insight into their networks and their decision-making processes with respect to their deployment of solutions.
We maintain sales and support offices in several markets around the world, including the United States, Canada, the United Kingdom, India, Singapore, China and Australia, and we have sales personnel in an additional nine countries. The sales team is managed geographically and by key accounts to ensure appropriate focus on our global customer base. Given the large portion of mobile subscribers that are accounted for by the largest mobile service providers the top twenty mobile service providers by subscribers globally have about 57% of the global subscribers we are focused on addressing those large mobile service providers.
For the six months ended June 30, 2013 and 2012, respectively, approximately 40.1% and 44.4% of our revenues result from our direct sales team. For the years ended December 31, 2012, 2011 and 2010, respectively, approximately 44%, 33% and 30% of our revenues resulted from our direct sales team.
Channel Partner Relationships. We have developed relationships with a number of channel partners, including Cisco Systems and other Value Added Resellers (VARs). These relationships have allowed us to reach a broader mobile service provider market than was possible through our direct sales efforts.
For the six months ended June 30, 2013 and 2012, respectively, approximately 59.9% and 55.6% of our revenues result from our channel partner relationships. For the years ended December 31, 2012, 2011 and 2010, respectively, approximately 56%, 67% and 70% of our revenues resulted from our channel partner relationships.
Marketing. We market and promote our products and solutions through a series of coordinated efforts that include customer workshops, customer social events, participation on discussion panels at industry events, speeches, webinars and seminars for customers, industry analyst and press briefings, press releases, attendance at trade shows, demonstrations of product capabilities and trials, including early adopters programs and marketing collateral such as product briefs, solution briefs, advertising in trade journals, placed articles and white papers.
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These marketing activities are typical for the telecommunications industry. We also use social media, such as blogs and posts on Twitter and LinkedIn, to broadcast time-sensitive information of topical interest.
Research and Development
Our technology requires continued investment to maintain our market and technology leadership position. Accordingly, we believe that a strong research and development program is critical to our success. Our research and development efforts are focused on designing, developing and enhancing our products as well as the technology underlying our products, investigating new technologies, performing testing, quality assurance and certification activities with major operators and integrating our solutions with third-party products, if necessary.
Continued investment and innovation in research and development is critical to our business. As of June 30, 2013, we had approximately 370 engineering development personnel located in the United States, India, China and other countries. These personnel are skilled with deep domain expertise in the diverse areas of telecommunications, IP networking, software development, web technologies, and have successfully delivered high-availability voice and video telephony applications leveraging cloud computing and open source software. We deliver end-to-end solutions combining our products and best-of-breed third-party components. This open approach is supported by a highly scalable software platform, flexible software architecture and a skilled employee base. Our delivery of the first operational VoLTE solution at MetroPCS (now part of T-Mobile) in a complex multi-vendor environment illustrates our position at the forefront of the technology space and our ability to execute in a demanding customer environment.
Our research and development expenses were $11.5 million and $12.8 million for the six months ended June 30, 2013 and 2012, respectively. Our research and development expenses were $23.3 million, $15.0 million and $6.5 million during the years ended December 31, 2012, 2011 and 2010, respectively.
Competition
The market for mobile network infrastructure products and solutions is highly competitive and evolving rapidly. The market is subject to changing technology trends and shifting subscriber needs and expectations that lead our customers to introduce new services frequently. With the growth and adoption of 4G LTE technology, we expect competition to continue and intensify for all of our solutions, and in all of our target markets.
We believe there are a number of important factors to compete effectively in our market, including:
| Voice, Video and Messaging Features. Mobile service providers are increasingly demanding a comprehensive set of solutions that includes closely integrated mobile voice, video and messaging features. |
| Solution Scalability and Robustness. The transition to 4G LTE technology is starting with small-scale deployments with the mobile service providers expectation of expanding the deployed services to address all subscribers over time. Mobile service providers are seeking solutions that can be grown seamlessly from the initial small-scale deployments for a subset of subscribers to full deployment for all subscribers and that have the required carrier-grade robustness. |
| Competitive Pricing. Total cost of ownership is one of the key attributes that mobile service providers evaluate when selecting a solution. With declining revenues for voice services and basic messaging, mobile service providers expect that the evolved networks will lower costs to deliver equivalent services, and provide the infrastructure necessary to deliver enhanced services, both now and in the future. |
| Flexibility and Responsiveness. Mobile service providers typically require functionality to be integrated into their networks on aggressive timelines to meet their desired service launch dates. Also, the specific features required for launch of new services varies among mobile service providers due to each providers unique network requirements and the new service set being launched. We believe it is |
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critical that solutions providers have the flexibility to offer customized solutions and implementation approaches. |
| Market Recognition. The implementation of network infrastructure often ties mobile service providers into their chosen vendors for extended periods. As a result, mobile service providers tend to favor suppliers who are well-known, whose successes are demonstrated and whose reputations are well-established. |
Our primary competitors consist of two broad categories:
| Major network infrastructure providers. These competitors include Alcatel-Lucent, Ericsson, Nokia Siemens Networks and Huawei. We believe that we are generally very competitive against these vendors because of the features we offer within our solutions, our flexibility in delivering solutions that are well optimized and deliver the specific feature set required for each mobile service providers unique network requirements, the timeliness of delivering solutions, and competitive pricing. We believe that the large infrastructure vendors generally face structural challenges to both support their legacy businesses and deliver the innovative next-generation solutions challenges that we believe will prevent them from delivering the innovation that mobile service providers need to quickly launch new enhanced services. |
| Specialty solution providers. These competitors include solutions providers such as Acme Packet (recently acquired by Oracle), Broadsoft and Sonus Networks, voice providers such as Broadsoft and Metaswitch and messaging specialists such as Comverse and Acision. Each of these solution providers has the ability to deliver one communications medium but lacks the ability to deliver comprehensive communication solutions. We believe that we are very competitive against these vendors with the breadth of our voice, video and messaging solutions, the features we offer within each of the solutions, the timeliness of delivering the solutions, and competitive pricing. Additionally, we believe that we are becoming better known than these niche vendors as a leading provider of mobile communications solutions for next-generation 4G LTE networks and RCS services with the early successes we have earned with our customers. |
We also compete with some of our channel partners that sell our Equipment Identity Register. We believe that the areas in which we compete with these channel partners will have no material impact on existing resale arrangements.
Our current and potential competitors may have significantly greater financial, technical, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their products. Our competitors may have more extensive customer bases and broader customer relationships than we do, including relationships with our potential customers. In addition, these competitors may have longer operating histories and greater brand recognition than we do. Our competitors may be in a stronger position to respond quickly to new technologies and may be able to market and sell their products more effectively. Moreover, if one or more of our competitors were to merge or partner with another of our competitors, the change in the competitive landscape could adversely affect our customer relationships and competitive position or otherwise affect our ability to compete effectively. For more information on the competitive risks we face, please read Risk Factors Risks Related to Our Business and Our Industry.
Intellectual Property
Our success depends to a significant degree upon our ability to protect our core technology and intellectual property. To accomplish this, we rely on a combination of intellectual property rights, including patents, trade secrets, copyrights and trademarks, as well as customary confidentiality and other contractual protections. Our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and non-U.S. patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business. As of June 30, 2013, we had been issued 17 U.S. patents and 24 non-U.S. patents.
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In addition, as of June 30, 2013, we had a total of ten patent applications pending in the United States, and 19 pending non-U.S. patent applications. Many of the non-U.S. patents and applications are counterparts to the U.S. patents or certain of the U.S. patent applications.
Our U.S. patents are scheduled to expire at various dates between March 2021 and October 2026. The expiration dates of our pending U.S. patent applications, if those applications are issued as patents, will presently be as late as May 2031. Our non-U.S. patents are scheduled to expire at various dates between August 2021 and July 2027. The expiration dates of our pending non-U.S. patent applications if those applications are issued as patents, will presently be as late as May 2032.
Our registered trademarks in the United States consist of the Mavenir Systems® name, mOne®, AirMessenger® and Airwide®.
Our software is protected by U.S. and international copyright laws. We also incorporate a number of third-party software programs into our solutions, pursuant to license agreements. Our software is not substantially dependent on any third-party software, although it utilizes open source code.
In addition to the protections described above, we generally control access to and use of our proprietary software and other confidential information through the use of internal and external controls, including nondisclosure agreements with employees, consultants, customers and vendors and other measures for maintaining trade secret protection. We license our software to customers pursuant to agreements that impose restrictions on the customers ability to use the software, including prohibitions on reverse engineering and limitations on the use of copies. We also seek to avoid disclosure of our intellectual property by requiring employees and consultants with access to our proprietary information to execute nondisclosure and assignment of intellectual property agreements and by restricting access to our source code. For information on the risks associated with our use and protection of intellectual property, please see Risk Factors Risks Related to Our Intellectual Property and Our Technology.
Employees
As of June 30, 2013, we had approximately 670 full-time employees, approximately 360 of whom were primarily engaged in engineering, approximately 60 of whom were primarily engaged in sales and marketing, approximately 180 of whom were primarily engaged in providing implementation and professional support services and approximately 70 of whom were primarily engaged in administration and finance. These employees are located in the United States, India, China, the United Kingdom, Canada, Australia, Finland, Croatia, Germany, Singapore, Malaysia, Dubai and other locations globally. We also had approximately twenty subcontractors engaged in engineering working through subcontractor relationships in India. While the laws of certain of the jurisdictions in which we have employees do not require employees to advise us of union membership, to our knowledge, none of our employees is represented by a labor union or covered by a collective bargaining agreement, except that all of our several employees located in Finland are covered by a collective bargaining agreement. We consider our relationship with employees to be good.
Facilities
Our principal offices occupy approximately 30,500 square feet of leased office space in Richardson, Texas. We are obligated to lease an additional 13,250 square feet at our headquarters by April 2014, and we have the option to expand into that additional office space earlier if we choose. We also have an option to lease and a right of first refusal on an additional 14,785 square feet at our headquarters. The lease term for our headquarters runs through April 2019, and we have a one-time option to terminate the lease early in February 2018.
We also maintain sales, development or technical assistance offices in the following cities: Reading, United Kingdom; Espoo, Finland; North Sydney, Australia; Kuala Lumpur, Malaysia; Singapore; Shanghai, China; Bangalore, India; Cologne, Germany; and Zagreb, Croatia.
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We believe that our current facilities are suitable and adequate to meet our current needs. We intend to add new facilities or expand existing facilities as we add employees, and we believe that suitable additional or substitute space will be available as needed to accommodate any such expansion of our operations.
Legal Proceedings
From time to time, we, our customers and our competitors are subject to various litigation and claims arising in the ordinary course of business. The software and communications infrastructure industries are characterized by frequent litigation and claims, including claims regarding patent and other intellectual property rights, claims for damages or indemnification for alleged breach under commercial supply or service contracts and claims regarding alleged improper hiring practices. From time to time we may be involved in various legal proceedings or claims but we are not aware of any pending or threatened legal proceeding against us that could have a material adverse effect on our business, operating results or financial condition.
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Executive Officers and Directors
The following table sets forth information about our directors, executive officers and other key employees as of the date of this prospectus.
Name |
Age | Position(s) | ||||
Executive Officers |
||||||
Pardeep Kohli |
48 | President, Chief Executive Officer and Director | ||||
Terry Hungle |
59 | Chief Financial Officer | ||||
Terence McCabe |
47 | Chief Technology Officer | ||||
Bahram Jalalizadeh |
53 | Executive Vice President of Global Sales and Business Development | ||||
Sam Garrett |
54 | General Counsel and Secretary | ||||
Key Employees |
||||||
Ian Maclean |
50 | Vice President of Strategy and Marketing | ||||
Ashok Kumar Khuntia |
50 | Vice President of Engineering | ||||
Mahesh Shah |
57 | Vice President of Operations | ||||
Brett Wallis |
42 | Vice President of Systems Engineering | ||||
David Lunday |
48 | Vice President, Corporate Controller and Chief Accounting Officer | ||||
Carolyn Turner |
52 | Vice President of Human Resources | ||||
Non-Employee Directors |
||||||
Benjamin L. Scott(2)(3) |
63 | Chairman of the Board of Directors | ||||
Ammar H. Hanafi(2)(3) |
47 | Director | ||||
Jeffrey P. McCarthy(1) |
58 | Director | ||||
Vivek Mehra(1) |
49 | Director | ||||
Hubert de Pesquidoux(1)(3) |
47 | Director | ||||
Venu Shamapant(2) |
46 | Director |
(1) | Member of our Audit Committee |
(2) | Member of our Compensation Committee |
(3) | Member of our Nominating and Corporate Governance Committee |
Executive Officers
Pardeep Kohli has been our President and Chief Executive Officer and a member of our Board of Directors since joining us in July 2006. Mr. Kohli brings to Mavenir over 20 years of experience in the wireless industry. Prior to joining Mavenir, Mr. Kohli served as co-founder, President and Chief Executive Officer of Spatial Communications Technologies, Inc. (known as Spatial Wireless), a privately owned developer of software-based mobile switching solutions, from January 2001 until Spatial Wireless was acquired by Alcatel (now Alcatel-Lucent) in December 2004. Following the acquisition of Spatial Wireless by Alcatel, Mr. Kohli led the continued expansion and success of the Spatial Wireless product as Senior Vice President of Alcatels Mobile Next Generation Network (NGN) business until June 2006. Mr. Kohli began his career at Siemens India and has served in various roles at NEC Corporation of America, a provider of network and communications products and solutions, DSC Corporation, a manufacturer of telecom products, Pacific Bell Mobile Services and Alcatel USA. Mr. Kohli holds a Bachelors degree in Electronics and Electrical Communications and a Masters degree in Computer Science.
Terry Hungle has served as our Chief Financial Officer since joining us in April 2008. Mr. Hungle has over 30 years of business experience, principally in the telecommunications industry. Most recently, Mr. Hungle was the Chief Financial Officer of Navini Networks, Inc., a provider in the mobile WiMAX (Worldwide Interoperability for Microwave Access) broadband wireless industry, from January 2005 until its sale to Cisco
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Systems in December 2007, and he remained in a transitional role following the acquisition until March 2008. Previously, Mr. Hungle was the Vice President of Corporate Planning of Spatial Wireless from January 2003 until Spatial Wireless was acquired by Alcatel (now Alcatel-Lucent) in December 2004. Mr. Hungle has held a number of senior finance and controllership positions, both domestically and internationally, including that of Chief Financial Officer for Nortel Networks (Nortel) and President of Finance for Nortel Networks Americas. In these positions, he has experience guiding and supporting business growth and development, defining business structures and leading projects that improved overall liquidity in operations and capital structuring. Mr. Hungle worked at Nortel for 21 years. Over ten years ago, Mr. Hungle resigned as Nortels Chief Financial Officer in connection with the following circumstances. In February 2002, Mr. Hungle and Nortel self-reported to the Ontario Securities Commission (OSC) and the SEC that Mr. Hungle had engaged in two trades of a stock fund invested primarily in Nortel common shares through Nortels 401(k) plan. Each trade occurred outside the trading window established by Nortel policy for certain employees, including Mr. Hungle, and within days before a material announcement by Nortel. The first trade was a sale made on March 27, 2001 involving $78,500, and the second trade was a purchase made on December 18, 2001, involving $86,300. After reviewing these circumstances, neither the OSC nor the SEC filed any charges or took any enforcement action against Mr. Hungle. In September 2003, the OSC wrote Mr. Hungle, stating that the OSC had decided to close the matter with no further action. In December 2007, the SEC wrote Mr. Hungle, stating that the SEC Staff did not intend to recommend any enforcement action against him. Presently, Mr. Hungle also serves on the advisory board of Centina Systems, a privately held provider of network management solutions. Mr. Hungle began his finance career in 1974 with Imperial Oil Limited and in 1975 joined Peat, Marwick, Mitchell & Co., both in Canada. He holds a degree in Accountancy from the Saskatchewan Institute of Applied Arts and Sciences and is a Certified Management Accountant.
Terence McCabe was Chief Technology Officer at Airwide Solutions, a mobile messaging and wireless internet infrastructure company, from January 2008, and has served as our Chief Technology Officer since we acquired Airwide Solutions in May 2011. Mr. McCabe joined Airwide Solutions in July 2004 and previously held the positions of President, Americas and Vice President of Research and Development at Airwide Solutions. While at Airwide Solutions, Mr. McCabe expanded and renewed the product development organization with the successful creation of an offshore research and development base in India, and he also drove the rapid adoption of information technology and open source technologies across Airwides product portfolio. From February 1996 to July 2004, Mr. McCabe was with Sema Group plc, an information technology services company, in senior positions including Vice President of Engineering and Chief Technology Officer. At Sema Group, Mr. McCabe oversaw software architecture, research and development, and product management in Europe and North America, focusing on messaging, prepaid, and value-added service applications based on wireless mobile network technologies. Mr. McCabe also led Sema Groups participation in a number of standards organizations related to wireless communication. Prior to Sema Group, Mr. McCabe spent eight years with Digital Equipment Corporation working on realtime solutions, telecommunications and software usability. Mr. McCabe holds a degree in Computer Science from Trinity College in Dublin, Ireland.
Bahram Jalalizadeh is our Executive Vice President of Global Sales and Business Development. He joined Mavenir in October 2006 as our Vice President of Sales and Marketing Development, was our Vice President of Business Development from August 2008 until August 2011 and then served as our Executive Vice President of Business Development and Strategic Accounts until the promotion to his current position in August 2013. Mr. Jalalizadeh has more than twenty-five years of executive management and engineering experience in the telecommunications industry, with an emphasis on wireless technology. Prior to joining Mavenir, Mr. Jalalizadeh was the Vice President of Business Development and Marketing for Mobile Next Generation at Alcatel, where he oversaw global expansion and growth of Alcatels next generation wireless solutions, beginning in December 2004. From May 2001, he was the Vice President of Business Development at Spatial Wireless until it was acquired by Alcatel. At Spatial Wireless, Mr. Jalalizadeh was responsible for developing and executing a global market development and international sales strategy that enabled Spatial Wireless to become a leading provider of mobile switching technology solutions while competing with larger, more established telecommunications companies. Mr. Jalalizadeh previously served as a Director of Market Development for Nortel Networks. He
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holds an MBA from the University of Dallas and a Bachelor of Science in Electrical Engineering from the University of Oklahoma.
Sam Garrett has been our General Counsel since joining Mavenir in August 2011 and was elected as our Secretary in December 2012. From February 2007 through July 2011, Mr. Garrett was a solo practitioner in Dallas, and from March 2008 he also wrote for Bloomberg Law as a contractor for Special Counsel, Inc. Mr. Garrett began his career in 1985 with Sullivan & Cromwell LLP in New York and London. In 1990 he joined McGuireWoods LLP in Richmond, Virginia, where he became a partner in 1993. From October 2000 through March 2005, he was Counsel with Davis Polk & Wardwell LLP in London and New York. In July 2005, he became Of Counsel with Carrington, Coleman, Sloman and Blumenthal L.L.P. in Dallas, Texas. Mr. Garrett holds a B.A. from the University of Tennessee, where he was Phi Beta Kappa, and earned his law degree from Vanderbilt Law School, where he graduated first in his class. In between law school graduation and legal practice, Mr. Garrett clerked for Judge Albert Henderson on the United States Court of Appeals in Atlanta.
Key Employees
Ian Maclean has served as our Vice President of Strategy and Marketing since January 2013. He previously held roles as Vice President of Solutions Strategy from July 2011 until December 2012 and Senior Director of Sales Engineering, after joining Mavenir in January 2007 as Director of Product Management. In his current role, Mr. Maclean is responsible for corporate strategy, portfolio management, global marketing and commercial pricing functions. Before joining us, he was a Senior Product Manager with Nortel Networks, working in the GSM/UMTS Product Management group, where he was responsible for driving Nortels Gateway GPRS Support Node (GGSN) product strategy, defining market requirements and managing an extensive customer base. Mr. Maclean started his career with Bell Northern Research in 1992 and held various roles in research and development and global operations before moving into product management at Nortel Networks. Mr. Maclean holds a B.S. in Electrical Engineering and a B.A in Political Science from the University of Missouri.
Ashok Kumar Khuntia joined us in September 2005. He left the company briefly in September 2007 to pursue a start-up communications technology company, and rejoined us in September 2008 as Senior Director of Engineering. He was promoted to his current position of Vice President of Engineering in June 2011. Mr. Khuntia brings more than 16 years of telecommunications experience leading research and development and system engineering projects, specializing in new product introduction and product evolution. Mr. Khuntia has been a key architect of our mOne® convergence platform. Before joining Mavenir, Mr. Khuntia was a Senior Architect at Cisco Systems from August 2000 to August 2005, where he was involved in the development of Ciscos call server and BTS soft switch. Prior to Cisco Systems, Mr. Khuntia worked as a key technical architect for IPMobile Inc. (later acquired by Cisco), where he worked on a wireless bandwidth broker. Mr. Khuntia received a Bachelor in Technology in Mechanical Engineering from the National Institute of Technology, Rourkela in India and a Masters in Technology from the Indian Institute of Technology, Kanpur, in Industrial Management. Mr. Khuntia also holds an MBA degree from the University of Dallas.
Mahesh Shah has been our Vice President of Operations since joining us in July 2011. Mr. Shah is a telecommunications industry veteran who brings over 25 years of telecommunications engineering and software development experience to Mavenir. At DSC Communications, where he served as Senior Director of Engineering from June 1991 to July 1997, he was responsible for creating complex telecommunications products from concept to successful deployment. At Opthos, where he was a senior director from July 2000 to April 2002, he led the creation of an optical router product. At Spatial Wireless and Alcatel, where he was Senior Director of Engineering from May 2002 to July 2011, he was responsible for the mobile switching center (MCS) call server and the Rockets innovation program. The holder of several technical patents, Mr. Shah has been responsible for creating a number of complex telecommunications products from concept through to successful deployment. Mr. Shah has a B.S. in Electrical Engineering from Gujarat University in India.
Brett Wallis is our Vice President of Systems Engineering, where he brings more than 20 years of wireless telecommunications experience leading projects for research and development, system engineering and
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product management, specializing in new product introduction and product evolution. Before joining Mavenir in March 2007, he served as Voice Core Solution Senior Architect at Nortel Networks from July 2005 to March 2007, where he was responsible for end-to-end solution architecture for the GSM/UMTS voice core products, and directed the evolution of Nortels legacy MSC into a Session Initiation Protocol enabled MSC Server. As a Solution Architect at Nortel, Mr. Wallis served as R&D liaison into product management, technical sales support and standards organizations and was responsible for all technical customer engagements. Prior to this, Mr. Wallis held other roles at Nortel in system architecture, software design and operations. Mr. Wallis received a Bachelor of Science in Engineering degree in computer engineering from Tulane University, where he was the valedictorian of the College of Engineering, and he holds an MBA from the University of Texas at Dallas.
David Lunday joined Mavenir in August 2011 and is our Vice President, Corporate Controller and Chief Accounting Officer. From September 2009 to August 2011, Mr. Lunday was the Controller and then the Chief Financial Officer, North America, for Acision, a privately-held provider of mobile messaging products and solutions. From September 2008 to July 2009, he was the Controller for Revenue at Allegro Development, a leading provider of energy trading and risk management solutions for energy utilities, refiners, producers and traders, where he was responsible for leading all revenue-side functions. From August 2006 to September 2008, Mr. Lunday was the Corporate Controller, North America for Retalix, Ltd., a publicly-traded company specializing in software that automates retail, distribution and supply chain operations for retailers and distributors worldwide. Prior to joining Retalix, Mr. Lunday held managerial controller, finance and accounting positions with RealPage, Inc., a publicly-traded provider of property management software, GVI Security Solutions, a private distributor of professional security equipment, and Airband Communications, a privately held provider of fixed wireless internet service. Mr. Lunday is a Certified Public Accountant and holds an M.S. and a B.B.A. in Accounting from the University of Texas at Arlington.
Carolyn Turner previously led the human resources department at Airwide Solutions from January 2004 and joined us as our Vice President of Human Resources when we acquired Airwide Solutions in May 2011. Ms. Turner brings 20 years of experience in all facets of human resources management in the high technology industry. Prior to joining Airwide Solutions, Ms. Turner held a variety of different staff and human resource management positions with SchlumbergerSema and its predecessor organizations. Before her career in human resources, Ms. Turner developed a foundation in the information technology industry by spending eight years working in the software industry as a developer, analyst, and project manager. Ms. Turner holds a B.Sc. with honors in Mathematics.
Non-Employee Directors
Ammar H. Hanafi has been a member of our Board since February 2007 and joined Alloy Ventures, a venture capital firm, as a general partner in February 2005. At Alloy Ventures, Mr. Hanafi focuses on investments in cloud computing infrastructure and services. Mr. Hanafi joined Alloy Ventures from Cisco Systems, Inc., a multinational manufacturer of networking equipment, where he had since October 2002 been Vice President of New Business Ventures, leading new product efforts in the enterprise data center market. Mr. Hanafi joined Cisco Systems in 1997 as a member of the Corporate Business Development Group and from 2000 to 2002, he was Vice President of Corporate Business Development, where he was responsible for Ciscos acquisitions, acquisition integration, investment and joint venture activity on a global basis. Prior to Cisco, Mr. Hanafi held positions at PanAmSat Corporation, a global satellite services provider, and the investment banking firms of Morgan Stanley and Donaldson, Lufkin & Jenrette. Mr. Hanafi serves on the boards of several privately held companies in the cloud computing infrastructure and services businesses. He holds a B.S. in Applied and Engineering Physics from Cornell University and an M.B.A. from Stanford University. Mr. Hanafi was selected to serve on our Board of Directors because of his professional and business development experience in the communications industry, as well as his substantial experience as a venture capitalist and as a director of a number of privately-held information technology companies.
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Jeffrey P. McCarthy has been a member of our Board since April 2006. Since December 1998, Mr. McCarthy has served as a General Partner of North Bridge Venture Partners, a venture capital firm. Prior to joining North Bridge Venture Partners, Mr. McCarthy was Chief Executive Officer of New Oak Communications, a privately-held leading provider of virtual private network (VPN) switches that was acquired by Bay Networks. He previously held senior management positions at Cadia Networks, a developer of ATM concentrator products for the service provider marketplace, and Wellfleet Communications, an Internet router company. Mr. McCarthy also served on the board of A123 Systems (AONE), a publicly-traded developer and manufacturer of lithium ion phosphate batteries and systems, from December 2001 until October 2012 and he serves on the boards of directors of several private companies. Mr. McCarthy holds a B.S. in Business Administration from Northeastern University and an M.B.A. from Bentley University. Mr. McCarthy was selected to serve on our Board of Directors because of his business development experience as a partner for a venture capital firm.
Vivek Mehra has served on our Board of Directors since May 2011. Since February 2003, Mr. Mehra has been a partner with August Capital, a venture capital firm. Prior to joining August Capital, Mr. Mehra co-founded Cobalt Networks, a provider of server appliances, in 1996, where he served as Chief Technology Officer and Vice President, Products. Cobalt Networks completed its initial public offering in November 1999 and was subsequently sold to Sun Microsystems, Inc., a computer products and software company, in December 2000. Mr. Mehra continued to serve with Sun Microsystems after the acquisition as Chief Technology Officer and General Manager of Suns Cobalt Business Unit until August 2002. Mr. Mehra serves and has served on the boards and board committees of a number of private companies. Mr. Mehra earned a B.S. in Electronics from Punjab University in India and an M.S. in Computer Engineering from Iowa State University. Mr. Mehra was selected to serve on our Board of Directors because of his professional experience in building and scaling startups, including founding and taking a company public, as well as his substantial experience as a venture capitalist and as a director of a number of privately-held information technology companies.
Hubert de Pesquidoux has served on our Board of Directors since January 2012. Most recently, Mr. de Pesquidoux served as Executive Partner at Siris Capital and is the founder of HDP Consulting, a private consulting firm. Mr. de Pesquidoux was Chief Financial Officer of Alcatel-Lucent from November 2007 to December 2008 and the President and Chief Executive Officer of the Enterprise Business Group of Alcatel-Lucent from November 2006 to December 2008. In his nearly 20-year career at Alcatel-Lucent (and its predecessor, Alcatel), Mr. de Pesquidouxs executive positions included President and Chief Executive Officer of Alcatel North America (from June 2003 to November 2006); Chief Operating Officer of Alcatel USA; President and Chief Executive Officer of Alcatel Canada; Chief Financial Officer of Alcatel USA and Treasurer of Alcatel Alsthom. He joined Alcatel in 1991 after several years in the banking industry. Mr. de Pesquidoux has served as a member of the board of directors and chairman of the audit committee of Sequans Communications, a French telecommunications chip equipment maker traded on the New York Stock Exchange, since March 2011 and as director and member of the audit committee of Radisys Corporation, a publicly traded provider of embedded wireless infrastructure solutions, since April 2012. Mr. de Pesquidoux also previously served as Chairman of the Board and a member of the audit committee at Tekelec, a publicly traded provider of multimedia and mobile traffic solutions that was taken private in January 2012, and serves or has served on the boards of a number of private companies. Mr. de Pesquidoux holds a masters degree in law from Nancy Law University, an MBA from the Institute for Political Studies (Sciences Po) in Paris and a DESS in International Affairs from Paris Dauphine University. Mr. de Pesquidoux was selected to serve as a member of our Board of Directors because of his extensive financial and operational experience in our industry and his experience on public company boards of directors.
Benjamin L. Scott has served as a member of our Board since August 2006 and as Chairman of the Board since October 2007, and is a General Partner with LiveOak Venture Partners, an Austin, Texas based early stage venture capital firm. Prior to this, Mr. Scott served as a Venture Partner with Austin Ventures, a venture capital firm, from May 2002 until June 2009. From January 2000 to May 2002, Mr. Scott served as a Partner with Quadrant Management, a venture capital firm. From October 1997 to November 1999, Mr. Scott served as the Chairman and Chief Executive Officer of IXC Communications, a public provider of data and voice
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communications services that is now known as Broadwing Communications. In the past, Mr. Scott has served as a senior executive with AT&T, PrimeCo and Bell Atlantic. Mr. Scott also served on the board of Active Power, Inc., a publicly traded designer and manufacturer of continuous power and infrastructure solutions from March 2002 until May 2013, including service as Chairman of the Board from February 2007 and service as chairman of the compensation committee and member of the nominating and corporate governance committee. He also serves or has served on the boards of directors of several private companies. He holds a B.S. in Psychology from Virginia Polytechnic Institute and State University. Mr. Scott was chosen to serve on our Board of Directors because of his extensive general management experience with large and with rapidly growing technology companies, including his past service as Chairman of mobile solutions providers Spatial Wireless and Navini Networks, as well as more than 10 years of experience in the venture capital industry, where he routinely provides strategic and financial guidance to emerging technology companies.
Venu Shamapant has been a member of our Board since April 2006, since participating in a seed round of financing for the company, and is a General Partner with LiveOak Venture Partners, an Austin, Texas based early stage venture capital firm. Prior to co-founding LiveOak Venture Partners, Mr. Shamapant had been a General Partner with Austin Ventures since 2005, having joined Austin Ventures in 1999. He serves on, and has previously worked with and served on, the boards of directors of several private companies in enterprise software and systems, wireless infrastructure and technology-enabled services. Mr. Shamapant began his career as a software developer and engineering lead at Mentor Graphics, a design automation company, and, prior to joining Austin Ventures, was with McKinsey & Co. serving clients in the enterprise systems and software markets. Mr. Shamapant holds an M.B.A. from Harvard Business School, an M.S. in Computer Engineering from the University of Texas at Austin and a B.S. in Electronics and Communications Engineering from Osmania University in India. Mr. Shamapant was selected to serve on our Board of Directors because of his professional experience, including his professional experience in building and scaling startups, as well as his substantial experience as a venture capitalist.
Board Composition
Our Board of Directors currently consists of seven members. All of our current directors were elected or appointed in accordance with the terms of an amended and restated investors rights agreement among us and certain of our stockholders. The voting provisions of this amended and restated investors rights agreement will terminate upon the completion of this offering, and there will be no further contractual obligations regarding the election of our directors. Our current directors will continue to serve as directors until their resignation or until their successors are duly elected by the holders of our common stock, despite the fact that the voting provisions of our amended and restated investors rights agreement will terminate upon the completion of this offering.
In accordance with the terms of our amended and restated certificate of incorporation and our amended and restated bylaws, each of which will become effective upon completion of this offering, the Board of Directors will be divided into three classes, Class I, Class II, and Class III, with each class serving staggered three-year terms. At each annual meeting, a class of directors will be elected for a three-year term to succeed the directors of the same class whose terms are then expiring. Upon the completion of this offering, the members of the classes will be divided as follows:
| the Class I directors will be Messrs. McCarthy and Mehra, and their term will expire at the annual meeting of stockholders to be held in 2014; |
| the Class II directors will be Messrs. Hanafi and Shamapant, and their term will expire at the annual meeting of stockholders to be held in 2015; and |
| the Class III directors will be Messrs. de Pesquidoux, Kohli and Scott, and their term will expire at the annual meeting of stockholders to be held in 2016. |
Our amended and restated certificate of incorporation that will become effective upon the completion of this offering provides that the authorized number of directors may be changed only by resolution of the Board of
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Directors. Any additional directorships resulting from an increase in the number of directors will be distributed between the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of the Board of Directors may have the effect of delaying or preventing changes in our management or a change in control of us.
Our directors may be removed only for cause by the affirmative vote of the holders of two thirds of our outstanding voting stock.
Board Independence
We have applied to list our common stock on the New York Stock Exchange. Under the rules of the NYSE, independent directors must comprise a majority of a listed companys board of directors within twelve months from the date of listing. In addition, NYSE rules require that, subject to specified exceptions, each member of a listed companys audit, compensation and nominating and corporate governance committees be independent within twelve months from the date of listing. Audit committee members must also satisfy additional independence criteria, including those set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Under NYSE rules, a director will only qualify as an independent director if, in the opinion of that companys board of directors, that person does not have a material relationship with the company. In order to be considered independent for purposes of Rule 10A-3 under the Exchange Act, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the Board of Directors or any other board committee: (1) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries, other than compensation for board service; or (2) be an affiliated person of the listed company or any of its subsidiaries.
In October 2012, our Board of Directors undertook a review of its composition and that of its committees as well as the independence of each director. Based upon information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, our Board of Directors has determined that none of our non-employee directors Messrs. Scott, Hanafi, McCarthy, Mehra, de Pesquidoux and Shamapant has a material relationship with us and that each of these directors is independent in accordance with the rules of the New York Stock Exchange. In making that determination, our Board of Directors considered the relationships that each of those non-employee directors has with us and all other facts and circumstances the Board of Directors deemed relevant in determining independence, including the potential deemed beneficial ownership of our capital stock by each non-employee director, including non-employee directors that are affiliated with certain of our major stockholders.
The Board of Directors does not currently have a process for security holders to send communications to the Board. The Board intends to implement such a process following the completion of this offering.
Board Committees
Our Board of Directors has an audit committee, a compensation committee and a nominating and corporate governance committee.
Audit Committee
Our audit committee consists of Hubert de Pesquidoux (chairman), Jeffrey P. McCarthy and Vivek Mehra. The functions of the audit committee include:
| appointing our independent registered public accounting firm and being directly responsible for the compensation, retention and oversight of the independent registered public accounting firm, who will report directly to the audit committee; |
| reviewing and pre-approving the engagement of our independent registered public accounting firm to perform audit services and any permissible non-audit services, including the fees to be paid for those services; |
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| reviewing our annual and quarterly financial statements and reports and discussing the financial statements and reports with our independent registered public accounting firm and management; |
| reviewing and approving all related person transactions; |
| reviewing with our independent registered public accounting firm and management significant issues that may arise regarding accounting principles and financial statement presentation, as well as matters concerning the scope, adequacy and effectiveness of our internal controls over financial reporting; |
| establishing procedures for the receipt, retention and treatment of complaints received by us regarding internal controls over financial reporting, accounting or auditing matters; and |
| preparing the audit committee report for inclusion in our proxy statement for our annual meeting. |
All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NYSE. Our Board of Directors has determined that Mr. de Pesquidoux qualifies as an audit committee financial expert within the meaning of applicable SEC regulations. In making this determination, our Board of Directors considered the nature and scope of experience that Mr. de Pesquidoux has previously had with public reporting companies, including service as Chief Financial Officer of a large public company and service on public company audit committees. Our Board of Directors has determined that all of the current members of our audit committee satisfy the relevant independence requirements for service on the audit committee set forth in the rules of the NYSE and, after the one-year phase-in period under the applicable requirements of the SEC and the listing requirements of the NYSE, upon which we intend to rely, all members of our audit committee will be independent directors under applicable SEC rules. Both our independent registered public accounting firm and management periodically meet privately with our audit committee.
Our Board of Directors has adopted an audit committee charter. We believe that the composition of our audit committee, and our audit committees charter and functioning, will comply with the applicable requirements of the NYSE and SEC rules and regulations. We intend to comply with future requirements to the extent they become applicable to us.
Following the completion of this offering, the full text of our audit committee charter will be posted on the investor relations portion of our website at http://www.mavenir.com. We do not incorporate the information contained on, or accessible through, our corporate website into this prospectus, and you should not consider it a part of this prospectus.
Compensation Committee
Our compensation committee consists of Benjamin L. Scott (chairman), Ammar H. Hanafi and Venu Shamapant. The functions of the compensation committee include:
| determining the compensation and other terms of employment of our Chief Executive Officer and other executive officers and reviewing, developing and recommending to our Board of Directors our performance goals and objectives relevant to that compensation; |
| administering and implementing our incentive compensations plans and equity-based plans, including approving option grants, restricted stock and other awards for non-executive officer employees and recommending to our Board of Directors such plans and awards for executive officers; |
| evaluating and recommending to our Board of Directors incentive compensation plans, equity-based plans and similar programs advisable for us, as well as modifications or terminations of our existing plans and programs; |
| reviewing, developing and recommending to our Board of Directors the terms of any employment-related agreements, severance arrangements, change-in-control and similar agreements or provisions with our Chief Executive Officer and other executive officers; |
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| reviewing and discussing the Compensation Discussion & Analysis required in our annual report and proxy statement with management and determining whether to recommend to our Board of Directors the inclusion of the Compensation Discussion & Analysis in the annual report or proxy, to the extent that the Compensation Discussion & Analysis is required by SEC rules; and |
| preparing a report on executive compensation for inclusion in our proxy statement for our annual meeting, to the extent required by SEC rules. |
Each member of our compensation committee is a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act, and an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code of 1986. Furthermore, our Board of Directors has determined that each of Messrs. Scott, Hanafi and Shamapant satisfy the independence standards for compensation committee membership established by the SEC and the listing rules of the NYSE, as applicable.
Our Board of Directors has adopted a compensation committee charter. We believe that the composition of our compensation committee, and our compensation committees charter and functioning, will comply with the applicable requirements of the NYSE and SEC rules and regulations. We intend to comply with future requirements to the extent they become applicable to us.
Following the completion of this offering, the full text of our compensation committee charter will be posted on the investor relations portion of our website at http://www.mavenir.com. We do not incorporate the information contained on, or accessible through, our corporate website into this prospectus, and you should not consider it a part of this prospectus.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Ammar H. Hanafi (chairman), Hubert de Pesquidoux and Benjamin L. Scott. The functions of the nominating and corporate governance committee include:
| evaluating director performance on the Board of Directors and applicable committees of the Board of Directors; |
| reviewing, developing and recommending to our Board of Directors the cash and equity compensation to be paid to our non-employee directors; |
| identifying, recruiting, evaluating and recommending individuals for membership on our Board of Directors, the audit committee and the compensation committee; |
| considering questions of independence or possible conflicts of interest (other than related person transactions) of members of our Board of Directors or our executive officers; |
| evaluating nominations by stockholders of candidates for election to our Board of Directors; |
| reviewing and recommending to our Board of Directors any amendments to our corporate governance documents; and |
| making recommendations to the Board of Directors regarding management succession planning. |
Our Board of Directors has determined that Messrs. Hanafi, de Pesquidoux and Scott each satisfy the independence standards for nominating and corporate governance committee members established by the SEC and the listing standards of the NYSE, as applicable.
Our Board of Directors has adopted a nominating and corporate governance committee charter. We believe that the composition of our nominating and corporate governance committee, and our nominating and corporate governance committees charter and functioning, will comply with the applicable requirements of the NYSE and
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SEC rules and regulations. We intend to comply with future requirements to the extent they become applicable to us.
Following the completion of this offering, the full text of our nominating and corporate governance committee charter will be posted on the investor relations portion of our website at http://www.mavenir.com. We do not incorporate the information contained on, or accessible through, our corporate website into this prospectus, and you should not consider it a part of this prospectus.
Compensation Committee Interlocks and Insider Participation
During 2012, our compensation committee consisted of Benjamin L. Scott (chairman), Ammar H. Hanafi and Venu Shamapant. Our former director, K.P. Wilska, served on our compensation committee until he resigned from our Board of Directors in January 2012. None of our executive officers serve as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving as a member of our Board of Directors or our compensation committee.
Code of Business Conduct and Ethics
Our Board of Directors has adopted a Code of Business Conduct and Ethics in connection with this offering. The Code of Business Conduct and Ethics will apply to all of our employees, officers, agents and representatives, including directors and consultants.
Our Board of Directors has also adopted an additional Code of Ethics for our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer. This Code of Ethics, applicable to the specified officers, contains additional requirements including a prohibition on personal loans from the company (except where permitted by, and disclosed pursuant to, applicable law), and a requirement to review reports to be filed with SEC once we are a public company.
We intend to disclose future amendments to certain provisions of our Code of Business Conduct and Ethics and our Code of Ethics for our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer, or waivers of those provisions, applicable to any principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions or our directors on our website identified below. Upon the effectiveness of the registration statement of which this prospectus forms a part, the full text of our Code of Business Conduct and Ethics and our Code of Ethics for our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer will be posted on our website at http://www.mavenir.com. The inclusion of our website address in this prospectus does not include or incorporate by reference the information on our website into this prospectus, and you should not consider that information a part of this prospectus.
Director Compensation
Prior to this offering, we have not compensated our non-employee directors that are affiliated with our stockholders for their service on our Board of Directors. We also do not, and do not expect to, provide separate compensation to our directors who are also our employees, such as Mr. Kohli, our President and Chief Executive Officer. However, we provide, and expect to continue to provide, reimbursement to our non-employee directors for their reasonable expenses incurred in attending meetings of our Board of Directors and committees of our Board of Directors.
During 2010, 2011 and 2012, we paid Benjamin L. Scott a monthly fee of $7,500 for service as the Chairman of our Board of Directors. Mr. Scotts compensation in 2012 is set forth in the table below. We also granted options to Hubert de Pesquidoux in 2012, which are described below. No other member of our Board of
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Directors received compensation in 2012. We also reimbursed Mr. Scott and Mr. de Pesquidoux for expenses incurred in connection with attending meetings of our Board of Directors.
Name |
Fees earned or paid in cash ($) |
Option Awards ($)(1) |
Total ($) |
|||||||||
Hubert de Pesquidoux |
| 41,505 | 41,505 | |||||||||
Benjamin L. Scott |
90,000 | (2) | | 90,000 | ||||||||
All other directors |
| | |
(1) | Amounts represent the aggregate grant date fair market value of stock options granted during 2012, computed in accordance with FASB ASC Topic 718. Assumptions used in calculating the fair market value of these stock options are described in Note 11 to the consolidated financial statements of Mavenir Systems, Inc. and subsidiaries included elsewhere in this prospectus. |
(2) | Represents a monthly retainer of $7,500 paid to Mr. Scott for service as Chairman of our Board of Directors. |
We have granted stock options to two of our independent directors who are not affiliated with our major investors. In September 2006, we granted to Benjamin L. Scott options to purchase 112,500 shares of our common stock at an exercise price of $0.06 per share, and in October 2010, we granted him options to purchase 37,500 shares of our common stock at an exercise price of $0.11 per share. In January 2012, we granted to Hubert de Pesquidoux options to purchase 234,750 shares of our common stock at an exercise price of $0.30 per share. These options vest in 48 equal monthly installments, subject to continued service, from the applicable vesting commencement date. In January 2013, we granted to Mr. de Pesquidoux options to purchase 59,418 shares of our common stock at an exercise price of $1.11 per share. These options vest in full on the first anniversary of the grant date. In addition, the vesting of these options will accelerate in full upon a change in control of us. For purposes of options granted through 2012, a change in control of us is defined as:
| the acquisition of our company by another entity by means of any transaction or series of related transactions (including, without limitation, any merger, consolidation or other form of reorganization in which our outstanding shares are exchanged for securities or other consideration issued, or caused to be issued, by the acquiring entity or its subsidiary, but excluding any transaction effected primarily for the purpose of changing our jurisdiction of incorporation) that results in the transfer or acquisition of at least a majority of the voting power of our outstanding shares to that other entity; or |
| a sale of all or substantially all of our assets or the exclusive license of all or substantially all of our intellectual property by means of any transaction or series of related transactions. |
For purposes of the options granted to Mr. de Pesquidoux in 2013, a change in control of us is defined in substantially the same manner as described in Executive Compensation Potential Payments upon Termination or a Change in Control Definitions of Cause, Good Reason and Change in Control.
Our Board of Directors has adopted a policy pursuant to which, following the completion of this offering, each non-employee director will receive an annual fee of $20,000, and the Chairman of the Board will receive an additional annual fee of $20,000. Independent non-employee directors will receive an additional $5,000 annually for serving on the audit committee of our Board of Directors and an additional $3,000 annually for serving on the compensation committee or the nominating and corporate governance committee of our Board of Directors. The chairman of our audit committee will receive an additional $12,000 annually, the chairman of our compensation committee will receive an additional $10,000 annually and the chairman of our nominating and corporate governance committee will receive an additional $7,500 annually. We have also adopted a program pursuant to which, following the completion of this offering, our independent non-employee directors will receive equity awards as described under Executive Compensation Benefit Plans 2013 Equity Incentive Plan Automatic Director Awards. Members of our Board of Directors will continue to be reimbursed for travel and other out-of-pocket expenses in connection with attending meetings.
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Our Board of Directors has adopted stock ownership guidelines applicable to our non-employee directors. These guidelines require each non-employee director to own shares of our common stock having a value of at least three times that non-employee directors regular cash retainer within five years from the later of (i) the completion of this offering or (ii) the directors initial election to our Board. Shares held by a stockholder with whom a director is employed or affiliated as well as vested and exercised equity awards and shares held in entities for the benefit of a director or his or her immediately family will count towards this requirement.
Limitations on Liability and Indemnification Agreements
As permitted by Delaware law, we have adopted provisions in our amended and restated certificate of incorporation and amended and restated bylaws, both of which will become effective upon the completion of this offering, that limit or eliminate the personal liability of directors for a breach of their fiduciary duty of care as a director. The duty of care generally requires that, when acting on behalf of the corporation, a director exercise an informed business judgment based on all material information reasonably available to him or her. Consequently, a director will not be personally liable to us or our stockholders for monetary damages or breach of fiduciary duty as a director, except for liability for:
| any breach of the directors duty of loyalty to us or our stockholders; |
| any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; |
| any act related to unlawful stock repurchases, redemptions or other distributions or payments of dividends; or |
| any transaction from which the director derived an improper personal benefit. |
These limitations of liability do not limit or eliminate our rights or any stockholders rights to seek non-monetary relief, such as injunctive relief or rescission. These provisions will not alter a directors liability under other laws, such as the federal securities laws or other state or federal laws. Our amended and restated certificate of incorporation that will become effective upon the completion of this offering also authorizes us to indemnify our officers, directors and other agents to the fullest extent permitted under Delaware law.
As permitted by Delaware law, our amended and restated bylaws also provide that:
| we will indemnify our directors, officers, employees and other agents to the fullest extent permitted by law; |
| we must advance expenses to our directors and officers, and may advance expenses to our employees and other agents, in connection with a legal proceeding to the fullest extent permitted by law; and |
| the rights provided in our amended and restated bylaws are not exclusive. |
If Delaware law is amended to authorize corporate action further eliminating or limiting the personal liability of a director or officer, then the liability of our directors or officers will be so eliminated or limited to the fullest extent permitted by Delaware law, as so amended. Our bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in connection with their services to us, regardless of whether our bylaws permit such indemnification. We have obtained such insurance.
In addition to the indemnification provided for in our amended and restated certificate of incorporation and amended and restated bylaws, we have entered into separate indemnification agreements with each of our directors and executive officers, which may be broader than the specific indemnification provisions contained in the Delaware General Corporation Law. These indemnification agreements may require us, among other things, to indemnify our directors and executive officers for some expenses, including attorneys fees, expenses, judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding
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arising out of his service as one of our directors or executive officers or any other company or enterprise to which the person provides services at our request. We believe that these provisions and agreements are necessary to attract and retain qualified individuals to serve as directors and executive officers.
This description of the indemnification provisions of our amended and restated certificate of incorporation, our amended and restated bylaws and our indemnification agreements is qualified in its entirety by reference to these documents, each of which is attached as an exhibit to the registration statement of which this prospectus forms a part.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable.
There is no pending litigation or proceeding naming any of our directors or officers as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.
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Summary Compensation Table
The following table shows the compensation awarded or paid to, or earned by, our Chief Executive Officer and our three other most highly compensated executive officers for the year ended December 31, 2012. We refer to these four executive officers in this prospectus as our named executive officers.
Name and Principal Position |
Year | Salary ($) |
Bonus ($) |
Option Awards ($)(1) |
Nonequity Incentive Plan Compensation ($)(2) |
All Other Compensation ($) |
Total ($) |
|||||||||||||||||||||
Pardeep Kohli, President and Chief Executive Officer |
2012 | 360,000 | | | 114,000 | | 474,000 | |||||||||||||||||||||
Terry Hungle, Chief Financial Officer |
2012 | 256,667 | | | 64,800 | | 321,467 | |||||||||||||||||||||
Bahram Jalalizadeh, Executive Vice President of Global Sales and Business Development |
2012 | 210,000 | | | 230,684 | | 440,684 | |||||||||||||||||||||
Matt Dunnett(3), Former Executive Vice President of International Sales |
2012 | 253,648 | | | 176,696 | 10,146 | (4) | 440,490 | (5) |
(1) | We calculate the values of option awards based on the aggregate grant date fair market value of stock options, computed in accordance with FASB ASC Topic 718. Assumptions used in calculating the fair market value of stock options are described in Note 11 to the consolidated financial statements of Mavenir Systems, Inc. and subsidiaries, included elsewhere in this prospectus. |
(2) | These amounts represent payments approved by our compensation committee and our Board of Directors and paid to the named executive officers under our 2012 Executive Bonus Plan in the case of Messrs. Kohli and Hungle and under our 2012 Sales Commission Plan in the case of Messrs. Dunnett and Jalalizadeh. See Cash Awards Under the 2012 Executive Bonus Plan and Cash Awards Under the 2012 Sales Commission Plan below. |
(3) | Mr. Dunnett commenced a paid leave of absence in August 2013 and his employment will terminate in October 2013. |
(4) | Reflects matching contributions by us to the defined contribution pension scheme available to our UK employees as described below under Retirement Plans. |
(5) | Mr. Dunnett resides in the United Kingdom and was paid in pounds sterling. The amounts set forth in the Summary Compensation Table with respect to Mr. Dunnett have been converted into U.S. Dollars using the average exchange rate in effect during 2012. |
Cash Awards under the 2012 Executive Bonus Plan
In 2012, Messrs. Kohli and Hungle participated in, and were eligible for cash awards under, our 2012 Executive Bonus Plan, or the 2012 EBP. The 2012 EBP was a performance-based compensation program adopted by our Board of Directors in May 2012 upon the recommendation of our compensation committee. The 2012 EBP was administered by a special committee consisting of our Chief Executive Officer, our Chief Financial Officer and our Vice President of Human Resources, and provided for annual cash awards to the participants designated by the plan administrator, which participants included Messrs. Kohli and Hungle.
Payments of cash awards under the 2012 EBP were based on the achievement of certain company and individual financial and performance objectives established by the 2012 EBP and pre-determined by our compensation committee and approved by our Board of Directors. Under our 2012 EBP, the performance targets were based on our 2012 revenue, our 2012 operating loss and individual achievements of our executives, as determined by our Chief Executive Officer and agreed upon by our Board of Directors. While the Board of Directors took account of the performance and financial objectives set forth in the 2012 EBP in determining awards to be paid, the ultimate payment of awards relating to the financial objectives in the 2012 EBP was discretionary on the part of the Board of Directors. The Board of Directors also retained authority under the 2012
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EBP to change performance metrics or weighting factors at any time in its sole discretion, based on changes to our strategy or performance, or material events related to our capital structure such as an acquisition or significant financing.
The 2012 EBP provided for availability of awards if certain objective performance and financial targets were achieved at certain minimum threshold levels, with increasing payouts on a pro-rated basis based on improved achievement up to specified maximums. The threshold, target and maximum levels of achievement and the corresponding percentage payouts to Messrs. Kohli and Hungle under the 2012 EBP were as follows:
Threshold | Target | Maximum | ||||||||||||||||||||||
Performance Objective |
Achievement | Percentage Payout |
Achievement | Percentage Payout |
Achievement | Percentage Payout |
||||||||||||||||||
Revenue |
$ | 81 million | 50 | % | $ | 90 million | 100 | % | $ | 108 million | 200 | % | ||||||||||||
Operating Income |
$ | 1 | 50 | % | $ | 3 million | 100 | % | $ | 6 million | 200 | % |
The weighting of the various objectives to be used under the 2012 EBP to determine the target cash payment to Messrs. Kohli and Hungle was as follows:
Performance Objective |
Target Level | Weighting for President and Chief Executive Officer |
Weighting for Chief Financial Officer |
|||||||||
Revenue |
$ | 90 million | 50 | % | 50 | % | ||||||
Operating Income |
$ | 3 million | 30 | % | 30 | % | ||||||
Management Objectives |
(1) | 20 | % | 20 | % |
(1) | Management objectives for Mr. Kohli, our President and Chief Executive Officer, were (1) achieving a year-end cash balance of $10 million without any financing activity, (2) successful submission to the SEC of a registration statement for an initial public offering and (3) preparation and presentation to our Board of Directors of a plan for IPO readiness. Management objectives for Mr. Hungle, our Chief Financial Officer, were (1) achieving a year-end cash balance of $10 million without any financing activity and (2) successful submission to the SEC of a registration statement for an initial public offering. |
For the year ended December 31, 2012, we had revenues of $73.8 million and an operating loss of $(14.0) million, which were both below the threshold levels specified in our 2012 EBP. Despite the fact that we did not achieve our threshold revenue or operating income targets under the 2012 EBP, our Board of Directors, upon the recommendation of our compensation committee, exercised its discretion under the 2012 EBP to award each of Messrs. Kohli and Hungle a 50% payout with respect to the revenue and operating income objectives in the 2012 EBP, which is the cash award equivalent to what each would have respectively received if our revenue and operating income targets had been achieved at the threshold level. The Board of Directors made this determination in light of their respective overall performance and contribution to our company as well as our companys overall performance.
In March 2013, the Board of Directors determined to award each of Messrs. Kohli and Hungle a full payout with respect to the management objective portion of their incentive payments under the 2012 EBP, which management objectives are described in a footnote to the table above. We initially submitted a registration statement to the SEC in late 2012, and the Board determined that Messrs. Kohli and Hungle had achieved their respective IPO-related objectives. We had a cash balance of approximately $7.4 million at December 31, 2012 and engaged in financing through our loan agreement with Silicon Valley Bank, however our Board of Directors determined to award a full payout to Mr. Kohli and Mr. Hungle for achievement of management objectives in light of our overall performance in 2012. In making this determination, the Board considered that our company had made a strategic decision during 2012 to incur additional costs to aggressively pursue certain customer accounts, including hiring of additional sales and support staff, which impacted our cash balance.
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The target amounts achievable by each of Messrs. Kohli and Hungle under the 2012 EBP and the actual amounts paid in March 2013 are set forth in the table below.
Named Executive Officer |
Target Cash Incentive ($) |
Actual Amount Paid ($) | ||
Pardeep Kohli |
190,000 | 114,000 | ||
Terry Hungle |
108,000 | 64,800 |
Cash Awards under the 2012 Sales Commission Plan
Bahram Jalalizadeh, our Executive Vice President of Global Sales and Business Development, and Matt Dunnett, our former Executive Vice President of International Sales, participated in, and were eligible for cash awards under, our 2012 Sales Commission Plan, or 2012 SCP. Our 2012 SCP was adopted by our Board of Directors in March 2012 upon the recommendation of our compensation committee, and was administered by a special committee consisting of our Chief Executive Officer and our Chief Financial Officer. The 2012 SCP provided for periodic cash awards to the participants designated therein.
Payment of cash awards under the 2012 SCP is to be based on the achievement of established targets with respect to customer orders as well as additional key sales objectives. The targets were established by the committee administering the 2012 SCP, and were subject to adjustment in the discretion of the committee including to reflect market conditions, other factors beyond our or the participants control or any factors that the committee considers relevant. In addition, the 2012 SCP included new account incentives, which provided for flat quarterly cash payments to certain participants who participated in the successful acquisition of a new customer account in excess of $500,000. The 2012 SCP also provides for special bonuses to be paid for the achievement of certain specific marketing or sales objectives that may be announced from time to time by the committee administering the 2012 SCP.
Mr. Jalalizadehs total incentive payment under the 2012 SCP was $230,684. Mr. Jalalizadehs bonus under the 2012 SCP was calculated based on his achievement of his 2012 bookings, new channel partner relationships and new customer attainment goals. Mr. Jalalizadeh was entitled to a sales commission payment under the 2012 SCP of $140,000 upon the achievement of $30 million in bookings, with the potential for proportional upward adjustments for bookings in excess of $30 million. He achieved bookings in excess of $30 million, and his sales commission payment was proportionately adjusted upward. The Board of Directors awarded the remainder of his bonus for achieving his goals relating to development of additional channel partner relationships and obtaining two new large mobile service provider customers.
Mr. Dunnetts incentive payment under the 2012 SCP was $176,696. Mr. Dunnetts bonus under the 2012 SCP was calculated based on a percentage of his 2012 orders and bookings. He was entitled to a target incentive payment of £140,000 (equivalent to $221,858 using the average exchange rate during 2012) based on his sales goal, which amount was to be prorated based on his achievement. Mr. Dunnett achieved approximately 80% of his 2012 sales goal.
Option Grants to Our Named Executive Officers in 2012
None of our named executive officers were granted any options in 2012.
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Outstanding Equity Awards at Fiscal Year-End
The following table below sets forth information regarding the outstanding equity awards held by our named executive officers at December 31, 2012. Please refer to Potential Payments upon Termination or a Change in Control for a description of certain vesting acceleration provisions applicable to certain of these option grants.
Name |
Date of Grant |
Vesting Commencement Date |
Number of Securities Underlying Unexercised Options (#) Exercisable(1) |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Options (#) Unearned |
Option Exercise Price ($) |
Option Expiration Date |
|||||||||||||||||||||
Pardeep Kohli |
8/24/2006 | 7/05/2006 | 2,900,000 | | | 0.06 | 8/24/2016 | (2) | ||||||||||||||||||||
4/21/2010 | 4/21/2010 | 1,000,000 | | 291,667 | 0.09 | 04/21/2020 | (3) | |||||||||||||||||||||
12/13/2011 | 6/1/2011 | 2,158,155 | | 1,213,962 | 0.30 | 12/13/2021 | (4) | |||||||||||||||||||||
Terry Hungle |
4/23/2008 | 4/1/2008 | 723,602 | | | 0.08 | 4/23/2018 | (2) | ||||||||||||||||||||
10/14/2010 | 10/14/2010 | 275,000 | | 114,583 | 0.11 | 10/14/2020 | (4) | |||||||||||||||||||||
12/13/2011 | 6/1/2011 | 500,791 | | 281,695 | 0.30 | 12/13/2021 | (4) | |||||||||||||||||||||
Bahram Jalalizadeh |
11/1/2006 | 10/18/2006 | 490,741 | | | 0.06 | 11/1/2016 | (2) | ||||||||||||||||||||
10/15/2008 | 10/15/2008 | 130,000 | | | 0.08 | 10/15/2018 | (5) | |||||||||||||||||||||
4/21/2010 | 4/21/2010 | 350,000 | | 19,444 | 0.09 | 4/21/2020 | (6) | |||||||||||||||||||||
12/13/2011 | 12/13/2011 | 301,471 | | 213,542 | 0.30 | 12/13/2021 | (4) | |||||||||||||||||||||
Matt Dunnett |
12/13/2011 | 9/26/2011 | 300,000 | | 193,750 | 0.30 | 12/13/2021 | (7) |
(1) | All options were granted under the amended and restated 2005 Stock Plan. The options described in this table may be exercised prior to vesting with the stock acquired on exercise being subject to repurchase rights of the company at the lesser of fair market value or the exercise price, with the repurchase rights lapsing when the underlying options would have vested. Options listed in this table held by Mr. Kohli, Mr. Hungle or Mr. Jalalizadeh are entitled to acceleration of vesting if the named executive officer is involuntarily terminated upon or following a change in control of us. Certain of these options are also subject to limited acceleration upon the named executive officers termination without cause or resignation for good reason. Please see Potential Payments upon Termination or a Change in Control for more information. |
(2) | Represents options granted in connection with the commencement of the respective named executive officers employment with us. One fourth of the total number of shares vested on the first anniversary of the vesting commencement date, and an additional 1/48th of the total number of shares vest each month thereafter, subject to continuous service. |
(3) | One fourth of the total number of shares vested on the first anniversary of the vesting commencement date, and an additional 1/48th of the total number of shares vest each month thereafter, subject to continuous service. |
(4) | Options vest in 48 equal monthly installments from the vesting commencement date, subject to continuous service. |
(5) | Options vested in 36 equal monthly installments from the vesting commencement date. |
(6) | 350,000 shares underlying these options became eligible shares upon the achievement of milestones related to the acquisition of purchase orders for our products from customers and reseller partners. These eligible shares vest as to one-third of the eligible shares on the first anniversary of the vesting commencement date and as to an additional 1/36th of the number of eligible shares each month thereafter, subject to continuous service. |
(7) | One fourth of the total number of shares vested on the first anniversary of the vesting commencement date, and an additional 1/48th of the total number of shares vested each month thereafter during Mr. Dunnetts service. Vesting of certain of Mr. Dunnetts stock options was accelerated pursuant to his separation agreement, as described below in Separation of Matt Dunnett. Under the terms of Mr. Dunnetts separation agreement, his vested options will remain exercisable until June 30, 2014. |
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On August 7, 2013, our Board of Directors approved the grant to Mr. Kohli of an option to purchase 650,000 shares of our common stock at an exercise price per share equal to the initial public offering price of our common stock. This option was granted pursuant to our 2013 Equity Incentive Plan and is scheduled to vest, subject to Mr. Kohlis continued employment by us, as to 1/48th of the total shares monthly, commencing on August 7, 2013. This option is entitled to acceleration of vesting if the Mr. Kohli is involuntarily terminated upon or following a change in control of us, and this option is subject to limited acceleration upon Mr. Kohlis termination without cause or resignation for good reason. Please see Potential Payments upon Termination or a Change in Control for more information.
Option Exercises
None of our named executive officers exercised option awards in 2012.
Pension Benefits
We do not provide any pension benefits to our named executive officers, except as described below under Retirement Plans.
Other Compensatory Benefits
We provide the following benefits to our U.S. named executive officers, generally on the same basis provided to all of our U.S. employees, except that our U.S. named executive officers have certain rights to reimbursement of health insurance costs following separation from service as described in Potential Payments upon Termination or a Change in Control:
| medical, dental and vision insurance; |
| 401(k) plan (see Retirement Plans below for a description of our 401(k) plan); |
| employee assistance program; |
| short- and long-term disability, life insurance, accidental death and dismemberment insurance; and |
| health and dependent care flexible spending accounts. |
We also provided the following benefits to Mr. Dunnett, a United Kingdom resident, while he was employed with us generally on the same basis provided to all of our UK employees:
| medical insurance; |
| a company pension scheme plan (see Retirement Plans below for a description of this pension scheme); and |
| short- and long-term disability and life insurance. |
Under the terms of his separation agreement with us, Mr. Dunnett was entitled to receive certain of these benefits for a period following the cessation of his employment. For more information, please read Separation of Matt Dunnett.
Retirement Plans
We maintain a 401(k) retirement plan which is intended to be a tax-qualified defined contribution plan under Section 401(k) of the Internal Revenue Code. All of our U.S. employees are eligible to participate on the first day of the month following their date of hire. The 401(k) plan includes a salary deferral arrangement pursuant to which participants may elect to reduce their current compensation up to the statutorily prescribed limit, which was equal to $17,000 in 2012, and is equal to $17,500 in 2013 (catch up contributions for employees over 50 allow for an additional $5,500 each year), and have the amount of their compensation reduction contributed to the 401(k) plan.
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We also maintain a pension scheme for our United Kingdom (UK) employees. As a UK employee, Mr. Dunnett was entitled to participate in this pension scheme during his employment with us. Under our UK pension scheme, we match 100% of an employees contributions up to a maximum of 4% of the employees base salary. Amounts paid on behalf of Mr. Dunnett in the form of matching contributions under this pension scheme in 2012 are set forth in the Summary Compensation Table above. Under the terms of his separation agreement with us, Mr. Dunnett was entitled to receive certain of these benefits for a period following the cessation of his employment. For more information, please read Separation of Matt Dunnett.
Employment Agreements with Named Executive Officers
We are party to employment agreements with each of our named executive officers except for Mr. Dunnett. The original versions of these agreements were entered into upon the commencement of the respective named executive officers employment and have been subsequently amended and restated. Each employment agreement provides for at will employment of the respective named executive officer, which means that the employment relationship can be ended by the named executive officer or by us at any time, subject to the executives potential right to certain severance benefits as described below under Potential Payments Upon Termination or a Change in Control.
Each employment agreement provides for an annual salary, subject to adjustment by the Board of Directors or an authorized committee of our Board of Directors. The following chart shows the current annual base salaries for our named executive officers with whom we have employment agreements.
Named Executive Officer |
Base Salary ($) |
|||
Pardeep Kohli |
380,000 | |||
Terry Hungle |
270,000 | |||
Bahram Jalalizadeh |
250,000 |
Each named executive officers employment agreement entitles him to equity compensation in such forms and amounts as determined by our Board of Directors or an authorized committee of our Board of Directors, to be covered by our directors and officers insurance policy and to be reimbursed for reasonable and necessary out-of-pocket business expenses. Messrs. Kohli and Hungle are entitled to participate in any executive bonus or performance-based incentive plan to the extent determined by our Board of Directors or an authorized committee of our Board of Directors. Mr. Jalalizadeh is entitled to participate in our sales commission program, which is described under Summary Compensation Table Cash Awards Under the 2012 Sales Commission Plan.
The named executive officer employment agreements also contain the following covenants and provisions:
| confidentiality: each named executive officer is required to hold our confidential information in strictest confidence and not to disclose our confidential information, unless authorized by our Board of Directors in writing or pursuant to a written non-disclosure agreement that adequately protects the confidential information, at all times during and after the named executive officers employment; |
| non-solicitation: each named executive officer is prohibited from (i) directly or indirectly soliciting our employees, contractors or consultants, (ii) interfering with our relationships with existing clients or attempting to take away our business with those clients, (iii) interfering or competing with any of our proposal efforts contemplated to be submitted to a client within twelve months of the end of the executives employment with us and (iv) using any personal relationships or business contacts used within two years prior to the end of the executives employment in a manner competitive with our business, in each case at all times during and for twelve months following the end of employment; |
| non-competition: each named executive officer is prohibited from (i) serving as an advisor, agent, consultant, director, employee, officer, partner or otherwise, (ii) having any ownership in (other than passive investments in publicly-traded companies) or (iii) participating in the organization, operation or |
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management of any business competitive with us in the state of Texas or anywhere in the world where we have non-trivial operations prior the termination of the executives employment, at all times during and for twelve months following the end of employment; |
| excise tax gross-up: each named executive officer is entitled to a gross-up in the event any severance or other benefit paid under his employment agreement triggers an excise tax imposed by Section 4999 of the Internal Revenue Code; and |
| mandatory arbitration: all disputes arising out of the executives service with us are subject to mandatory arbitration, which arbitration is final (except in the case of disputes arising out of the non-competition provisions of the employment agreement). |
Each named executive officer, like substantially all of our employees, has executed an employee proprietary information agreement as a condition to his employment. Each of our named executive officers is also entitled to certain benefits upon termination of employment under certain circumstances, including in connection with a change in control of us. These benefits are described below in Potential Payments upon Termination or a Change in Control.
The foregoing description of the employment agreements of our named executive officers is a summary only and is qualified in its entirety by reference to the employment agreements of our Messrs, Kohli, Hungle and Jalalizadeh which have been filed with the SEC as exhibits to the registration statement of which this prospectus forms a part.
Potential Payments upon Termination or a Change in Control
General Severance Benefits
The employment agreements of Messrs. Kohli, Hungle and Jalalizadeh, which are described above under Employment Agreements with Named Executive Officers, include certain severance benefits payable to the respective named executive officer in the event he is involuntarily terminated by us without cause or he resigns his position with us for good reason (cause and good reason as defined under these employment agreements are described below), except that Mr. Jalalizadehs employment agreement does not entitle him to benefits upon resignation for good reason absent a change in control of us. In that situation, the respective named executive officer would be entitled to the following severance benefits: (i) six months continued payment of his base salary in effect at the time of termination or resignation, (ii) accelerated vesting of all equity awards held by the named executive officer that would have vested within the twelve months following the termination or resignation (six months in the case of Mr. Jalalizadeh), except to the extent the terms of a particular equity award provide otherwise, (iii) reimbursement of health and dental insurance premiums for six months following termination and (iv) any payments due and unpaid under a performance incentive plan.
Messrs. Kohli, Hungle and Jalalizadeh are entitled to additional benefits in the event they are terminated in connection with a change in control of us, as described below.
Additional Benefits upon Termination in Connection with a Change in Control
In addition to the severance benefits described above under General Severance Benefits, our employment agreements with Messrs. Kohli, Hungle and Jalalizadeh provide for accelerated vesting of all outstanding equity awards held by such officer, including the options described above in the Outstanding Equity Awards at Fiscal Year-End table and related footnotes, in the event that such named executive officer is terminated involuntarily or resigns for good reason upon or following a change in control of us, unless the terms of a particular equity award provide otherwise.
The employment agreements of Mr. Kohli and Mr. Hungle additionally provide that if Mr. Kohli or Mr. Hungle is terminated without cause or resigns for good reason prior to or following a change in control of us,
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we will be required to execute an amendment to his option agreements to extend the exercisability of his options to the date that is one year after the earliest to occur of (i) a change in control of us, (ii) an initial public offering or (iii) the termination or resignation, if it occurs after a change in control of us or an initial public offering. This exercisability period will be further extended by any time period during which the executives option shares are subject to a lock-up, market standoff or similar restriction or otherwise refrains from selling his option shares at the request of an underwriter.
In addition, our amended and restated 2005 Stock Plan and 2013 Equity Incentive Plan provide for full acceleration of the vesting of any unvested stock options or stock purchase rights, including those held by our named executive officers, in the event that they are not assumed or otherwise substituted with new equivalent options or shares in a merger or change in control of us. See Benefit Plans Amended and Restated 2005 Stock Plan and Benefit Plans 2013 Equity Incentive Plan for more information.
Definitions of Cause, Good Reason and Change in Control
The employment agreements of Messrs. Kohli, Hungle and Jalalizadeh define cause and good reason in substantially the same manner.
Cause is generally defined as:
| the officers continued failure to perform his duties; |
| any willful act of personal dishonesty, fraud or misrepresentation taken by the officer which was intended to result in his substantial gain or personal enrichment at our expense; |
| willful violation of a federal or state law or regulation applicable to our business in a manner materially injurious to us; |
| conviction of a felony or a plea of nolo contendere; or |
| willful breach of the terms of the non-competition provisions of his employment agreement or his employee proprietary information agreement with us. |
Good reason is generally defined as the occurrence of any of the following without the executives consent:
| a material reduction of his salary, overall benefits package, duties or responsibilities except, generally, for any reduction of responsibilities related to an acquisition of us by a larger entity; or |
| his relocation to a facility or a location more than fifty miles from his then-present location. |
Change in control is generally defined as a change in ownership or control of us effected through any of the following transactions:
| a merger, consolidation or other reorganization approved by our stockholders in which a change in ownership or control of us is effected through the acquisition by any person, or group of persons acting together, of beneficial ownership of securities possessing more than fifty percent (50%) of the total combined voting power of our outstanding securities (as measured in terms of the power to vote with respect to the election of Board members); |
| a sale, transfer or other disposition of all or substantially all of our assets; |
| any transaction or series of related transactions pursuant to which any person or any group of persons acting together acquires, directly or indirectly (whether as a result of a single acquisition or one or more acquisitions within a rolling twelve (12)-month period), beneficial ownership of securities possessing more than fifty percent (50%) of the total combined voting power of our securities (as measured in terms of the power to vote with respect to the election of Board members) outstanding |
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immediately after the such transaction or series of related transactions, whether such transaction involves a direct issuance of securities by us or the acquisition of outstanding securities held by one or more of our existing stockholders; or |
| a change in the composition of our Board of Directors over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either have been Board members continuously since the beginning of such thirty-six (36)-month period or have been elected or nominated for election as Board members during such period by at least a majority such Board members who were still in office at the time the Board approved such election or nomination. |
Separation of Matt Dunnett
Mr. Dunnett commenced a paid leave of absence in August 2013 and his employment as our Executive Vice President of International Sales will terminate in October 2013. Pursuant to a separation agreement we entered into with Mr. Dunnett, he provided a general release of claims and will receive the following benefits:
| continued salary payments through October 4, 2013; |
| coverage under our medical insurance plan until December 31, 2013; |
| accelerated vesting of options to purchase 18,750 shares of our common stock, such that options to purchase 193,750 shares of our common stock will be vested; |
| extended exerciseability for his vested options until June 30, 2014; |
| a lump sum payment of £49,500 (approximately $76,600 using the exchange rate in effect on August 12, 2013, the date of the separation agreement), payable in November 2013; |
| eligibility for sales commission payments under the 2013 Sales Commission Plan for orders booked through October 4, 2013, and cash collection payments on booked orders through December 31, 2013; and |
| a reduction in the term of his non-competition and non-solicitation obligations, which will expire in January 2014 instead of August 2014 and February 2014, respectively. |
Benefit Plans
Amended and Restated 2005 Stock Plan
Our amended and restated 2005 Stock Plan was initially adopted by our Board of Directors in October 2005, was subsequently approved by our stockholders, and was amended in April 2006, September 2006, February 2007, October 2007, October 2010, May 2011, December 2012 and January 2013. In March 2007, our Board of Directors approved the adoption of sub-plans for the grant of stock options to our employees in India and the United Kingdom. In May 2011, in connection with our sale of Series E redeemable convertible preferred stock, our amended and restated 2005 Stock Plan was amended to (i) increase the maximum number of shares of common stock that may be issued or subject to stock options by 8,759,890 shares to 24,315,515 shares and (ii) provide our Board of Directors discretionary authority to cancel any outstanding option, to the extent unvested, without consideration in the event of a merger or other change in control of us in which the acquiror does not assume or substitute options issued under the amended and restated 2005 Stock Plan. In January 2013, our amended and restated 2005 Stock Plan was amended to provide that, upon a merger or change in control of us, the vesting of all unvested options or shares awarded thereunder would accelerate in full if the acquiring company does not assume or otherwise substitute new equivalent options or shares for options or shares outstanding under the amended and restated 2005 Stock Plan.
Our amended and restated 2005 Stock Plan provides for the grant of nonstatutory stock options, incentive stock options and stock purchase rights to our employees, directors and consultants. As of June 30, 2013, the
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maximum number of shares of common stock that could be issued under the amended and restated 2005 Stock Plan was 22,286,279 shares. As of June 30, 2013, options to purchase 18,479,824 shares of common stock were outstanding under the 2005 Stock Plan and no shares of common stock remained available for future grant. No stock purchase rights are outstanding under the amended and restated 2005 Stock Plan. Awards that expire, become unexercisable or are forfeited become available for future grant under the 2013 Equity Incentive Plan.
The standard form of option agreement under the amended and restated 2005 Stock Plan provides that options will vest 25% on the first anniversary of the vesting start date with the remainder vesting ratably over the next 36 months, subject to continued service through each applicable vesting date. Under our amended and restated 2005 Stock Plan, our Board of Directors, or a committee designated by our Board of Directors, has the authority to grant options with early exercise rights, subject to our repurchase right that lapses as the shares vest on the original vesting schedule, and to provide for accelerated vesting. To date, substantially all of the options granted under our amended and restated 2005 Stock Plan contain the early exercise feature.
The standard form of option agreement under the 2005 Stock Plan also restricts the transfer of shares of our common stock issued pursuant to an award for the period specified by the representative of the underwriters not to exceed 180 days following the effective date of the registration statement related to this offering.
The term of an incentive stock option may not exceed 10 years and the exercise price may not be less than the fair market value on the grant date, except that with respect to any optionee who owned 10% of the voting power of all classes of our outstanding stock as of the grant date, the term may not exceed 5 years and the exercise price of the incentive stock option must equal at least 110% of the fair market value on the grant date.
After the termination of service of an employee, director or consultant, he or she may exercise his or her options to the extent vested for the period of time stated in his or her option agreement. Generally, if termination is due to disability, the option will remain exercisable for six months, and if termination is due to death, the option will remain exercisable for one year. In all other cases, the option will generally remain exercisable for three months following the termination of service. However, in no event may an option be exercised later than the expiration of its term.
Unless the administrator provides otherwise, our amended and restated 2005 Stock Plan generally does not allow for the transfer of awards and only the recipient of an award may exercise an award during his or her lifetime.
Our amended and restated 2005 Stock Plan does not include, as a default provision, any acceleration of vesting of outstanding option awards in the event of a merger, acquisition or other change in control of us. Instead, our amended and restated 2005 Stock Plan provides that, in the event of a merger or change in control as defined under the 2005 Stock Plan, each outstanding option shall be (i) assumed or (ii) substituted with an equivalent option by the successor entity. If the successor entity does not assume or substitute the outstanding options, then the vesting of all unvested options or shares awarded under the amended and restated 2005 Stock Plan will accelerate. Our Board of Directors, or a committee designated by our Board of Directors, is required to give notice of any proposed merger or change in control prior to the closing date. If the consideration received in the merger or change in control is not solely common stock of the successor corporation or its parent, our Board of Directors, or a committee designated by our Board of Directors, may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of each share subject to the option to be solely common stock of the successor corporation or its parent equal in fair market value to the per share consideration received by holders of common stock in the merger or change in control.
Change in control is defined in our amended and restated 2005 Stock Plan as:
| the acquisition of our company by another entity by means of any transaction or series of related transactions (including, without limitation, any merger, consolidation or other form of reorganization in which our outstanding shares are exchanged for securities or other consideration issued, or caused to be |
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issued, by the acquiring entity or its subsidiary, but excluding any transaction effected primarily for the purpose of changing our jurisdiction of incorporation) that results in the transfer or acquisition of at least a majority of the voting power of our outstanding shares to that other entity; or |
| a sale of all or substantially all of our assets or the exclusive license of all or substantially all of our intellectual property by means of any transaction or series of related transactions. |
The amended and restated 2005 Stock Plan is administered by our Board of Directors. Our Board of Directors is permitted to delegate the administration of the amended and restated 2005 Stock Plan to a committee. Our Board of Directors also has the authority to amend or modify the amended and restated 2005 Stock Plan, as long as the amendment or modification does not impair the rights of any participant without the written consent of that participant, and provided further that the Board of Directors must obtain stockholder approval of any amendment to the extent required by applicable law.
We will not grant any additional awards under our amended and restated 2005 Stock Plan following this offering. Instead, we will grant options under our 2013 Equity Incentive Plan described below. However, following this offering, our amended and restated 2005 Stock Plan will continue to govern the terms and conditions of all outstanding options previously granted under the amended and restated 2005 Stock Plan.
2013 Equity Incentive Plan
In January 2013, our Board of Directors adopted, subject to the approval of our stockholders, the Mavenir Systems, Inc. 2013 Equity Incentive Plan. The 2013 Equity Incentive Plan is a broad-based incentive plan that provides for granting stock options, stock awards, performance awards and other stock-based awards and substitute awards to employees, service providers and non-employee directors. The 2013 Equity Incentive Plan has a term of ten years from the date of adoption, unless it is earlier terminated by the Board.
Available Shares. The maximum number of shares of common stock initially reserved for issuance under the 2013 Equity Incentive Plan was 13,200,000 shares. This amount includes shares of common stock that, as of the date of adoption of the 2013 Equity Incentive Plan, had been reserved but not issued pursuant to any awards granted under the amended and restated 2005 Stock Plan and are not subject to any awards granted thereunder. This initial amount will be increased by any shares of common stock subject to stock options or similar awards granted under the amended and restated 2005 Stock Plan that expire or otherwise terminate without having been exercised in full and shares of common stock pursuant to awards granted under the amended and restated 2005 Stock Plan that are forfeited to or repurchased by us up to a maximum of 18,912,429 additional shares which, as of June 30, 2013, totaled an aggregate of 303,670 shares. From January 2013 through June 2013, our Board of Directors authorized for grant options to purchase an aggregate of 1,793,968 shares of common stock under the 2013 Equity Incentive Plan.
The number of shares reserved for issuance under the 2013 Equity Incentive Plan will automatically increase on January 1st of each calendar year during the term of the 2013 Equity Incentive Plan, commencing on January 1, 2014, by
(i) | an amount, or the Annual Increase Amount, equal to the lesser of |
(A) | 4.5% of the total number of shares of common stock outstanding on the last trading day in December of the immediately preceding year and |
(B) | 20,000,000 shares, or |
(ii) | such other amount that is lower than the lesser of the amount determined by clauses (i)(A) and (B) above that our Board of Directors, in its sole discretion (but without any obligation), may determine shall be the Annual Increase Amount with respect to any applicable annual period. |
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The shares of common stock issued pursuant to awards granted under the 2013 Equity Incentive Plan may be authorized, but unissued, or reacquired common stock.
The maximum number of shares of common stock that may be issued under the 2013 Equity Incentive Plan pursuant to the exercise of incentive stock options is 32,112,249 shares, increased on the first trading day of January each year during the term of the 2013 Equity Incentive Plan, beginning with the year ending December 31, 2013, by the Annual Increase Amount. No more than 8,000,000 options, stock appreciation rights or shares of common stock shall be issued to any one participant pursuant to the 2013 Equity Incentive Plan in any one year.
Administration. The 2013 Equity Incentive Plan will be administered by the compensation committee of our Board of Directors. In the case of awards to covered employees as defined in Section 162(m) of the Internal Revenue Code the 2013 Equity Incentive Plan will, at the discretion of the compensation committee, be administered by a committee of two or more outside directors, within the meaning of Section 162(m) of the Internal Revenue Code. The compensation committee and the Board will have the full authority, subject to the terms of the 2013 Equity Incentive Plan, to establish rules and regulations for the proper administration of the 2013 Equity Incentive Plan, to promulgate forms of award agreements, to select the employees, service providers and directors to whom awards are granted and to determine the type of awards made and the terms of the awards. However, awards to covered employees may be administered only by the compensation committee.
Stock Options. The plan administrator may grant incentive and/or nonstatutory stock options under our 2013 Equity Incentive Plan, provided that incentive stock options are only granted to employees. The exercise price of such options must equal at least the fair market value of our common stock on the date of grant. The term of an option may not exceed ten years. However, an incentive stock option granted to a participant who owns more than 10% of the total combined voting power of all classes of our stock, or of certain of our parent or subsidiary corporations, may not have a term exceeding five years and must have an exercise price of at least 110% of the fair market value of our common stock on the grant date. The payment of the exercise price of an option may be made by cash, shares or other method of payment acceptable to the plan administrator and permitted by applicable laws. Subject to the provisions of our 2013 Equity Incentive Plan, the plan administrator determines the vesting terms of the options. After the termination of service of an employee, director or consultant, the participant may exercise his or her option, to the extent vested as of such date of termination, for the period of time stated in his or her option agreement. The plan administrator will have discretion to extend the period of time that an option will remain exercisable following a cessation of service, or to provide that an option will continue vesting following a cessation of service. Generally, if termination is due to death or disability, the option will remain exercisable by the grantees estate. However, in no event may an option be exercised later than the expiration of its term. If an employee, director or consultant is terminated for cause, then his or her options will terminate immediately.
Stock Appreciation Rights. Stock appreciation rights may be granted under our 2013 Equity Incentive Plan. Stock appreciation rights may be awarded as tandem stock appreciation rights, which are issued in conjunction with an option and may either be exercised as an option or settled as a stock appreciation right, or stand-alone stock appreciation rights. Stock appreciation rights allow the recipient to receive the appreciation in the fair market value of our common stock between the date of grant and the exercise date. Subject to the provisions of the 2013 Equity Incentive Plan, the administrator determines the terms of stock appreciation rights, including when such rights vest and become exercisable and whether to settle such awards in cash or with shares of our common stock, or a combination thereof, except that the per share exercise price for the shares to be issued pursuant to the exercise of a stock appreciation right will be no less than the fair market value per share on the date of grant. The specific terms will be set forth in an award agreement. The provisions governing post-termination exercise or settlement of a stock appreciation rights are substantially the same as those governing post-termination exercise of options as described above under Stock Options.
Restricted Stock. Restricted stock may be granted under our 2013 Equity Incentive Plan. Restricted stock awards are grants of shares of our common stock that are subject to various restrictions, including restrictions on
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transferability and forfeiture provisions. Shares of restricted stock will vest, and the restrictions on such shares will lapse, in accordance with terms and conditions established by the plan administrator, or such shares may be vested immediately at the grant date. Such terms may include, among other things, vesting upon the achievement of specific performance goals determined by the administrator or continued service to us. The plan administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. Recipients of restricted stock awards generally will have voting and dividend rights with respect to such shares upon grant without regard to vesting, unless the administrator provides otherwise. Shares of restricted stock that do not vest for any reason will be forfeited by the recipient and will revert to the 2013 Equity Incentive Plan; however, the plan administrator may, in its discretion, waive this forfeiture and instead provide that unvested restricted stock will vest despite the recipients termination of service or non-achievement of specified performance objectives. The specific terms will be set forth in an award agreement.
Restricted Stock Units. Restricted stock units may be granted under our 2013 Equity Incentive Plan. Each restricted stock unit granted is a bookkeeping entry representing an amount equal to the fair market value of one share of our common stock. The administrator determines the terms and conditions of restricted stock units, including the vesting criteria and vesting periods, which may include achievement of specified performance criteria or continued service to us, and the form and timing of payment. The plan administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. The plan administrator determines in its sole discretion whether an award will be settled in stock, cash or a combination of both. The specific terms will be set forth in an award agreement.
Performance Units. Performance units may be granted under our 2013 Equity Incentive Plan. Performance units are awards that will result in a payment to a participant only if performance goals established by the administrator are achieved or the awards otherwise vest. The administrator will establish organizational or individual performance goals in its discretion, which, depending on the extent to which they are met, will determine the number and the value of performance units to be paid out to participants, or the amount of cash or shares payable in connection with such performance units. After the grant of a performance unit or performance share, the administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such performance units or performance shares. Performance units shall have an initial dollar value established by the administrator prior to the grant date. Performance shares shall have an initial value equal to the fair market value of our common stock on the grant date. The administrator, in its sole discretion, may pay earned performance units or performance shares in the form of cash, in shares or in some combination thereof. The specific terms will be set forth in an award agreement.
Dividend Equivalent Rights. Dividend equivalent rights may be granted under our 2013 Equity Incentive Plan, either as stand-alone awards or in tandem with other awards. A dividend equivalent right represents the right to receive the economic equivalent of each dividend or distribution (other than dividends of our common stock) paid on our outstanding shares of common stock. In the sole discretion of the administrator, payments of amounts due with respect to dividend equivalent rights may be made in cash, shares of our common stock, or a combination of the two, based on the fair market value of our common stock. No award of a dividend equivalent right may have a term exceeding ten years.
Automatic Director Awards. Our 2013 Equity Incentive Plan also provides for the automatic grant of option or restricted stock awards to our non-employee directors. Upon the later of the completion of this offering or the date that a non-employee director is appointed to our Board (other than at an annual meeting of stockholders), non-employee directors will automatically receive an award of options to purchase a number of shares of our common stock determined in the discretion of the nominating and corporate governance committee of our Board of Directors (not to exceed 500,000 shares), or an award of restricted stock units of equivalent value (as determined using the option valuation method used by the company for the preparation of its financial statements). Any restricted stock unit issued under our automatic director award program will be accompanied by a dividend equivalent right of the type described above. Each of these initial option or restricted stock unit awards will vest as to one-third of the shares subject to such award on the first anniversary of the grant date, and in twenty-four equal monthly installments thereafter, provided that the recipient continues to serve as a director
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through each such date. No director will receive an initial award if he or she has received an award within the eighteen months prior to the completion of this offering.
In addition, our non-employee directors will be entitled to receive an annual award of options to purchase a number of shares of our common stock determined in the discretion of the nominating and corporate governance committee of our Board of Directors (not to exceed 250,000 shares), or an award of restricted stock units of equivalent value, on the date of each annual meeting (except for directors who have received an initial award described above within six months of that annual meeting). These annual awards will vest in full on the earlier of (i) the first anniversary of the annual award grant date or (ii) the day before our next annual meeting of stockholders.
These director awards will cease vesting upon a directors cessation of service but options will generally remain exerciseable for twelve months following such cessation. Awards granted under our automatic director award program will vest in full upon a change in control of us as described below under Merger or Change in Control. The amount of options or restricted stock units granted to our non-employee directors under the automatic director award program is subject to the discretion of the plan administrator, provided that such amounts may not exceed the maximum amounts set forth in the 2013 Equity Incentive Plan. Additionally, non-employee directors are eligible to receive discretionary grants.
Transferability of Awards. Unless the administrator provides otherwise, our 2013 Equity Incentive Plan generally does not allow for the transfer of awards and only the recipient of an option or stock appreciation right may exercise such an award during his or her lifetime.
Certain Adjustments. In the event of certain changes in our capitalization, to prevent diminution or enlargement of the benefits or potential benefits available under the 2013 Equity Incentive Plan, the administrator will make adjustments to one or more of the number and class of shares that may be delivered under the 2013 Equity Incentive Plan and/or the number, class and price of shares covered by each outstanding award and the numerical share limits contained in the 2013 Equity Incentive Plan.
Merger or Change in Control. Our 2013 Equity Incentive Plan provides that in the event of a merger or change in control, each outstanding award will fully vest and all restrictions will lapse, unless (i) the successor corporation or its parent or subsidiary assumes or substitutes an equivalent award , (ii) the successor corporation or its parent or subsidiary replaces such award with a cash retention program that preserves the spread payable to the award holder at the time of such change in control or (iii) the plan administrator provides otherwise. The plan administrator also has the discretion to provide that one or more outstanding awards shall accelerate in full, regardless of whether a successor corporation or its parent or subsidiary assumes or substitutes such award, or to provide that, even if an award is assumed or substituted, that it will fully vest upon the recipients termination other than for cause or resignation for good reason within a designated period following a change in control. Awards granted to our directors under the automatic director award program described above under Automatic Director Awards will vest in full upon a change in control of us.
The 2013 Equity Incentive Plan defines a change in control in substantially the same manner as described above under Potential Payments Upon Termination or Change in Control Definitions of Cause, Good Reason and Change in Control.
Plan Amendment, Termination. Our Board of Directors has the authority to amend, suspend or terminate the 2013 Equity Incentive Plan, provided such action does not impair the existing rights of any participant. Where required by applicable laws or stock exchange rules, our Board of Directors must obtain the approval of our stockholders to amend the 2013 Equity Incentive Plan.
This description of the 2013 Equity Incentive Plan is a summary only and is qualified in its entirety by the terms and provisions of the 2013 Equity Incentive Plan, a copy of which is filed as an exhibit to the registration statement of which this prospectus forms a part.
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2013 Employee Stock Purchase Plan
Introduction. Our Employee Stock Purchase Plan was adopted by the board on August 6, 2013. The plan was approved by our stockholders in September 2013. The plan will become effective on May 20, 2014. The plan is designed to allow our eligible employees and the eligible employees of our participating subsidiaries to purchase shares of our common stock at periodic intervals with their accumulated payroll deductions or other form of plan contribution.
Share Reserve. 3,375,000 shares of our common stock will initially be reserved for issuance. The reserve will automatically increase on the first trading day in January each calendar year during the term of the plan, beginning in calendar year 2015, by an amount equal to 1% of the total number of outstanding shares of our common stock on the last trading day in the immediately preceding calendar month. In no event will any such annual increase exceed 3,000,000 shares.
Offering Periods. The plan will have a series of overlapping offering periods, each with a duration of six (6) months, until such time as the plan administrator specifies otherwise. Offering periods for our U.S. employees will begin at semi-annual intervals on May 20 and November 20 each year. Separate offering periods for our non-U.S. employees will be established by the plan administrator, with such modified terms and provisions as may be necessary to comply with local law and may run concurrently with our U.S. employee offering periods or have their own individual start and end dates.
Eligible Employees. Individuals regularly expected to work more than 20 hours per week for more than 5 calendar months per year may join an offering period on the start date of that period.
Payroll Deduction/Plan Contribution. A participant may contribute any multiple of 1% of his or her cash earnings up to 15% (or such lesser percentage as may be specified by the plan administrator prior to the start date of any subsequent offering period) through payroll deductions, and the accumulated deductions will be applied to the purchase of shares of our common stock on each specified purchase date during the offering period.
For the purchase interval of the first offering period under the plan, no payroll deductions or other form of permitted contribution will be required of any participant until such time as the participant affirmatively elects to commence such payroll deductions or other form of permitted contribution following his or her receipt of the requisite prospectus for the plan. For such purchase interval, the participant will be required to contribute up to 15% of his or her cash earnings to the plan either in a lump sum or one or more installments after receipt of such prospectus and prior to the close of that purchase interval should he or she elect to purchase shares of our common stock for that initial purchase interval and his or her limited payroll deductions (if any) for that interval not be sufficient to fund the entire purchase price for those shares.
Purchase Price and Purchase Limitations. The purchase price per share will not be less than 85% of the lower of (i) the fair market value per share on the start date of the offering period in which the participant is enrolled or (ii) the fair market value per share on the applicable purchase date. Unless otherwise designated by the plan administrator for one or more offering periods, the purchase dates will occur semi-annually on the last business day in January and July each year. However, a participant may not purchase more than 4,000 shares on any purchase date, and not more than 1,250,000 shares may be purchased in total by all participants in a particular offering on any one purchase date. The plan administrator will have the authority to change these limitations for one or more offering periods, provided the change is made prior to the start of the affected offering period or periods.
Reset Feature. If the fair market value per share of our common stock on any purchase date is less than the fair market value per share on the start date of the offering period in which that purchase date occurs, then the individuals participating in that offering period will, immediately after the purchase of shares of our common stock on their behalf on that purchase date, be transferred from that offering period and automatically enrolled in the next offering period commencing after such purchase date, provided the market price of our common stock at that time is lower than the market price at the start of the offering period in which they are then participating.
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Change in Control. In the event of a change in control, all outstanding purchase rights will automatically be exercised immediately prior to the effective date of the acquisition. The purchase price will not be less than 85% of the lower of (i) the market value per share on the start date of the offering period in which the participant is enrolled at the time the acquisition occurs or (ii) the fair market value per share immediately prior to the acquisition.
A change in control will be deemed to occur upon the occurrence of any of the following events: (i) we are acquired by merger or asset sale; (ii) any person or group of related persons becomes the beneficial owner of securities possessing more than fifty percent of the total combined voting power of all of our outstanding securities or representing more than fifty percent of the aggregate market value of all of our outstanding capital stock; or (iii) there occurs certain changes in the composition of our board of directors.
Changes in Capitalization. In the event any change is made to the outstanding shares of our common stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction or other change in corporate structure effected without our receipt of consideration or should the value of the outstanding shares of our common stock be substantially reduced by reason of a spin-off transaction or extraordinary dividend or distribution, equitable adjustments will be made to: (i) the maximum number and class of securities issuable under the plan, (ii) the maximum number and/or class of securities by which the share reserve is to increase automatically each calendar year, (iii) the maximum number and class of securities purchasable per participant on any one purchase date, (iv) the maximum number and class of securities purchasable in total by all participants in a particular offering on any one purchase date and (v) the number and class of securities and the price per share in effect under each outstanding purchase right. Such adjustments will be made in such manner as the plan administrator deems appropriate, and its determination will be binding on all persons with an interest in the plan or any purchase right under the plan.
Miscellaneous Provisions. The following provisions will also be in effect under the plan:
| Our board of directors may amend the terms of an offering period prior to the start of that offering period and may terminate an existing offering period at any time, effective immediately following any purchase date within that offering period. |
| The plan will terminate no later than November 19, 2024. |
| Stockholder approval will be required for any amendments which increase the number of shares of our common stock issuable under the plan, except for permissible adjustments in the event of certain changes in our capital structure or modify the eligibility requirements for participation in the plan. |
Other Compensation Policies
Stock Ownership Guidelines
Currently, we have not implemented a policy regarding minimum stock ownership requirements for our named executive officers. The compensation committee will consider whether to adopt such a policy in the future.
Stock ownership guidelines for our directors are described under Management Director Compensation.
Recovery of Compensation
Currently, we have not implemented a policy regarding retroactive adjustments to any cash or equity-based incentive compensation paid to our named executive officers or other employees where the payments were predicated upon the achievement of financial results that were subsequently the subject of a financial restatement. Once we are publicly traded, we expect that the compensation committee will adopt, or recommend that our Board of Directors adopt, a compensation recovery policy consistent with the requirements of Section 954 of the DoddFrank Wall Street Reform and Consumer Protection Act.
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Pursuant to the terms of our 2012 Sales Commission Plan described above under Benefit Plans 2012 Sales Commission Plan, we have a policy of recovering sales commission payments to our sales executives to the extent such payments are predicated on sales orders that are later de-booked, rescinded or otherwise not fulfilled.
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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
The following is a description of transactions or series of transactions since January 1, 2010, to which we were or will be a party, in which:
| the amount involved in the transaction exceeds $120,000; and |
| in which any of our executive officers, directors and principal stockholders, including their immediate family members, had or will have a direct or indirect material interest. |
Compensation arrangements for our named executive officers and our directors are described elsewhere in this prospectus under Management Director Compensation and Executive Compensation.
Sale of Series D Redeemable Convertible Preferred Stock
In June 2010, we issued and sold an aggregate of 12,100,007 shares of our Series D redeemable convertible preferred stock, at a price per share of $1.1219, for aggregate proceeds of approximately $13,575,000. Certain of the shares of Series D redeemable convertible preferred stock were sold to entities affiliated with certain members of our Board of Directors and other holders of more than 5% of a class of our voting securities.
We believe that the terms obtained and consideration received in the Series D financing are comparable to terms and consideration we could have received in an arms length transaction. Our full Board of Directors reviewed and approved the terms of our Series D financing.
The table below and the accompanying footnotes summarize this sale:
Purchaser |
Shares of Series D Redeemable Convertible Preferred Stock Purchased(1) |
Aggregate Purchase Price | ||||||
Entities affiliated with North Bridge Venture Partners(2) |
5,348,071 | $ | 6,000,000 | |||||
Austin Ventures VIII, L.P.(3) |
2,317,497 | 2,600,000 | ||||||
Alloy Ventures 2005, L.P.(4) |
1,871,824 | 2,099,999 | ||||||
Greenspring Associates Crossover Ventures I, L.P.(5) |
1,247,883 | 1,400,000 | ||||||
Cisco Systems, Inc.(6) |
958,195 | 1,074,999 | ||||||
|
|
|
|
|||||
Total |
11,743,470 | $ | 13,174,998 | |||||
|
|
|
|
(1) | Upon the completion of this offering, all shares of our Series D redeemable convertible preferred stock will automatically convert into shares of our common stock on a one-for-one basis. |
(2) | Funds affiliated with North Bridge Venture Partners collectively hold greater than 5% of a class of our voting stock. Jeffrey P. McCarthy, an affiliate of these funds, is a member of our Board of Directors. |
(3) | Austin Ventures VIII, L.P. is a holder of greater than 5% of a class of our voting stock. |
(4) | Alloy Ventures 2005, L.P. is a holder of greater than 5% of a class of our voting stock. Ammar H. Hanafi, an affiliate of Alloy Ventures 2005, L.P., is a member of our Board of Directors. |
(5) | Greenspring Associates Crossover Ventures I, L.P. is, prior to the completion of this offering, and became as a result of this transaction, a holder of greater than 5% of a class of our voting stock. |
(6) | Cisco Systems, Inc. is, prior to the completion of this offering, a holder of greater than 5% of a class of our voting stock. These shares were purchased and are held by Starent Networks LLC, (formerly known as Starent Networks Corp.), which at the time of this transaction was, and remains, a wholly-owned subsidiary of Cisco Systems, Inc. |
Sale of Series E Redeemable Convertible Preferred Stock
In May and July 2011, we issued and sold an aggregate of 31,885,207 shares of our Series E redeemable convertible preferred stock, at a price per share of $1.2545, for aggregate proceeds of approximately
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$40,000,000. Certain of the shares of Series E redeemable convertible preferred stock were sold to entities affiliated with certain members of our Board of Directors and other holders of more than 5% of a class of our voting securities.
We believe that the terms obtained and consideration received in the Series E financing are comparable to terms and consideration we could have received in an arms length transaction. Our full Board of Directors reviewed and approved the terms of our Series E financing.
The table below and the accompanying footnotes summarize these sales:
Purchaser |
Shares of Series E Redeemable Convertible Preferred Stock Purchased(1) |
Aggregate Purchase Price | ||||||
August Capital V Special Opportunities, L.P.(2) |
20,326,823 | $ | 25,499,999 | |||||
Entities affiliated with Cross Creek Capital(3) |
2,789,956 | 3,500,000 | ||||||
Entities affiliated with North Bridge Venture Partners(4) |
2,703,232 | 3,391,205 | ||||||
Entities affiliated with Austin Ventures(5) |
2,546,682 | 3,194,813 | ||||||
Alloy Ventures 2005, L.P. (6) |
1,894,465 | 2,376,606 | ||||||
Cisco Systems, Inc.(7) |
705,436 | 884,969 | ||||||
Greenspring Associates Crossover Ventures I, L.P.(8) |
121,484 | 152,402 | ||||||
|
|
|
|
|||||
Total |
31,088,078 | $ | 38,999,994 | |||||
|
|
|
|
(1) | Upon the completion of this offering, all shares of our Series E redeemable convertible preferred stock will automatically convert into shares of our common stock on a one-for-one basis. |
(2) | August Capital V Special Opportunities, L.P. (as nominee for August Capital V Special Opportunities, L.P., August Capital Strategic Partners V, L.P. and related individuals) is, and became as a result of this transaction, a holder of greater than 5% of a class of our voting stock. Vivek Mehra, an affiliate of August Capital V Special Opportunities, L.P., is a member of our Board of Directors. |
(3) | Entities affiliated with Cross Creek Capital, as a result of this transaction, collectively hold greater than 5% of a class of our voting stock. |
(4) | Funds affiliated with North Bridge Venture Partners collectively hold greater than 5% of a class of our voting stock. Jeffrey P. McCarthy, an affiliate of these funds, is a member of our Board of Directors. |
(5) | Austin Ventures VIII, L.P. is a holder of greater than 5% of a class of our voting stock. |
(6) | Alloy Ventures 2005, L.P. is a holder of greater than 5% of a class of our voting stock. Ammar H. Hanafi, an affiliate of Alloy Ventures 2005, L.P., is a member of our Board of Directors. |
(7) | Cisco Systems, Inc. is, prior to the completion of this offering, a holder of greater than 5% of a class of our voting stock. These shares were purchased and are held by Starent Networks LLC, (formerly known as Starent Networks Corp.), which at the time of this transaction was, and remains, a wholly-owned subsidiary of Cisco Systems, Inc. |
(8) | Greenspring Associates Crossover Ventures I, L.P. is, prior to the completion of this offering, a holder of greater than 5% of a class of our voting stock. |
Amended and Restated Investors Rights Agreement
In connection with our Series D financing, we entered into an amended and restated investors rights agreement with certain of our stockholders, including Alloy Ventures 2005, L.P., Austin Ventures VIII, L.P., entities affiliated with North Bridge Venture Partners, Greenspring Associates Crossover Ventures I, L.P. and Starent Networks LLC, a wholly-owned subsidiary of Cisco Systems, Inc. The agreement was then amended and restated in connection with our Series E financing, and August Capital V Special Opportunities, L.P. and entities affiliated with Cross Creek Capital became additional parties to this amended and restated agreement. The amended and restated investors rights agreement among other things:
| grants such stockholders certain registration rights with respect to shares of our common stock, including shares of common stock issued or issuable upon conversion of our redeemable convertible preferred stock; |
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| obligates us to deliver periodic financial statements to any stockholder who holds at least 1,000,000 shares of our preferred stock, which we refer to as a qualified holder; |
| grants a right of first offer with respect to sales of our shares by us, subject to specified exclusions (which exclusions include the sale of the shares in connection with this offering), to qualified holders; and |
| requires us to reimburse certain legal expenses of Alloy Ventures, August Capital, Austin Ventures, North Bridge Venture Partners and Starent Networks LLC in connection with future financings or a liquidation event. |
Our amended and restated investors rights agreement also provides for, among other things, the voting of shares with respect to the constituency of our Board of Directors.
For more information regarding the registration rights provided in this agreement, please refer to the section of this prospectus titled Description of Capital Stock Registration Rights.
Certain provisions of this agreement, including the voting provisions and the covenants described above, will terminate automatically upon completion of this offering. This is not a complete description of the amended and restated investors rights agreement and is qualified by the full text of the amended and restated investors rights agreement filed as an exhibit to the registration statement of which this prospectus is a part.
Right of First Refusal and Co-Sale Agreement
In connection with our Series D financing, we entered into an amended and restated right of first refusal and co-sale agreement with certain of our stockholders, including Alloy Ventures 2005, L.P., Austin Ventures VIII, L.P., entities affiliated with North Bridge Venture Partners, Greenspring Associates Crossover Ventures I, L.P., Starent Networks LLC, a wholly-owned subsidiary of Cisco Systems, Inc. and Pardeep Kohli, our President and Chief Executive Officer. The agreement was then amended and restated in connection with our Series E financing, and August Capital V Special Opportunities, L.P. and entities affiliated with Cross Creek Capital became additional parties to this amended and restated agreement. The amended and restated right of first refusal and co-sale agreement, among other things:
| grants our investors certain rights of first refusal and co-sale with respect to proposed transfers of our securities by certain stockholders; and |
| grants us certain rights of first refusal with respect to proposed transfers of our securities by certain stockholders. |
The amended and restated right of first refusal and co-sale agreement will terminate automatically upon completion of this offering.
Indemnification Agreements
We have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us to indemnify each director and executive officer to the fullest extent permitted by Delaware law, including indemnification expenses such as attorneys fees, judgments, fines and settlement amounts incurred by the director or executive officer in any action or proceeding, including any action or proceeding by or in right of us, arising out of the persons services as a director or executive officer. These indemnification agreements are described in more detail under Management Limitations on Liability and Indemnification Agreements.
Reseller OEM Agreement with Cisco Systems
We entered into a Reseller OEM Agreement with Starent Networks in October 2008. We entered into this agreement concurrently with our issuance to Starent Networks of (i) 6,287,989 shares of our Series C redeemable
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convertible preferred stock for an aggregate purchase price of $6.0 million and (ii) a warrant to purchase 6,287,979 shares of our Series C redeemable convertible preferred stock at an exercise price of $0.9542 per share. As a result of its investment in our Series C redeemable convertible preferred stock, Starent Networks became a holder of greater than 5% of a class of our voting securities. In December 2009, Cisco Systems (Cisco) completed its acquisition of Starent Networks and this Reseller OEM Agreement was assigned from Starent Networks to Cisco in September 2010.
During 2012, 2011 and 2010, we earned $25.7 million, $23.3 million and $5.8 million in revenues under the Reseller OEM Agreement with Cisco, respectively. As of December 31, 2012, we also had outstanding accounts receivable of $0.3 million under the Reseller OEM Agreement. The following description of the Reseller OEM Agreement is a summary only and is qualified by the text of the Reseller OEM Agreement filed as an exhibit to the registration statement of which this prospectus is a part.
Term. The initial term of the Reseller OEM Agreement originally continued until October 2012 (four years after the effective date), and in August 2012 Cisco elected by written notice to extend the Reseller OEM Agreement for an additional one-year term (through October 2013). In August 2013, Cisco again elected to renew the Reseller OEM Agreement for one additional one-year term (through October 2014), and thereafter, the Reseller OEM Agreement is automatically renewed for one-year terms unless either party elects to terminate it by advance notice at the end of a term. Notwithstanding any such non-renewal of the Reseller OEM Agreement by Cisco, the Reseller OEM Agreement will continue in full force and effect as to certain Cisco projects with end-users for the duration of such projects. Accordingly, even after the expiration of the Reseller OEM Agreement we would have a continuing obligation to fulfill any orders from Cisco for our products, and to provide maintenance and support for those products, with respect to any such ongoing end-user projects. Moreover, following the termination of the Reseller OEM Agreement for any or no reason, we must offer maintenance and support services to Cisco under our then current published pricing, for all of our products already deployed by Cisco at the time of expiration or termination, for at least five (5) years from the last commercial sale of our products by Cisco prior to such expiration or termination unless Cisco ceases to pay all of our support fees. Either party may terminate the Reseller OEM Agreement upon a material uncured breach by the other party.
General. Under the Reseller OEM Agreement, Cisco is permitted but not obligated to order our solutions for resale to distributors or to end users, either as branded Mavenir products or as re-branded Cisco products. To support the successful deployment of our solutions, we are obligated under the Reseller OEM Agreement to participate in testing of our solutions and to provide certain maintenance and support services, at agreed-upon rates, to Cisco and any such distributor or end users. If Cisco enters into an agreement with an end-user to provide our solutions, Cisco has the right to seek our consent to a back-to-back agreement in which Cisco passes to us certain of its obligations to the end-user with respect to our solutions, which consent may not be unreasonably withheld.
Limited Exclusivity. If Cisco brings us a sales opportunity for any Mavenir solution with respect to a customer or potential customer and Cisco presents a reasonable account plan with respect to that customer, Cisco will have one year of exclusivity with respect to sales of our solutions to that customer if that customer is one of the approximately 30 large mobile service providers that is defined as a Tier One account in the Reseller OEM Agreement, and Cisco will have six months of exclusivity if that customer is not a Tier One customer.
Most Favored Customer Provision. We agree that, during the term of the Reseller OEM Agreement, the fees, terms and conditions for our solutions and services are and will be no less favorable to Cisco than those that we provide to our other customers, including reseller customers, of substantially similar volume or amount of sales of our products with substantially similar features and functionality.
If at any time we are not compliant with this most favored customer obligation, we are required to (i) apply the lower price to all pending and subsequent orders throughout the remainder of the term of the Reseller OEM Agreement, (ii) reissue all paid and unpaid invoices originally issued to Cisco for our products and services as of the date that we offered a lower price to another customer, which reissued invoices must reflect the lower price and (iii) at Ciscos option, remit the difference to Cisco in the form of cash or a credit for future
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purchases of our products and services. We are required to annually audit our compliance with this most favored customer covenant, including pricing and terms that we offer to other customers, to annually certify our compliance to Cisco and to inform Cisco of any price reductions that it has received as a result of our compliance with this covenant. Cisco also has the ability to audit our customer records not more than once a year to confirm our compliance with this most favored customer provision.
Source Code Escrow. The Reseller OEM Agreement also includes a provision requiring us to deposit the source code for our solutions into a source code escrow, and such source code could be released to Cisco under certain circumstances, such as our material breach of the Reseller OEM Agreement, material and repeated failure to provide required support or maintenance or if we are subject to a bankruptcy proceeding or otherwise liquidate or cease to do business as a going concern.
Indemnity and Liquidated Damages. We agree in the Reseller OEM Agreement to indemnify Cisco against certain third-party claims relating to alleged infringement of intellectual property rights by our products or services or the failure to comply with any open-source license by any of our technology that becomes subject to an open-source license. In addition, we are subject to certain liquidated damages, performance penalty and refund obligations in the event that our products cause network outages or lack of availability and we are unable to resolve such issues within specified response times. We are also generally required to pay liquidated damages or performance penalties that Cisco may incur to an end user caused by the use of our products by that end user.
Bonus Participation Agreement with Terence McCabe
Terence McCabe, our Chief Technology Officer, joined us from Airwide Solutions when we acquired that company in May 2011. In connection with our acquisition of Airwide Solutions, the board of directors of Airwide Solutions approved an Incentive Bonus Plan for certain Airwide Solutions employees that were joining us. Our wholly-owned subsidiary that merged with Airwide Solutions entered into a participation agreement with Mr. McCabe pursuant to which he was granted a cash award under this Incentive Bonus Plan totaling $150,000. This award vested in three installments of 30%, 30% and 40%, with vesting dates occurring six, twelve and eighteen months following our acquisition of Airwide Solutions. Each vesting date was contingent upon Mr. McCabes continued service with us.
Policies and Procedures for Related Person Transactions
Our Board of Directors has adopted a written related person transaction policy setting forth the policies and procedures for the review and approval or ratification of related person transactions. This policy will cover any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we were or are to be a participant and a related person had or will have a direct or indirect material interest, as determined by our audit committee. These related person transactions would include, without limitation, purchases of goods or services by or from the related person, or entities in which the related person has a material interest, and indebtedness, guarantees of indebtedness or employment by us of a related person.
Subsequent to the adoption of this written policy, our audit committee ratified, confirmed and approved the Reseller OEM Agreement with Cisco, including all previous amendments thereto. Additionally, for so long as the Reseller OEM Agreement with Cisco is an ongoing agreement, it will be subject to an annual review by our audit committee.
Prior to the adoption of this written policy, our Board of Directors reviewed related person transactions. Each of the related person transactions described above occurred prior to adoption of this written policy and as such, these transactions were not subject to the approval and review procedures set forth in the policy. However, each of these transactions was submitted to and approved by our Board of Directors, except that our Board of Directors did not specifically review the participation agreement for Mr. McCabe described above under Bonus Participation Agreements with Terence McCabe.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth, as of June 30, 2013, information regarding the beneficial ownership of our common stock by:
| each person, or group of affiliated persons, who is known by us to be the beneficial owner of five percent or more of our outstanding common stock; |
| each of our directors; |
| each of our named executive officers; |
| all our directors and executive officers as a group (14 persons); and |
| all selling stockholders. |
The information in the following table is calculated based on 124,558,248 shares of common stock outstanding before this offering and shares of common stock outstanding after this offering. The number of shares outstanding is based on the number of shares of common stock outstanding on June 30, 2013 as adjusted to give effect to:
| the automatic conversion of all outstanding shares of our preferred stock into 115,167,418 shares of common stock upon the completion of this offering; and |
| the sale of shares of common stock in this offering (assuming no exercise of the underwriters option to purchase additional shares). |
Each individual or entity shown on the table has furnished information with respect to beneficial ownership. Except as otherwise indicated below, the address of each officer, director and five percent stockholder listed below is c/o Mavenir Systems, Inc., 1700 International Parkway, Suite 200, Richardson, TX 75081.
We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options that are either immediately exercisable or exercisable within 60 days of June 30, 2013. These shares are deemed to be outstanding and beneficially owned by the person holding those options for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them.
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Shares of Common Stock Beneficially Owned Prior to this Offering |
Shares Being Offered |
Shares of Common Stock Beneficially Owned After this Offering |
||||||||||||||||||
Number | Percent | Number | Percent | |||||||||||||||||
5% Stockholders |
||||||||||||||||||||
Entities affiliated with North Bridge Venture Partners(1) |
30,470,603 | 24.5 | % | | 30,470,603 | % | ||||||||||||||
Austin Ventures VIII, L.P.(2) |
28,705,987 | 23.1 | | 28,705,987 | ||||||||||||||||
Alloy Ventures 2005, L.P.(3) |
21,354,253 | 17.1 | | 21,354,253 | ||||||||||||||||
August Capital V Special Opportunities, L.P.(4) |
20,326,823 | 16.3 | | 20,326,823 | ||||||||||||||||
Cisco Systems, Inc.(5) |
14,239,609 | 10.9 | | 14,239,609 | ||||||||||||||||
Directors and Executive Officers |
||||||||||||||||||||
Pardeep Kohli(6) |
6,186,517 | 4.7 | ||||||||||||||||||
Terry Hungle(6) |
1,499,393 | 1.2 | ||||||||||||||||||
Bahram Jalalizadeh(6) |
1,315,962 | 1.1 | ||||||||||||||||||
Matt Dunnett(6) |
300,000 | * | | 300,000 | ||||||||||||||||
Ammar H. Hanafi(3) |
21,354,253 | 17.2 | | 21,354,253 | ||||||||||||||||
Jeffrey P. McCarthy |
| | | | | |||||||||||||||
Vivek Mehra(4) |
20,326,823 | 16.3 | | 20,326,823 | ||||||||||||||||
Hubert de Pesquidoux(6) |
92,922 | * | | 92,922 | ||||||||||||||||
Benjamin L. Scott(6) |
150,000 | * | | 150,000 | ||||||||||||||||
Venu Shamapant |
| | | | | |||||||||||||||
All executive officers and directors as a group (12 persons)(6) |
51,750,870 | 38.5 |
* | Less than one percent. |
(1) | Consists of (a) 11,869,125 shares of common stock held by North Bridge Venture Partners V-A, L.P., (b) 5,817,532 shares of common stock held by North Bridge Venture Partners V-B, L.P. and (c) 12,783,946 shares of common stock held by North Bridge Venture Partners VI, L.P. North Bridge Venture Management V, L.P. is the sole general partner of North Bridge Venture Partners V-A, L.P. and North Bridge Venture Partners V-B, L.P. North Bridge Venture Management VI, L.P. is the sole general partner of North Bridge Venture Partners VI, L.P. NBVM GP, LLC, as the sole general partner of North Bridge Venture Management V, L.P., has ultimate voting and investment power of the shares held of record by North Bridge Venture Partners V-A, L.P. and North Bridge Venture Partners V-B, L.P., and as the sole General Partner of North Bridge Venture Management VI, L.P., has ultimate voting and investment power of the shares held of record by North Bridge Venture Partners VI, L.P. Shared voting and investment power over such shares is vested in the founding managers of NBVM GP, LLC, Edward T. Anderson and Richard A. DAmore. Jeffrey P. McCarthy, a member of our Board of Directors, is a manager of NBVM GP, LLC. The address for North Bridge Venture Partners is 950 Winter Street, Suite 4600, Waltham, MA 02451. |
(2) | Consists of shares held of record by Austin Ventures VIII, L.P. (AV VIII). AV Partners VIII, L.P. (AVP VIII) is the general partner of AV VIII and may be deemed to have sole voting and investment power over the shares held by AV VIII. Joseph C. Aragona, Kenneth P. DeAngelis, John D. Thornton and Christopher A. Pacitti are the general partners of AVP VIII and share voting and/or dispositive power over the shares held by AVP VIII. The address for Austin Ventures VIII, L.P. is 300 West Sixth Street, Suite 2300, Austin, TX 78701. |
(3) | All shares are held of record by Alloy Ventures 2005, L.P. Ammar H. Hanafi, a member of our Board of Directors, is a managing member of Alloy Ventures 2005, LLC, the general partner of Alloy Ventures 2005, L.P., and may be deemed to hold shared voting and dispositive power over the shares held by Alloy Ventures 2005, L.P. The address for Alloy Ventures 2005, L.P. is 400 Hamilton Avenue, Palo Alto, CA 94301. |
(4) | All shares are held of record by August Capital V Special Opportunities, L.P. (August V Special Opportunities), as nominee for August Capital V Special Opportunities, L.P., August Capital Strategic Partners V, L.P. and related individuals (collectively, the August Capital Funds). Howard Hartenbaum, David M. Hornik, John R. Johnston, David F. Marquardt, Vivek Mehra and Andrew S. Rappaport, as members of August Capital Management V, L.L.C., the general partner of August V Special Opportunities, |
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share voting and investment power with respect to the shares held by the August Capital Funds. Vivek Mehra is a member of our Board of Directors and may be deemed to have shared voting and investment power over the shares held by the August Capital Funds. The address for each of the August Capital Funds is 2480 Sand Hill Road, Suite 101, Menlo Park, CA 94025. |
(5) | Consists of shares held of record by Starent Networks LLC, a wholly-owned subsidiary of Cisco Systems, Inc., and includes an exerciseable warrant to purchase 6,287,989 shares of common stock at an exercise price of $0.9542 per share. The holders address is 170 W. Tasman Drive, San Jose, CA 95134. |
(6) | 9,941,432 shares of common stock beneficially owned by executive officers and directors consist of the following shares that are subject to options that are currently exercisable or will become exercisable within 60 days of June 30, 2013. |
Name of Beneficial Owner |
Shares Subject to Options | |||
Pardeep Kohli |
6,058,155 | |||
Terry Hungle |
1,499,393 | |||
Bahram Jalalizadeh |
1,315,962 | |||
Matt Dunnett |
300,000 | |||
Benjamin L. Scott |
150,000 | |||
Hubert de Pesquidoux |
92,922 | |||
|
|
|||
All executive officers and directors as a group (12 persons) |
9,941,432 | |||
|
|
Certain of these options may be exercised prior to vesting, subject to repurchase rights of the company at the lesser of fair market value or the exercise price, with such repurchase rights lapsing at such time as the underlying options vest. In the event of such early exercise, the holder would be entitled to vote all of the underlying shares acquired upon exercise and thus is deemed to beneficially own all shares underlying an option that permits early exercise. Of the options described in the table in this footnote, options to purchase 2,177,354 shares of common stock that were exercisable as of June 30, 2013 or within 60 days of June 30, 2013 would, if exercised, be subject to the companys repurchase rights.
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The following is a description of our capital stock and certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws, as they will be in effect upon the completion of this offering. This description is intended as a summary, and is qualified in its entirety by the provisions of our amended and restated certificate of incorporation and amended and restated bylaws, copies of which are filed as exhibits to the registration statement of which this prospectus is a part. This description of our capital stock reflects changes to our capital structure that will occur upon the completion of this offering.
Outstanding Shares
Upon completion of this offering, our authorized capital stock will consist of 300,000,000 shares of common stock, $0.001 par value per share, and 20,000,000 shares of preferred stock, $0.001 par value per share. As of June 30, 2013, assuming the filing of our amended and restated certificate of incorporation and the conversion of each outstanding share of redeemable convertible preferred stock into one share of common stock upon the completion of this offering, but without giving effect to this offering, we had 124,558,248 shares of common stock issued and outstanding. We have approximately 100 stockholders of record. In addition, as of June 30, 2013, options to purchase 20,260,292 shares of common stock and warrants to purchase 8,649,446 shares of common stock were issued and outstanding.
The number of shares of our capital stock outstanding after this offering assumes:
| the filing and effectiveness of our amended and restated certificate of incorporation; and |
| the conversion of all 115,167,418 shares of redeemable convertible preferred stock outstanding on June 30, 2013 into an aggregate of 115,167,418 shares of common stock. |
Common Stock
Dividends
Subject to preferences that may be applicable to any then outstanding preferred stock, holders of common stock are entitled to receive ratably those dividends, if any, as may be declared from time to time by the Board of Directors out of legally available funds. After the completion of this offering, we do not anticipate declaring any cash dividends to the holders of our common stock for the foreseeable future. In addition, the terms of our loan and security agreement with Silicon Valley Bank currently restrict our ability to pay dividends.
Voting Rights
Each holder of our common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. Under our amended and restated certificate of incorporation and amended and restated bylaws, our stockholders will not have cumulative voting rights. Because of this, the holders of a majority of the shares of common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they should so choose. Our amended and restated certificate of incorporation provides for a classified Board of Directors with staggered three-year terms and, as a result, only a portion of our Board of Directors will stand for election at each annual meeting of the stockholders.
Liquidation
In the event of our liquidation, dissolution or winding up, holders of common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any outstanding shares of preferred stock.
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Rights and Preferences
Holders of common stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate in the future.
Fully Paid and Nonassessable
All of our outstanding shares of common stock are, and the shares of common stock to be issued pursuant to this offering will be, fully paid and nonassessable.
Preferred Stock
Upon the closing of this offering, the Board of Directors will have the authority, without further action by the stockholders, to issue up to 20,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding. The Board of Directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of us and may adversely affect the market price of the common stock and the voting and other rights of the holders of common stock.
Options
As of June 30, 2013, options to purchase 20,260,292 shares of common stock were outstanding under our amended and restated 2005 Stock Plan and 2013 Equity Incentive Plan, with a weighted average exercise price of $0.33 per share.
Warrants
As of June 30, 2013, we had outstanding warrants to purchase (i) 6,366,588 shares of common stock at an exercise price of $0.9542 per share, (ii) 920,000 shares at an exercise price of $0.73 per share, and (iii) 1,362,358 shares at an exercise price of $0.001 per share.
Registration Rights
Demand Registration Rights
Pursuant to our amended and restated investors rights agreement dated May 26, 2011, at any time beginning six months after the consummation of this offering, the holders of at least a majority of the registrable shares of our common stock issued or issuable upon conversion of preferred stock can request that we file up to three registration statements registering all or a portion of their registrable shares. As of December 31, 2012, the holders of approximately 115 million shares of our common stock issuable upon conversion of our redeemable convertible preferred stock have demand registration rights. Under specified circumstances, we also have the right to defer filing of a requested registration statement for a period of not more than 120 days, which right may not be exercised more than once during any period of 12 consecutive months. These registration rights are subject to additional conditions and limitations, including the right of the underwriters to limit the number of shares included in any such registration under certain circumstances.
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Form S-3 Registration Rights
Pursuant to the amended and restated investors rights agreement, if we are eligible to file a registration statement on Form S-3, the holders of at least a majority of the registrable shares of common stock issued or issuable upon the conversion of preferred stock have the right to demand that we file additional registration statements, including a shelf registration statement, for such holder on Form S-3.
Piggyback Registration Rights
Pursuant to the amended and restated investors rights agreement, whenever we propose to file a registration statement under the Securities Act, other than with respect to a registration related to employee benefit or similar plans, corporate reorganizations, a demand for Form S-1 or Form S-3 registration requested under the amended and restated investors rights agreement or a registration on any form which does not permit secondary sales or does not include substantially the same information as would be required to be included in this registration statement, the holders of registrable shares of common stock issued or issuable upon conversion of our redeemable convertible preferred stock are entitled to notice of the registration and have the right to include their registrable shares in such registration. As of June 30, 2013, the holders of approximately 115 million shares of our common stock and redeemable convertible preferred stock will be entitled to notice of this registration and will be entitled to include their shares of common stock in the registration statement. The underwriter(s) of any underwritten offering will have the right to limit the number of shares having registration rights to be included in the registration statement.
Expenses of Registration
We are required to pay all expenses relating to any demand, Form S-3 or piggyback registration, other than underwriting discounts and commissions, subject to certain limited exceptions. We will not pay for any expenses of any demand registration if the request is subsequently withdrawn by the holders of a majority of the shares requested to be included in such a registration statement, subject to limited exceptions.
Expiration of Registration Rights
The registration rights described above will expire for each holder upon the earlier of (i) five years after this offering is completed or (ii) the date after this offering on which the holder may sell all of his, her or its shares under Rule 144 under the Securities Act during any 90-day period without regard to current public information, volume limitations, manner of sale restrictions or Form 144 filing requirements. For a description of Rule 144, see Shares Eligible for Future Sale Rule 144.
Holders of all of our shares with these registration rights have signed or are expected to sign agreements with the underwriters prohibiting the exercise of their registration rights for 180 days following the date of this prospectus. These agreements are described below under Underwriters.
Other Stockholder Rights
Our amended and restated right of first refusal and co-sale agreement dated May 26, 2011 provides certain rights of first refusal and co-sale rights to certain of our stockholders. In addition, (i) our amended and restated investors rights agreement obligates certain of our stockholders regarding the voting of their shares in elections of our directors and provides certain rights of indemnification and (ii) certain of our investors are entitled to observer rights pursuant to certain Management Rights Letters entered into between us and such investors. The amended and restated right of first refusal and co-sale agreement, the voting provisions of the amended and restated investors rights agreement and the Management Rights Letters will expire upon the completion of this offering.
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Anti-Takeover Effects of Delaware Law and Certain Provisions of our Certificate of Incorporation Amended and Restated Bylaws
Delaware Law
We are governed by Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a public Delaware corporation from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A business combination includes mergers, asset sales or other transactions resulting in a financial benefit to the stockholder. An interested stockholder is a person who, together with affiliates and associates, owns, or within three years, did own, 15% or more of the corporations outstanding voting stock. These provisions may have the effect of delaying, deferring or preventing a change in our control.
Amended and Restated Certificate of Incorporation and Amended and Restated Bylaw Provisions
Our amended and restated certificate of incorporation and amended and restated bylaws that will become effective upon the completion of this offering will:
| provide for a classified Board of Directors with staggered, three-year terms; |
| permit our Board of Directors to issue shares of preferred stock, with any rights, preferences and privileges as they may designate, including the right to approve an acquisition or other change in our control; |
| provide that the authorized number of directors may be changed only by resolution of the Board of Directors; |
| provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; |
| require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and not be taken by written consent; |
| provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and also specify requirements as to the form and content of a stockholders notice; |
| prohibit cumulative voting (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose); |
| provide that special meetings of our stockholders may be called only by the chairman of the Board of Directors, our Chief Executive Officer or president (in the absence of a Chief Executive Officer) or by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors; and |
| provide that stockholders will be permitted to amend our amended and restated bylaws and certain provisions of our amended and restated certificate of incorporation only upon receiving at least sixty-six and two thirds percent of the votes entitled to be cast by holders of all outstanding shares then entitled to vote generally in the election of directors, voting together as a single class. |
These and other provisions contained in our certificate of incorporation and bylaws could delay or discourage some types of transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares over then current prices, and may limit the ability of stockholders to remove current management or approve transactions that stockholders may deem to be in their best interests and, therefore, could adversely affect the price of our common stock.
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Choice of Forum
Our amended and restated certificate of incorporation that will become effective upon the completion of this offering will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a breach of fiduciary duty by one or more of our directors, officers or employees, (iii) any action asserting a claim against us arising pursuant to the Delaware General Corporation Law or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our amended and restated certificate of incorporation. The enforceability of similar choice of forum provisions in other companies certificates of incorporation and bylaws has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable.
Stock Exchange Listing
We have applied to list our common stock on the New York Stock Exchange under the trading symbol MVNR.
Transfer Agent and Registrar
The Transfer Agent and Registrar for our common stock will be the American Stock Transfer & Trust Company, LLC.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common stock. Future sales of shares of our common stock in the public market, or the availability of shares for future sale, may adversely affect the market price of our common stock prevailing from time to time. As described below, only a portion of our outstanding shares of common stock will be available for sale shortly after this offering due to contractual and legal restrictions on resale. Nevertheless, sales of substantial amounts of common stock in the public market after these restrictions lapse, or the perception that such sales could occur, could adversely affect the market price of the common stock and could impair our future ability to raise capital through the sale of our equity securities.
Based on the number of shares outstanding as of June 30, 2013, upon completion of this offering, shares of our common stock will be outstanding, assuming no exercise of the underwriters option to purchase additional shares and no exercise of options or warrants. All of the shares sold in this offering by us and the selling stockholders, plus any shares sold upon exercise of the underwriters option to purchase additional shares, will be freely tradable, except for any shares acquired by our affiliates, as that term is defined in Rule 144 under the Securities Act. Except as set forth below, the remaining shares of common stock outstanding after this offering will be restricted as a result of securities laws or lock-up agreements. Restricted shares may be sold in the public market only (i) upon expiration of any applicable lock-up agreement and (ii) if registered or if their resale qualifies for an exemption from registration under Rule 144 or Rule 701 under the Securities Act, each as described below.
These remaining shares will be available for sale in the public market roughly as follows:
Approximate |
Date of Availability of Sales | |
As of the date of this prospectus | ||
124,558,248 |
At 180 days after the date of this prospectus and various times thereafter, subject in some cases to volume and other sale restrictions described below under Rule 144.(1) |
(1) | The 180-day restricted period under the lock-up agreements may be waived by the underwriters, as described in more detail in Underwriters. |
Lock-Up Agreements
We, the selling stockholders, all of our directors and officers and all of our principal stockholders have agreed not to sell or otherwise transfer or dispose of any of our securities for a period of 180 days from the date of this prospectus, subject to certain exceptions. Morgan Stanley & Co. LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank Securities Inc. on behalf of the underwriters may, in their sole discretion, permit early release of shares subject to the lock-up agreements. Please read Underwriters for a description of these lock-up provisions.
Rule 144
In general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any preceding holders that are not affiliates of us, is entitled to sell such shares, subject only to the availability of current public information about us and subject to the lock-up agreements described above. If such a non-affiliated person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any preceding holders that are not affiliates of us, then such person is entitled to sell such shares without regard to the limitations of Rule 144.
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In general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements for at least 90 days, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell upon expiration of the lock-up agreements described above, within any three-month period, a number of shares that does not exceed the greater of:
| 1% of the number of shares of our common stock then outstanding, which will equal approximately shares immediately after this offering; or |
| the average weekly trading volume of our common stock during the four calendar weeks preceding the filing of notice of the sale. |
Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.
Rule 701
In general, under Rule 701 of the Securities Act, any of our employees, directors, officers or natural person consultants or advisors who purchased shares from us in connection with a compensatory stock or option plan or other written compensatory agreement before the date of this prospectus is eligible to resell those shares 90 days after the date of this prospectus in reliance on Rule 144 without having to comply with the holding period requirement of Rule 144 and, in the case of non-affiliates, without having to comply with the public information, volume limitation or notice filing provisions of Rule 144.
However, substantially all shares issued under Rule 701 are subject to lock-up agreements and will only become eligible for sale at the expiration of such agreements.
Stock Issued Under Compensatory Plans
In connection with this offering, we intend to file with the SEC a registration statement on Form S-8 under the Securities Act to register common stock issuable under our amended and restated 2005 Stock Plan, our 2013 Equity Incentive Plan and our 2013 Employee Stock Purchase Plan. This registration statement will be automatically effective upon filing. Accordingly, shares registered under such registration statement will be available for sale in the open market following the effective date, unless such shares are subject to vesting restrictions with us, Rule 144 restrictions applicable to our affiliates or the lock-up restrictions described above.
Market Stand-Off Provisions
Under our amended and restated investors rights agreement, certain holders of our capital stock that are party to such agreement have agreed to not sell any of our securities owned by them for a period specified by us and by the managing underwriter not to exceed 180 days after the date of this prospectus. Such market stand-off rights are contingent upon all directors, officers and holders of at least 1% of our voting capital stock entering into a similar agreement and do not apply to any shares of our common stock that may be purchased by a stockholder on the open market.
In addition to the market stand-off restrictions under our amended and restated investors rights agreement described above, the stock option agreements entered into by all optionees who have received options under our amended and restated 2005 Stock Plan contain a market stand-off restriction of a number of days requested by the underwriters, up to a maximum of 180 days following the date of this prospectus or 180 days following the effective date of any registration statement that we file under the Securities Act.
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Registration Rights
Upon completion of this offering, the holders of approximately 115 million shares of our common stock issued or issuable upon conversion of preferred stock, or their transferees, will be entitled to rights with respect to the registration of their shares under the Securities Act. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by affiliates, immediately upon the effectiveness of this registration. For more information about these registration rights, please read Description of Capital Stock Registration Rights.
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MATERIAL UNITED STATES FEDERAL TAX CONSIDERATIONS FOR NON-UNITED STATES HOLDERS
The following is a summary of the material United States federal income and estate tax consequences of the acquisition, ownership and disposition of shares of our common stock purchased pursuant to this offering by a beneficial owner that, for United States federal income tax purposes, is not a United States person, as we define that term below. A beneficial owner of shares of our common stock who is an individual, corporation, estate or trust and is not a United States person is referred to below as a non-United States holder. This summary is based upon current provisions of the Internal Revenue Code of 1986, as amended, Treasury regulations promulgated thereunder, judicial opinions, administrative pronouncements and published rulings of the United States Internal Revenue Service, or IRS, all as in effect as of the date hereof. These authorities may be changed, possibly retroactively, resulting in United States federal tax consequences different from those set forth below. We have not sought, and will not seek, any ruling from the IRS with respect to the statements made in the following summary, and there can be no complete assurance that the IRS will not take a position contrary to such statements or that any such contrary position taken by the IRS would not be sustained.
This summary is limited to non-United States holders who purchase shares of our common stock issued pursuant to this offering and who hold our common stock as a capital asset (generally property held for investment) for United States federal income tax purposes. This summary does not purport to be complete and does not address the tax considerations arising under the laws of any state, local or non-United States jurisdiction, or under United States federal estate or gift tax laws, except as specifically described below. In addition, this summary does not address tax considerations that may be applicable to an investors particular circumstances nor does it address the special tax rules applicable to special classes of non-United States holders, including, without limitation:
| banks, insurance companies or other financial institutions; |
| partnerships or other entities treated as partnerships for United States federal income tax purposes; |
| persons subject to the alternative minimum tax; |
| persons subject to the Medicare contribution tax; |
| United States expatriates; |
| tax-exempt organizations; |
| tax-qualified retirement plans; |
| brokers or dealers in securities or currencies; |
| real estate investment trusts; |
| regulated investment companies; |
| mutual funds; |
| traders in securities that elect to use a mark-to-market method of accounting for their securities holdings; or |
| persons that will hold common stock as a position in a hedging transaction, straddle, conversion or other integrated transaction for tax purposes. |
If a partnership, including any entity treated as a partnership for United States federal income tax purposes, is a beneficial owner of shares of our common stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A beneficial owner of shares of our common stock that is a partnership, and partners in such partnership, are urged to consult their own tax advisors regarding the tax consequences of the acquisition, ownership and disposition of shares of our common stock.
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For purposes of this discussion, a United States person means a person who is for United States federal income tax purposes:
| an individual who is a citizen or resident of the United States; |
| a corporation, including any entity taxable as a corporation for United States federal income tax purposes created or organized in or under the laws of the United States, any state within the United States or the District of Columbia; |
| an estate the income of which is subject to United States federal income taxation regardless of its source; or |
| a trust (1) if it is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) that has a valid election in effect under applicable Treasury regulations to be treated as a United States person. |
An individual is generally treated as a resident of the United States in any calendar year for United States federal income tax purposes if the individual is present in the United States for at least 31 days in that calendar year and for an aggregate of at least 183 days during the three-year period ending on the last day of the current calendar year. For purposes of the 183-day calculation, all of the days present in the current year, one-third of the days present in the immediately preceding year and one-sixth of the days present in the second preceding year are counted. Residents are generally taxed for United States federal income tax purposes as if they were United States citizens.
You are urged to consult your tax advisor with respect to the application of the United States federal income tax laws to your particular situation as well as any tax consequences arising under the United States federal estate or gift tax rules or under the laws of any state, local, non-United States or other taxing jurisdiction or under any applicable tax treaty.
Distributions on Shares of Our Common Stock
If distributions are paid on shares of our common stock, the distributions will constitute dividends for United States federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under United States federal income tax principles. To the extent a distribution exceeds our current and accumulated earnings and profits, it will constitute a return of capital that is applied against and reduces, but not below zero, the adjusted tax basis of your shares in our common stock. Any remainder will be treated as gain from the sale of shares of our common stock. Dividends paid to a non-United States holder generally will be subject to withholding of United States federal income tax at the rate of 30% or such lower rate as may be specified by an applicable income tax treaty, the benefits for which a non-United States holder is eligible. However, if the dividend is effectively connected with the non-United States holders conduct of a trade or business in the United States and, where an income tax treaty applies, is attributable to a United States permanent establishment or fixed base maintained by such non-United States holder, the dividend will not be subject to any withholding tax, provided certain certification and disclosure requirements are met, as described below, but will be subject to United States federal income tax imposed on net income on the same basis that applies to United States persons generally. A corporate non-United States holder under certain circumstances also may be subject to a branch profits tax equal to 30%, or such lower rate as may be specified by an applicable income tax treaty, the benefits for which a non-United States holder is eligible, on a portion of its effectively connected earnings and profits for the taxable year. Non-United States holders are urged to consult their own tax advisors regarding the potential applicability of any income tax treaty.
To claim the benefit of an applicable income tax treaty or to claim exemption from withholding because the income is effectively connected with the conduct of a trade or business in the United States, a non-United States holder must provide a properly executed IRS Form W-8BEN for treaty benefits or W-8ECI for effectively connected income, or such successor forms as the IRS designates, and certify under penalties of perjury that such
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holder is not a United States person prior to the payment of distributions on our common stock. These forms must be periodically updated. Special certification and other requirements apply to certain non-United States holders that are pass-through entities and non-United States holders whose stock is held through certain foreign intermediaries. Non-United States holders may obtain a refund or credit of any excess amounts withheld by timely filing an appropriate claim with the IRS.
Gain on Disposition
A non-United States holder generally will not be subject to United States federal income tax, including by way of withholding, on gain recognized on a sale or other disposition of shares of our common stock unless any one of the following is true:
| the gain is effectively connected with the non-United States holders conduct of a trade or business in the United States and, where an applicable income tax treaty applies, is attributable to a United States permanent establishment or fixed base maintained by such non-United States holder; |
| the non-United States holder is a nonresident alien individual present in the United States for 183 days or more in the taxable year of the disposition and certain other requirements are met; or |
| our common stock constitutes a United States real property interest by reason of our status as a United States real property holding corporation, or USRPHC, for United States federal income tax purposes at any time during the shorter of (1) the period during which you hold our common stock and (2) the five-year period ending on the date you dispose of our common stock. |
We believe that we are not currently, and will not become, a USRPHC for United States federal income tax purposes. However, because the determination of whether we are a USRPHC depends on the fair market value of our United States real property interests relative to the fair market value of our other business assets, we cannot assure you that we will not become a USRPHC in the future. As a general matter, as long as our common stock is regularly traded on an established securities market, however, it will not be treated as a United States real property interest with respect to any non-United States holder that holds no more than 5% of such regularly traded common stock. If we are determined to be a USRPHC and the foregoing exception does not apply, among other things, a purchaser may be required to withhold 10% of the proceeds payable to a non-United States holder from a disposition of shares of our common stock, and the non-United States holder generally will be taxed on its net gain derived from the disposition at the graduated United States federal income tax rates applicable to United States persons.
Unless an applicable income tax treaty provides otherwise, gain described in the first bullet point above will be subject to the United States federal income tax imposed on net income on the same basis that applies to United States persons generally but will generally not be subject to withholding. Corporate non-United States holders also may be subject to a branch profits tax on such gain. Gain described in the second bullet point above will be subject to a flat 30% United States federal income tax, which may be offset by certain United States source capital losses. Non-United States holders are urged to consult any potentially applicable income tax treaties that may provide for different rules.
Legislation Involving Payments to Certain Foreign Entities
Legislation enacted in March 2010 imposes a 30% withholding tax on any dividends on shares of our common stock made to a foreign financial institution or non-financial foreign entity (including, in some cases, when such foreign financial institution or entity is acting as an intermediary), and on the gross proceeds of the sale or other disposition of shares of our common stock, unless (i) in the case of a foreign financial institution, such institution enters into an agreement with the U.S. government to withhold on certain payments, and to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders
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that are foreign entities with U.S. owners), (ii) in the case of a non-financial foreign entity, such entity provides the withholding agent with a certification identifying the direct and indirect U.S. owners of the entity or (iii) the foreign financial institution or non-financial entity otherwise qualifies for an exemption from these rules. Under certain circumstances, a non-United States holder might be eligible for refunds or credits of such taxes.
The withholding will apply to dividend payments made after June 30, 2014 and to disposition and sale proceeds after December 31, 2016. Non-United States holders are encouraged to consult with their own tax advisors regarding the possible implications of this legislation on an investment in shares of our common stock.
United States Federal Estate Taxes
Shares of our common stock owned or treated as owned by an individual who at the time of death is a non-United States holder are considered United States situs assets and will be included in the individuals estate for United States federal estate tax purposes, unless an applicable estate tax treaty provides otherwise.
Information Reporting and Backup Withholding
Information reporting and backup withholding (currently at a 31% rate) generally will apply to dividends paid with respect to our common stock. In certain circumstances, non-United States holders may avoid information reporting and backup withholding if they provide a properly executed IRS Form W-8BEN for treaty benefits or W-8ECI for effectively connected income, or such successor forms as the IRS designates, and certify under penalties of perjury as to their status as non-United States holders and meet certain other requirements, or otherwise establish an exemption. Copies of information returns may also be made available to the tax authorities in the country in which the non-United States holder resides under the provisions of an applicable income tax treaty. Non-United States holders are urged to consult their own tax advisors regarding the application of the information reporting and backup withholding rules to them.
The gross proceeds from the disposition of shares of our common stock may be subject to information reporting and backup withholding. If a non-United States holder sells shares of our common stock outside the United States through a non-United States office of a non-United States broker and the sales proceeds are paid to such holder outside the United States, then the United States backup withholding and information reporting requirements generally will not apply to that payment. However, United States information reporting will generally apply to a payment of sale proceeds, even if that payment is made outside the United States, if a non-United States holder sells shares of our common stock through a non-United States office of a broker that:
| is a United States person for United States federal tax purposes; |
| is a foreign person that derives 50% or more of its gross income in specific periods from the conduct of a trade or business in the United States; |
| is a controlled foreign corporation for United States tax purposes; or |
| is a foreign partnership, if at any time during its tax year (1) one or more of its partners are United States persons who in the aggregate hold more than 50% of the income or capital interests in the partnership; or (2) the foreign partnership is engaged in a United States trade or business, |
unless the broker has documentary evidence in its files that the non-United States holder is not a United States person and certain other conditions are met, or the non-United States holder otherwise establishes an exemption. In such circumstances, backup withholding will not apply unless the broker has actual knowledge or reason to know that the non-United States holder is not a non-United States person.
If a non-United States holder receives payments of the proceeds of a sale of shares of our common stock to or through a United States office of a broker, the payment is subject to both backup withholding and information reporting unless such non-United States holder properly provides IRS Form W-8BEN (or valid substitute or
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successor form) certifying under penalties of perjury that such stockholder is not a United States person or otherwise establishes an exemption.
Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules from a payment to a non-United States holder can be refunded or credited against the non-United States holders United States federal income tax liability, if any, provided that an appropriate claim is timely filed with the IRS.
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Under the terms and subject to the conditions in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank Securities Inc. are acting as representatives, have severally agreed to purchase, and we and the selling stockholders have agreed to sell to them, severally, the number of shares indicated below:
Name |
Number of Shares | |
Morgan Stanley & Co. LLC |
||
Merrill Lynch, Pierce, Fenner & Smith Incorporated |
||
Deutsche Bank Securities Inc. |
||
Needham & Company, LLC |
||
| ||
Total |
||
|
The underwriters and the representatives are collectively referred to as the underwriters and the representatives, respectively. The underwriters are offering the shares of common stock subject to their acceptance of the shares from us and the selling stockholders and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of common stock offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters option to purchase additional shares described below. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the non-defaulting underwriters may be increased under certain circumstances.
The underwriters initially propose to offer part of the shares of common stock directly to the public at the offering price set forth on the cover page of this prospectus and part to certain dealers. After the initial offering of the shares of common stock, the offering price and other selling terms may from time to time be varied by the representatives.
We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to additional shares of common stock at the public offering price set forth on the cover page of this prospectus, less underwriting discounts and commissions. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional shares of common stock as the number listed next to the underwriters name in the preceding table bears to the total number of shares of common stock listed next to the names of all underwriters in the preceding table.
The following table shows the per share and total public offering price, underwriting discounts and commissions and proceeds before expenses to us and the selling stockholders. These amounts are shown assuming both no exercise and full exercise of the underwriters option to purchase up to an additional shares of common stock from us and the selling stockholders.
Total | ||||||||||||
Per Share | No Exercise | Full Exercise | ||||||||||
Public offering price |
$ | $ | $ | |||||||||
Underwriting discounts and commissions paid by: |
||||||||||||
Us |
$ | $ | $ | |||||||||
The selling stockholders |
$ | $ | $ | |||||||||
Proceeds, before expenses, to us |
$ | $ | $ | |||||||||
Proceeds, before expenses, to the selling stockholders |
$ | $ | $ |
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The estimated offering costs payable by us, exclusive of the underwriting discounts and commissions, are approximately $ million, which includes legal, accounting and printing costs and various other fees associated with the registration and listing of our common stock.
The underwriters have informed us that they do not intend sales to discretionary accounts to exceed 5% of the total number of shares of common stock offered by them.
We have applied to list our common stock on the New York Stock Exchange under the trading symbol MVNR.
We, the selling stockholders, all of our directors and executive officers and substantially all of the holders of our outstanding common stock and other equity securities outstanding immediately prior to this offering have agreed that, without the prior written consent of Morgan Stanley & Co. LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank Securities Inc. on behalf of the underwriters, we and they will not, during the period ending 180 days after the date of this prospectus:
| offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of common stock; |
| enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock; or |
| make a demand for, or in our case file, a registration statement with the SEC (other than a registration statement on Form S-8) relating to the offering of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; |
whether any such transaction described in the first or second bullet points above is to be settled by delivery of common stock or such other securities, in cash or otherwise.
The restrictions described in the immediately preceding paragraph do not apply to:
| the sale of shares of common stock to the underwriters in this offering; |
| the conversion of our outstanding preferred stock into common stock upon the completion of this offering, provided that such shares of common stock shall remain subject to the restrictions described in the immediately preceding paragraph; |
| transactions relating to shares of common stock or other securities convertible into or exercisable or exchangeable for common stock acquired in open market transactions after the completion of this offering; |
| transfers of shares of common stock or any security convertible into or exercisable or exchangeable for common stock as a bona fide gift or charitable contribution; |
| transfers of shares of common stock or any security convertible into or exercisable or exchangeable for common stock to immediate family members or a trust formed for the benefit of immediate family members, by will or intestate succession or from a trust to a trustor or beneficiary of such trust; |
| distributions by any persons other than us of shares of common stock or any security convertible into or exercisable or exchangeable for our common stock to limited partners, members, stockholders, affiliates of such person, or any entity which is directly or indirectly controlled by, or is under common control with, such person; |
| the issuance of shares of our common stock upon the exercise of an option or warrant or the conversion of a security outstanding on the date of this prospectus which the underwriters have been advised in writing (including any description thereof in the registration statement of which this prospectus is a |
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part) or grants of stock options or restricted stock in accordance with the terms of a plan in effect on the date of this prospectus and described herein or the issuance by us of shares of our common stock upon the exercise thereof; |
| sales or transfers to us of shares of our common stock or any security convertible into or exercisable or exchangeable for our common stock in connection with (A) the termination of employment or other termination of a service provider and pursuant to agreements whereby we have the option to repurchase such shares or securities, (B) option agreements relating to the early exercise of unvested options issued pursuant to our equity incentive plans or (C) agreements wherein we have a right of first refusal with respect to transfers of such shares or securities; |
| the transfer of shares of our common stock or any security convertible into or exercisable or exchangeable for our common stock to us in a transaction exempt from Section 16(b) of the Exchange Act upon a vesting event or upon the exercise of options to purchase shares of common stock on a cashless or net exercise basis or in connection with the payment of taxes due; |
| the sale or issuance of or entry into an agreement to sell or issue shares of our common stock (or options, warrants or convertible securities relating to shares of our common stock) in connection with bona fide mergers or acquisitions, joint ventures, commercial relationships or other strategic transactions; provided that the aggregate number of shares of such common stock, options, warrants or convertible securities shall not exceed 7.5% of the total number of shares of our common stock (or options, warrants or convertible securities relating to shares of our common stock) issued and outstanding immediately following the completion of this offering; |
| transfers of shares of our common stock or any security convertible into or exercisable or exchangeable for our common stock pursuant to a bona fide third-party tender offer, merger, consolidation or other similar transaction made to all holders of our common stock involving a change in control of us; provided that in the event that the tender offer, merger, consolidation or other such transaction is not completed, such common stock or securities owned by the stockholder shall remain subject to the restrictions described in the immediately preceding paragraph; |
| the transfer of shares of our common stock or any security convertible into or exercisable or exchangeable for our common stock that occurs by operation of law or by order of a court of competent jurisdiction; provided that the transferor shall use its reasonable best efforts to cause the transferee, prior to such transfer, to agree in writing to be bound by the restrictions described in the immediately preceding paragraph; and |
| the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of shares of our common stock, provided that such plan does not provide for the disposition of our common stock during the restricted period and no public announcement or filing under the Exchange Act regarding the establishment of such plan shall be required of or voluntarily made by or on behalf of such person or us; |
provided that in the case of any transfer or distribution as described in the fourth, fifth, sixth, seventh or tenth bullet point above, the respective recipient agrees to be subject to the restrictions described in the immediately preceding paragraph; provided further that in the case of any transfer or distribution described in the third, fourth, fifth, sixth, seventh, eighth, ninth or tenth bullet point above, no filing under Section 16(a) of the Exchange Act, reporting a net reduction in beneficial ownership of shares of common stock, is required or shall be voluntarily made during the restricted period referred to above (other than a filing on a Form 5, Schedule 13D or Schedule 13G (or any amendment of the foregoing).
Morgan Stanley & Co. LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank Securities Inc., in their sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time with or without notice. When determining whether or not to release common stock and other securities from lock-up agreements, Morgan Stanley & Co. LLC, Merrill
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Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank Securities Inc. will consider, among other factors, the holders reasons for requesting the release, the number of shares of common stock and other securities for which the release is being requested and market conditions at the time. In addition, in the event that any of our executive officers or directors (including their respectively immediate family members or any family vehicle for the benefit of any such person), any investment fund affiliated with one of our directors or any holder of preferred stock, or common stock issued or issuable upon the conversion of such preferred stock, representing more than one percent (aggregating ownership of affiliates) of our preferred stock, or common stock issued or issuable upon the conversion of such preferred stock, outstanding immediately prior to this offering (each, a Major Holder) is granted an early release from the lock-up restrictions with respect to shares of our common stock or any security convertible into or exercisable or exchangeable for our common stock having a fair market value in excess of $1.0 million in the aggregate (whether in one or multiple releases), then each other Major Holder automatically will be granted an equivalent early release from its obligations under the lock-up agreement on a pro-rata basis (a Pro-Rata Release). Such Pro-Rata Release shall not be applicable in the event of any underwritten primary or secondary public offering or sale of our common stock during the period ending 180 days after the date of this prospectus; provided, however, that each Major Holder is given an opportunity to participate on a pro-rata basis in such underwritten primary or secondary public offering with and otherwise pursuant to the same terms and conditions as any other Major Holder.
In order to facilitate the offering of the common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common stock. Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short position is no greater than the number of shares available for purchase by the underwriters under their option to purchase additional shares. The underwriters can close out a covered short sale by exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available under the option to purchase additional shares. The underwriters may also sell shares in excess of the option to purchase additional shares, creating a naked short position. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in this offering. As an additional means of facilitating this offering, the underwriters may bid for, and purchase, shares of common stock in the open market to stabilize the price of the common stock. These activities may raise or maintain the market price of the common stock above independent market levels or prevent or retard a decline in the market price of the common stock. The underwriters are not required to engage in these activities and may end any of these activities at any time.
We, the selling stockholders and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.
A prospectus in electronic format may be made available on websites maintained by one or more underwriters, or selling group members, if any, participating in this offering. The representatives may agree to allocate a number of shares of common stock to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters that may make Internet distributions on the same basis as other allocations.
In addition, in the ordinary course of their business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
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From time to time, certain of the underwriters or their respective affiliates may engage in transactions with us and may perform investment banking and advisory services for us in the ordinary course of their business for which they would receive customary fees and expenses.
Pricing of the Offering
Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives. Among the factors to be considered in determining the initial public offering price will be our future prospects and those of our industry in general, our sales, earnings and certain other financial and operating information in recent periods and the price-earnings ratios, price-sales ratios, market prices of securities and certain financial and operating information of companies engaged in activities similar to ours.
The estimated initial public offering price range set forth on the cover page of this preliminary prospectus is subject to change as a result of market conditions and other factors. We cannot assure you that the prices at which the shares will sell in the public market after this offering will not be lower than the initial public offering price or that an active trading market in our common stock will develop and continue after this offering.
Selling Restrictions
European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State) an offer to the public of any shares of our common stock may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any shares of our common stock may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:
(a) | to any legal entity which is a qualified investor as defined in the Prospectus Directive; |
(b) | to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives for any such offer; or |
(c) | in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of shares of our common stock shall result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive. |
For the purposes of this provision, the expression an offer to the public in relation to any shares of our common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares of our common stock to be offered so as to enable an investor to decide to purchase any shares of our common stock, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression 2010 PD Amending Directive means Directive 2010/73/EU.
United Kingdom
Each underwriter has represented and agreed that:
(a) | it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the shares of our common stock in circumstances in which Section 21(1) of the FSMA does not apply to us; and |
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(b) | it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares of our common stock in, from or otherwise involving the United Kingdom. |
Switzerland
Shares of our common stock may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (SIX) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to shares of our common stock or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, us or shares of our common stock have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares of our common stock will not be supervised by, the Swiss Financial Market Supervisory Authority (FINMA), and the offer of shares of our common stock has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (CISA). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares of our common stock.
Dubai International Financial Centre
This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (DFSA). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares of our common stock to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of shares of our common stock offered should conduct their own due diligence on such shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.
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The validity of the shares of common stock offered hereby and certain other legal matters will be passed upon for us by Andrews Kurth LLP, Austin, Texas. Certain legal matters will be passed upon for the underwriters by Davis Polk & Wardwell LLP, New York, New York.
The consolidated balance sheets of Mavenir Systems, Inc. and its subsidiaries as of December 31, 2011 and 2012 and related consolidated statements of operations and comprehensive loss, shareholders deficit and cash flows for each of the years in the three-year period ended December 31, 2012 and the consolidated financial statements of Airwide Solutions, Inc. as of and for the year ended December 31, 2011 and as of and for the period ended May 26, 2011 included in this prospectus and in the registration statement of which this prospectus forms a part have been so included in reliance on the report of BDO USA, LLP, an independent registered public accounting firm, appearing elsewhere herein and in the registration statement of which this prospectus forms a part, on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement, of which this prospectus is a part, on Form S-1 with the SEC relating to this offering. This prospectus does not contain all of the information in the registration statement and the exhibits and financial statements included with the registration statement. References in this prospectus to any of our contracts, agreements or other documents are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contracts, agreements or documents.
Our filings with the SEC are available to the public on the SECs website at http://www.sec.gov. You may also read and copy, at SEC prescribed rates, any document we file with the SEC, including the registration statement (and its exhibits) of which this prospectus is a part, at the SECs Public Reference Room located at 100 F Street, N.E., Washington D.C. 20549. You can call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room.
We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus only. Our business, financial condition, results of operations and prospects may have changed since that date.
Following the completion of this offering, we will be subject to the informational reporting requirements of the Exchange Act and, in accordance with the Exchange Act, will file periodic reports, proxy and information statements and other information with the SEC. Such annual, quarterly and current reports; proxy and information statements; and other information can be inspected and copied at the locations set forth above. We also expect to make our periodic reports and other information filed with or furnished to the SEC available, free of charge, through our website at http://www.mavenir.com, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. The information contained on or accessible through our corporate web site or any other web site that we may maintain is not part of this prospectus or the registration statement of which this prospectus is a part. You may also request a copy of these filings, at no cost to you, by writing or telephoning us at the following address:
Mavenir Systems, Inc.
1700 International Parkway, Suite 200
Richardson, TX 75081
Attention: Chief Financial Officer
(469) 916-4393
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We will report our financial statements on a year ended December 31. We intend to furnish or make available to our stockholders annual reports containing consolidated financial statements audited by our independent registered public accounting firm. We also intend to furnish or make available to our stockholders our quarterly reports containing unaudited interim financial information for each of the first three quarters of each year.
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Mavenir Systems, Inc. and Subsidiaries
Page | ||||
Consolidated Financial Statements of Mavenir Systems, Inc. and Subsidiaries |
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F-2 | ||||
F-3 | ||||
Consolidated Statements of Operations and Comprehensive Loss |
F-5 | |||
F-6 | ||||
F-7 | ||||
F-8 | ||||
Consolidated Financial Statements of Airwide Solutions, Inc. and Subsidiaries |
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F-39 | ||||
Consolidated Balance Sheets as of December 31, 2010 and May 26, 2011 |
F-40 | |||
F-42 | ||||
F-43 | ||||
F-44 | ||||
F-45 |
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
of Mavenir Systems, Inc.
We have audited the accompanying consolidated balance sheets of Mavenir Systems, Inc. and Subsidiaries (the Company) as of December 31, 2011 and 2012 and the related consolidated statements of operations and comprehensive loss, shareholders deficit and cash flows for each of the years in the three-year period ended December 31, 2012. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedules. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mavenir Systems, Inc. and Subsidiaries as of December 31, 2011 and 2012, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.
/s/ BDO USA, LLP
Dallas, Texas
April 9, 2013
F-2
Mavenir Systems, Inc. and Subsidiaries
(in thousands, except share and per share amounts)
December 31, | June 30, | Unaudited Pro Forma Shareholders Deficit (see Note 1) |
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2011 | 2012 | 2013 | ||||||||||||||
(unaudited) | ||||||||||||||||
Assets |
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Current assets: |
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Cash and cash equivalents |
$ | 19,466 | $ | 7,402 | $ | 20,453 | ||||||||||
Accounts receivable, net (related party $6,063, $308 and $361, respectively) |
16,112 | 15,159 | 19,292 | |||||||||||||
Unbilled revenue |
4,845 | 9,782 | 7,284 | |||||||||||||
Inventories |
2,242 | 2,255 | 3,967 | |||||||||||||
Prepaid expenses and other current assets |
2,547 | 6,484 | 7,611 | |||||||||||||
Deferred contract costs |
4,647 | 5,288 | 8,112 | |||||||||||||
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|
|
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Total current assets |
49,859 | 46,370 | 66,719 | |||||||||||||
Non-current assets: |
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Property and equipment, net |
3,426 | 5,919 | 5,557 | |||||||||||||
Intangible assets, net |
5,904 | 5,714 | 5,416 | |||||||||||||
Deposits and other assets |
297 | 1,555 | 1,433 | |||||||||||||
Goodwill |
901 | 923 | 874 | |||||||||||||
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|
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Total assets |
$ | 60,387 | $ | 60,481 | $ | 79,999 | $ | |||||||||
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See accompanying notes to Consolidated Financial Statements.
F-3
Mavenir Systems, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
December 31, | June 30, | Unaudited Pro Forma Shareholders Deficit (see Note 1) |
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2011 | 2012 | 2013 | ||||||||||||||
(unaudited) | ||||||||||||||||
Liabilities and shareholders deficit: |
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Current liabilities: |
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Trade accounts payable |
$ | 4,481 | $ | 6,087 | $ | 8,570 | ||||||||||
Accrued liabilities |
9,453 | 14,067 | 12,405 | |||||||||||||
Deferred revenue |
18,663 | 12,927 | 13,773 | |||||||||||||
Income tax payable |
720 | 27 | 551 | |||||||||||||
Deferred income tax liability |
| 34 | | |||||||||||||
Current portion of long-term debt |
814 | | | |||||||||||||
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Total current liabilities |
34,131 | 33,142 | 35,299 | |||||||||||||
Non-current liabilities: |
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Other long-term liabilities |
| 876 | 876 | |||||||||||||
Long-term debt |
| 14,700 | 38,153 | |||||||||||||
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Total liabilities |
34,131 | 48,718 | 74,328 | |||||||||||||
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Series A redeemable convertible preferred stock, $0.001 par value. 26,137,758 shares authorized; 26,137,758 shares issued and outstanding. |
13,005 | 13,005 | 13,005 | | ||||||||||||
Series B redeemable convertible preferred stock, $0.001 par value. 26,727,505 shares authorized; 26,727,505 shares issued and outstanding. |
20,500 | 20,500 | 20,500 | | ||||||||||||
Series C redeemable convertible preferred stock, $0.001 par value. 24,683,530 shares authorized; 18,316,941 shares issued and outstanding. |
17,478 | 17,478 | 17,478 | | ||||||||||||
Series D redeemable convertible preferred stock, $0.001 par value. 12,100,007 shares authorized; 12,100,007 shares issued and outstanding. |
13,575 | 13,575 | 13,575 | | ||||||||||||
Series E redeemable convertible preferred stock, $0.001 par value. 32,135,213 shares authorized; 31,885,207 shares issued and outstanding. |
40,000 | 40,000 | 40,000 | | ||||||||||||
Commitments and contingencies |
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Shareholders deficit: |
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Common stock, $0.001 par value. 155,203,902 shares authorized; 13,761,324 and 14,611,270 and 14,636,455 shares issued; 8,515,699 and 9,365,645 and 9,390,830 shares outstanding in 2011, 2012 and 2013, respectively. |
9 | 10 | 10 | |||||||||||||
Additional paid-in capital |
518 | 1,206 | 3,151 | |||||||||||||
Accumulated deficit |
(80,008 | ) | (95,577 | ) | (103,512 | ) | ||||||||||
Accumulated other comprehensive income |
1,179 | 1,566 | 1,464 | |||||||||||||
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Total shareholders deficit |
(78,302 | ) | (92,795 | ) | (98,887 | ) | ||||||||||
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Total liabilities and shareholders deficit |
$ | 60,387 | $ | 60,481 | $ | 79,999 | $ | |||||||||
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See accompanying notes to Consolidated Financial Statements.
F-4
Mavenir Systems, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
Year Ended December 31, | Six months ended June 30, | |||||||||||||||||||
2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||
(unaudited) | ||||||||||||||||||||
Revenues |
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Software products |
$ | 7,009 | $ | 38,264 | $ | 52,409 | $ | 29,333 | $ | 37,264 | ||||||||||
Maintenance |
1,242 | 11,240 | 21,431 | 10,616 | 10,926 | |||||||||||||||
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(related party $5,754, $23,340, $25,725, $8,214 and $17,874, respectively) |
8,251 | 49,504 | 73,840 | 39,949 | 48,190 | |||||||||||||||
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Cost of revenues |
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Software products |
4,537 | 26,200 | 23,891 | 11,247 | 17,414 | |||||||||||||||
Maintenance |
566 | 4,584 | 6,568 | 3,844 | 2,827 | |||||||||||||||
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5,103 | 30,784 | 30,459 | 15,091 | 20,241 | ||||||||||||||||
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Gross profit |
3,148 | 18,720 | 43,381 | 24,858 | 27,949 | |||||||||||||||
Operating expenses: |
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Research and development |
6,487 | 14,970 | 23,312 | 12,848 | 11,498 | |||||||||||||||
Sales and marketing |
3,813 | 12,332 | 20,580 | 8,607 | 9,656 | |||||||||||||||
General and administrative |
3,024 | 10,603 | 14,052 | 7,946 | 9,361 | |||||||||||||||
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Total operating expenses |
13,324 | 37,905 | 57,944 | 29,401 | 30,515 | |||||||||||||||
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Operating loss |
(10,176 | ) | (19,185 | ) | (14,563 | ) | (4,543 | ) | (2,566 | ) | ||||||||||
Other expense (income): |
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Interest income |
(4 | ) | (246 | ) | (10 | ) | (4 | ) | (8 | ) | ||||||||||
Interest expense |
112 | 307 | 393 | 29 | 1,115 | |||||||||||||||
Foreign exchange loss (gain) |
(21 | ) | 1,182 | (529 | ) | 871 | 2,644 | |||||||||||||
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|
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Total other expense (income), net |
87 | 1,243 | (146 | ) | 896 | 3,751 | ||||||||||||||
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|
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Loss before income tax |
(10,263 | ) | (20,428 | ) | (14,417 | ) | (5,439 | ) | (6,317 | ) | ||||||||||
Income tax expense |
131 | 1,330 | 1,152 | 211 | 1,618 | |||||||||||||||
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|||||||||||
Net loss |
$ | (10,394 | ) | $ | (21,758 | ) | $ | (15,569 | ) | $ | (5,650 | ) | $ | (7,935 | ) | |||||
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Basic and diluted loss per common share |
$ | (1.35 | ) | $ | (2.69 | ) | $ | (1.73 | ) | $ | (0.65 | ) | $ | (0.85 | ) | |||||
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Weighted average common shares outstanding |
7,726,175 | 8,091,861 | 9,015,901 | 8,752,420 | 9,376,175 | |||||||||||||||
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Net loss |
$ | (10,394 | ) | $ | (21,758 | ) | $ | (15,569 | ) | $ | (5,650 | ) | $ | (7,935 | ) | |||||
Other comprehensive income |
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Foreign currency translation adjustments |
481 | 711 | 387 | 10 | (102 | ) | ||||||||||||||
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Total comprehensive loss |
$ | (9,913 | ) | $ | (21,047 | ) | $ | (15,182 | ) | $ | (5,640 | ) | $ | (8,037 | ) | |||||
|
|
|
|
|
|
|
|
|
|
See accompanying notes to Consolidated Financial Statements.
F-5
Mavenir Systems, Inc. and Subsidiaries
Consolidated Statements of Shareholders Deficit
(in thousands, except share and per share amounts)
Common Stock | Additional Paid- in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Income (Loss) |
Total | ||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Balance at January 1, 2010 | 7,834,914 | $ | 8 | $ | 245 | $ | (47,856 | ) | $ | (13 | ) | $ | (47,616 | ) | ||||||||||
Exercise of stock options | 229,625 | | 15 | | | 15 | ||||||||||||||||||
Stock compensation expense | | | 71 | | | 71 | ||||||||||||||||||
Net loss | | | | (10,394 | ) | | (10,394 | ) | ||||||||||||||||
Foreign currency translation adjustment | | | | | 481 | 481 | ||||||||||||||||||
|
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|
|
|
|
|
|
|
|||||||||||||
Balance at December 31, 2010 | 8,064,539 | 8 | 331 | (58,250 | ) | 468 | (57,443 | ) | ||||||||||||||||
Exercise of stock options | 451,160 | 1 | 49 | | | 50 | ||||||||||||||||||
Stock compensation expense | | | 138 | | | 138 | ||||||||||||||||||
Net loss | | | | (21,758 | ) | | (21,758 | ) | ||||||||||||||||
Foreign currency translation adjustment | | | | | 711 | 711 | ||||||||||||||||||
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|
|||||||||||||
Balance at December 31, 2011 | 8,515,699 | 9 | 518 | (80,008 | ) | 1,179 | (78,302 | ) | ||||||||||||||||
Exercise of stock options |
849,946 | 1 | 72 | | | 73 | ||||||||||||||||||
Stock compensation expense |
| | 291 | | | 291 | ||||||||||||||||||
Warrants issued |
| | 325 | | | 325 | ||||||||||||||||||
Net loss |
| | | (15,569 | ) | | (15,569 | ) | ||||||||||||||||
Foreign currency translation adjustment |
| | | | 387 | 387 | ||||||||||||||||||
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|
|||||||||||||
Balance at December 31, 2012 |
9,365,645 | $ | 10 | $ | 1,206 | $ | (95,577 | ) | $ | 1,566 | $ | (92,795 | ) | |||||||||||
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See accompanying notes to Consolidated Financial Statements.
F-6
Mavenir Systems, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||
2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||
(unaudited) | ||||||||||||||||||||
Operating activities: |
||||||||||||||||||||
Net loss |
$ | (10,394 | ) | $ | (21,758 | ) | $ | (15,569 | ) | $ | (5,650 | ) | $ | (7,935 | ) | |||||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||||||||||
Depreciation of property and equipment |
807 | 949 | 1,527 | 685 | 1,082 | |||||||||||||||
Amortization of intangible assets |
| 1,984 | 2,521 | 1,000 | 712 | |||||||||||||||
Amortization of debt discount |
| | 25 | | 87 | |||||||||||||||
Provision for bad debts and doubtful accounts |
3 | 638 | 199 | | 301 | |||||||||||||||
Stock-based compensation expense |
71 | 138 | 291 | 105 | 300 | |||||||||||||||
Unrealized foreign currency loss/(gain) |
| 643 | (1,194 | ) | 488 | 955 | ||||||||||||||
Write-off of software license |
| | 281 | | | |||||||||||||||
Changes in operating assets and liabilities: |
||||||||||||||||||||
Accounts receivable |
4,126 | (3,039 | ) | (103 | ) | 7,005 | (4,416 | ) | ||||||||||||
Unbilled revenue |
(2,155 | ) | 1,055 | (2,735 | ) | (4,455 | ) | 2,072 | ||||||||||||
Deposits and other assets |
(495 | ) | 95 | 1,126 | 246 | (146 | ) | |||||||||||||
Inventories |
(494 | ) | (1,382 | ) | (20 | ) | (365 | ) | (1,712 | ) | ||||||||||
Prepaid expenses |
(519 | ) | (557 | ) | (3,556 | ) | (536 | ) | (1,806 | ) | ||||||||||
Deferred contract costs |
1,975 | (1,222 | ) | (1,770 | ) | (747 | ) | (2,791 | ) | |||||||||||
Deferred revenues |
922 | 10,179 | (9,734 | ) | (7,509 | ) | 1,346 | |||||||||||||
Accounts payable and accrued liabilities |
831 | 4,180 | 6,324 | 1,465 | 1,776 | |||||||||||||||
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|
|
|||||||||||
Net cash used in operating activities |
(5,322 | ) | (8,097 | ) | (22,387 | ) | (8,268 | ) | (10,175 | ) | ||||||||||
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Investing activities: |
||||||||||||||||||||
Acquisition of Airwide, net of cash acquired |
| (14,497 | ) | | | | ||||||||||||||
Purchases of property and equipment |
(937 | ) | (4,029 | ) | (5,217 | ) | (1,671 | ) | (1,413 | ) | ||||||||||
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|
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|
|
|
|||||||||||
Net cash used in investing activities |
(937 | ) | (18,526 | ) | (5,217 | ) | (1,671 | ) | (1,413 | ) | ||||||||||
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Financing activities: |
||||||||||||||||||||
Repayments of notes payable |
| (688 | ) | | | | ||||||||||||||
Borrowing from long-term debt |
| | 5,000 | | 27,000 | |||||||||||||||
Repayments of long-term debt |
| | | | (2,000 | ) | ||||||||||||||
Borrowing from line of credit |
1,252 | 3,741 | 13,000 | 3,000 | | |||||||||||||||
Repayments of line of credit borrowing |
(5,216 | ) | (2,927 | ) | (3,814 | ) | | | ||||||||||||
Issuance of preferred stock |
13,575 | 40,000 | | | | |||||||||||||||
Exercise of options to purchase common stock |
15 | 50 | 73 | 53 | 7 | |||||||||||||||
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|
|||||||||||
Net cash provided by financing activities |
9,626 | 40,176 | 14,259 | 3,053 | 25,007 | |||||||||||||||
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|
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Effect of foreign currency exchange rate changes on cash and cash equivalents |
(879 | ) | 488 | 1,281 | (399 | ) | (368 | ) | ||||||||||||
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|
|
|
|||||||||||
Net increase (decrease) in cash and cash equivalents |
2,488 | 14,041 | (12,064 | ) | (7,285 | ) | 13,051 | |||||||||||||
Cash and cash equivalents at beginning of period |
2,937 | 5,425 | 19,466 | 19,466 | 7,402 | |||||||||||||||
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|
|
|
|||||||||||
Cash and cash equivalents at end of period |
$ | 5,425 | $ | 19,466 | $ | 7,402 | $ | 12,181 | $ | 20,453 | ||||||||||
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Supplemental cash flow information: |
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Cash paid for interest |
$ | 109 | $ | 84 | $ | 83 | $ | 30 | $ | 771 | ||||||||||
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Income tax payments, net |
$ | 53 | $ | 387 | $ | 47 | $ | | $ | 136 | ||||||||||
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|
See accompanying notes to Consolidated Financial Statements.
F-7
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
1. Description of the Business and Summary of Significant Accounting Policies
Description of Business
Mavenir Systems, Inc. (Mavenir) was originally formed as a limited liability company on April 26, 2005. Mavenir was then incorporated under the laws of Texas in August 2005, and subsequently incorporated under the laws of the state of Delaware in March 2006.
Mavenir is a leading provider of software-based telecommunications networking solutions that enable mobile service providers to deliver internet protocol (IP)-based voice, video, rich communication and enhanced messaging services to their subscribers globally. Mavenirs solutions deliver Rich Communication Suite (RCS)-based services, which enable enhanced mobile communications such as group text messaging, multi-party voice or video calling and live video streaming as well as the exchange of files or images, over existing 2G and 3G networks as well as next generation 4G LTE networks. Mavenirs solutions also deliver voice services over Long Term Evolution (LTE) technology and wireless (Wi-Fi) networks known respectively as Voice over LTE (VoLTE) and Voice over Wi-Fi (VoWi-Fi). Mavenirs mOne® Convergence Platform has enabled leading mobile service providers to introduce the industrys first live network deployment of VoLTE and the industrys first live deployment of next-generation RCS 5.
Mavenir is headquartered in Richardson, Texas and has research and development personnel located at its wholly-owned subsidiaries in China and India. Additionally, Mavenir has a sales presence in Hong Kong and Europe.
On May 27, 2011, Mavenir acquired Airwide Solutions, Inc. (Airwide) (the Airwide Acquisition). Airwides operations are focused on the provision of messaging and content delivery software to mobile operators. Airwide designs, develops, and supports messaging and content systems. The majority of Airwides revenues and expenses are from outside the United States. Prior to the Airwide Acquisition, Airwides corporate offices were located in Burlington, Massachusetts. Airwide has significant operations in the United Kingdom, Finland, Australia and Canada. In addition, there are operations in India, Malaysia, Spain and Singapore.
Basis of Presentation and Consolidation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of Mavenir and its wholly-owned subsidiaries (collectively, the Company or we). All intercompany accounts and transactions have been eliminated in consolidation. The Airwide Acquisition is included in the consolidated financial statements from the date of acquisition.
Unaudited Interim Consolidated Financial Information
The accompanying interim consolidated balance sheet as of June 30, 2013, and the consolidated statements of operations and comprehensive loss, and cash flows for the six months ended June 30, 2012 and 2013 and the related footnote disclosures are unaudited. These unaudited interim consolidated financial statements have been prepared in accordance with U.S. GAAP. In managements opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of our statement of financial position as of June 30, 2013 and our consolidated results of operations and our cash flows for the six months ended June 30, 2012 and 2013. The results for the six months ended June 30, 2013 are not necessarily indicative of the results expected for the full fiscal year.
F-8
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
Reclassifications
Revision of prior period financial statements
During the six months ended June 30, 2013, we identified certain expenses which had been inconsistently classified between the years ended December 31, 2011 and 2012, as well as an allocation error. The misclassification overstated software product costs by $193 and research and development costs by $436 and understated gross profit by $193 and sales and marketing costs by $436 for the year ended December 31, 2012. Additionally, we noted interest expense was erroneously allocated out of general and administrative expenses as part of an overall allocation for the year ended December 31, 2012, when it was included in other (income) expense. This resulted in general and administrative expenses being understated by $249, an overstatement of software product costs and an understatement of gross profit of $87, and an overstatement of research and development expenses of $71 and sales and marketing expenses of $91 for the year ended December 31, 2012. Additionally, we reassessed how certain personnel costs were being classified based on functions and industry standards and made changes accordingly. Therefore, we reclassified prior period amounts to conform to current period presentation. This reclassification reduced cost of revenues, increased gross profit and increased research and development for the years ended December 31, 2010, 2011 and 2012 by $390, $457 and $509, respectively. There was no change to net loss or total comprehensive loss. We assessed the materiality of such reclassifications in accordance with the Securities and Exchange Commission (SEC) guidance on considering the effects of prior period misstatements based on an analysis of quantitative and qualitative factors. Based on this analysis, we determined that the errors were immaterial to each of the prior reporting periods affected and, therefore, amendments of reports previously filed with the SEC were not required. Accordingly, we reflected the correction of these prior period reclassifications in the periods in which they originated and revised our consolidated statements of operations and comprehensive loss for the years ended December 31, 2010, 2011 and 2012.
We also reclassified foreign currency (gain) loss out of general and administrative expenses and reported that amount on a separate line in the consolidated statements of operations.
The effect of the reclassifications on the consolidated statements of operations and comprehensive loss were as follows (in thousands):
As Reported | Revisions | As Revised | ||||||||||
For the year ended December 31, 2010 |
||||||||||||
Software product costs |
$ | 4,927 | $ | (390 | ) | $ | 4,537 | |||||
Gross profit |
2,758 | 390 | 3,148 | |||||||||
Research and development expenses |
6,097 | 390 | 6,487 | |||||||||
General and administrative expenses |
3,003 | 21 | 3,024 | |||||||||
Foreign exchange gain |
| (21 | ) | (21 | ) | |||||||
As Reported | Revisions | As Revised | ||||||||||
For the year ended December 31, 2011 |
||||||||||||
Software product costs |
$ | 26,657 | $ | (457 | ) | $ | 26,200 | |||||
Gross profit |
18,263 | 457 | 18,720 | |||||||||
Research and development expenses |
14,513 | 457 | 14,970 | |||||||||
General and administrative expenses |
11,785 | (1,182 | ) | 10,603 | ||||||||
Foreign exchange loss |
| 1,182 | 1,182 | |||||||||
As Reported | Revisions | As Revised | ||||||||||
For the year ended December 31, 2012 |
||||||||||||
Software product costs |
$ | 24,681 | $ | (790 | ) | $ | 23,891 | |||||
Gross profit |
42,591 | 790 | 43,381 | |||||||||
Research and development expenses |
23,116 | 196 | 23,312 | |||||||||
Sales and marketing expenses |
20,235 | 345 | 20,580 | |||||||||
General and administrative |
13,274 | 778 | 14,052 | |||||||||
Foreign exchange gain |
| (529 | ) | (529 | ) |
F-9
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
Unaudited Pro Forma Presentation
The Company has submitted a Registration Statement on Form S-1 to the United States Securities and Exchange Commission (the SEC) for its proposed initial public offering of shares of its common stock (the IPO). If the IPO contemplated by this prospectus is consummated, all of the redeemable convertible preferred stock outstanding will automatically convert into 115,167,418 shares of common stock. Unaudited pro forma shareholders deficit, as adjusted for the assumed conversion of the redeemable convertible preferred stock, is set forth on the consolidated balance sheet as of June 30, 2013.
Liquidity
At December 31, 2011 and 2012, and June 30, 2013 the Company had an accumulated deficit of approximately $80,000, $96,000, and $104,000 respectively, and has incurred losses from operations since inception. Based upon anticipated levels of operations, the Company anticipates that ongoing working capital requirements will be funded by additional financing and by a potential equity offering. The Company anticipates that such sources of funds will be sufficient to fund operations and finance its cash flow needs for the ensuing year. In the event that the initial public offering is delayed, Mavenir would anticipate another equity raising funding from existing shareholders.
Business Combination
The Company accounts for business combinations under the acquisition method of accounting, which requires the assets acquired and liabilities assumed to be recorded at their respective fair values as of the acquisition date in the Companys consolidated financial statements. The determination of estimated fair value may require management to make significant estimates and assumptions. The purchase price is the fair value of the total consideration conveyed to the seller and the excess of the purchase price over the fair value of the acquired identifiable net assets, where applicable, is recorded as goodwill. The results of operations of an acquired business are included in our consolidated financial statements from the date of acquisition. Costs associated with the acquisition of a business are expensed in the period incurred.
Cash and Cash Equivalents
Cash and cash equivalents consist of corporate bank accounts and money market funds with an original maturity of three months or less. For purposes of the statement of cash flows, the Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents. Cash balances consisted of U.S. Dollar, Australian Dollar (AUD), British Pound (GBP), Canadian Dollar (CAD), Chinese Yuan Renminbi (CNY), Croatian Kuna (HRK), European Union (EURO), Indian Rupee (INR), Malaysian Ringgit (MYR), and Singapore Dollar (SGD).
Cash and cash equivalents are maintained at high credit-quality financial institutions. Balances may exceed the limits of government provided insurance, if applicable or available. The Company has never experienced any losses resulting from a financial institution failure or default. All non-interest bearing cash balances in the United States were fully insured by the FDIC at December 31, 2012 due to a temporary federal program in effect from December 31, 2010 through December 31, 2012. Under the program, there is no limit to the amount of insurance for eligible accounts. Beginning 2013, FDIC insurance coverage will revert to $250 per depositor at each financial institution, and the Companys non-interest bearing cash balances in the United States may again exceed federally insured limits. We maintain some cash and cash equivalents with financial institutions that are in excess of FDIC insurance limits.
F-10
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
Accounts Receivable
The Companys accounts receivable are primarily due from companies in the mobile telecommunications industry. Credit is extended based on evaluation of the customers financial condition and generally collateral is not required. Accounts receivable are determined by the payment milestones referenced and agreed to in each of the commercial agreements. Payment milestones vary by contract. Payment terms typically range from 30 to 60 days from invoice date. Accounts outstanding longer than the contractual payment term are considered past due.
Allowance for doubtful accounts |
Balance at Beginning of Period |
Charged to Costs and Expense |
Deductions | Balance at End of Period |
||||||||||||
Year ended December 31, 2011 |
$ | 3 | $ | 638 | $ | | $ | 641 | ||||||||
Year ended December 31, 2012 |
$ | 641 | $ | 199 | $ | (458 | ) | $ | 382 | |||||||
Six months ended June 30, 2013 |
$ | 382 | $ | 301 | $ | (80 | ) | $ | 603 |
Revenue Recognition
The Company generates revenue from the sale of software products and maintenance and support. Professional services consist primarily of software development and implementation services, but also can include training of customer personnel. The Companys products and services are generally sold as part of a contract, the terms of which are considered as a whole to determine the appropriate revenue recognition.
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sale price is fixed or determinable and collectability is reasonably assured. The Company recognizes revenue in accordance with either the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 985-605, Software Revenue Recognition, as amended, or with ASC 605-25 Multiple Element Arrangements (MEAs), with consideration to ASC 605-35 Construction-Type and Production-Type Contracts.
The Company first determines whether its products consist of tangible products that contain essential software elements and as such, are excluded from the software revenue recognition method of accounting.
The Companys products and services are sold through distribution partners and directly through its sales force. The Company typically does not offer contractual rights of return, stock balancing or price protection to its distribution partners, however, it does offer certain price protection to Cisco under the arrangement. See Note 16 for additional related party disclosures. Actual product returns from our customers have been insignificant to date. As a result, the Company does not currently maintain allowances for product returns and related services. A reserve based on historical experience or specific identification is recorded for estimated reductions to revenue for customer and distributor programs and incentive offerings, including price protections, promotions, other volume-based incentives and expected returns and has historically been insignificant.
The Companys software related products MEAs include software, non-essential hardware, professional services, and maintenance and typically involve significant professional services for customization and implementation and various combinations of these products and maintenance. The Company generally recognizes all multiple elements except maintenance using the percentage of completion accounting for its projects. Revenue for hardware is non-essential and not material to the projects and is recognized on a percentage of completion basis along with the software related products. Maintenance is allocated based on vendor-specific objective evidence (VSOE).
F-11
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
The Companys tangible products containing essential software MEAs include hardware, software essential to the functionality of the hardware, installation, and maintenance and are dependent on final customer acceptance, except maintenance which is recognized over the term of coverage. All multiple elements except maintenance are only recognized upon customer acceptance, and the total transaction price is allocated based on the relative ESP for the accepted product and maintenance.
Software Related Revenue Recognition
Certain of the Companys software products are delivered under contracts, which generally require significant integration within a customers production and business system environment. As the Companys agreements generally require significant production, modification or customization of the software, the Company accounts for these agreements under the percentage-of-completion method on the basis of hours incurred to date compared to total hours expected under the contract. The percentage-of-completion method generally results in the recognition of consistent profit margins over the life of the contract since management has the ability to produce estimates of contract billings and contract costs. We use the level of profit margin that is most likely to occur on a contract. If the most likely profit margin cannot be precisely determined, the lowest probable level of profit in the range of estimates is used until the results can be estimated more precisely. Under the percentage-of-completion accounting, management must also make key judgments in areas such as the percentage-of-completion, estimates of project revenue, costs and margin, estimates of total and remaining project hours and liquidated damages assessments. Changes in job performance, job conditions, estimated profitability, final contract settlements and resolution of claims may result in a revision to job costs and income amount that are different than amounts originally estimated. At the time a loss on a contract is known, the entire amount of the estimated loss is accrued.
Software contracts that do not qualify for use of the percentage-of-completion method, as reasonable estimates of percentage of completion are not available, are accounted for using the completed contract method. Under the completed-contract method, all billings and related costs, net of anticipated losses, are deferred until completion of the contract. In 2011, all software contracts qualified for use of the percentage-of-completion method. Customers are billed in accordance with specific contract terms, which may differ from the rate at which revenue is earned. Revenue recognized in excess of the amount billed of $4,845, $9,782 and $7,284 at December 31, 2011 and 2012, and June 30, 2013, respectively, are classified as unbilled revenue. Amounts received from customers pursuant to the terms specified in contracts, but for which revenue has not yet been recognized, are recorded as deferred revenue. The Company also evaluates its revenue recognition in accordance with FASB Accounting Standards Codification 605-45, Principal Agent Consideration, regarding gross versus net revenue reporting. The Company believes that it meets the criteria for gross recognition and reports revenue on a gross basis.
In certain situations, the Company sells software that does not require significant modification of services considered essential to the softwares functionality. Such software, generally consisting of capacity license upgrades, is recognized upon delivery if the other revenue recognition criteria are met.
For multiple element software arrangements, each element of the arrangement is analyzed and allocated a portion of the total arrangement fee to the elements based on the fair value of the element using VSOE of fair value, regardless of any separate prices stated within the contract for each element. Fair value is considered the price a customer would be required to pay if the element were sold separately based on our historical experience of stand-alone sales of these elements to third parties. For PCS such as maintenance, we use renewal rates for continued support arrangements to determine fair value. For software services, we use the fair value we charge
F-12
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
our customers when those services are sold separately. We monitor our transactions at least annually to ensure we maintain and periodically revise VSOE to reflect fair value.
Some of our software arrangements include services not considered essential for the customer to use the software for the customers purpose, such as training. When software services are not considered essential, the fee allocable to the service element is recognized as revenue as we perform the services. Revenue for hardware is non-essential and not material to the projects and is recognized on a percentage of completion basis along with the software related products.
Tangible Product Containing Essential Software
On January 1, 2011, the Company retroactively adopted, for all periods presented, an accounting update regarding revenue recognition for multiple deliverable arrangements and an accounting update for certain revenue arrangements that consist of tangible products that include essential software elements.
The amended update for multiple deliverable arrangements changed the units of accounting for the Companys revenue transactions, and these products and services qualify as separate units of accounting. Under the previous guidance for multiple deliverable arrangements with tangible products and software elements, the Company was unable to determine the fair value of the undelivered element so it deferred its costs and related billings and recognized such amounts over the performance period of the last deliverable, which was generally the PCS or maintenance period.
MEAs are arrangements with customers which include multiple deliverables, including a combination of equipment and services. The deliverables included in the MEAs are separated into more than one unit of accounting when (i) the delivered equipment has value to the customer on a stand-alone basis, and (ii) delivery of the undelivered service element(s) is probable and substantially in our control. Revenue from arrangements for the sale of tangible products containing both software and non-software components that function together to deliver the products essential functionality requires allocation of the arrangement consideration to the separate deliverables using the relative selling price method (RSP) of each unit of accounting based first on VSOE if it exists, second on third-party evidence (TPE) if it exists, and on ESP if neither VSOE nor TPE exist.
| VSOE For certain elements of an arrangement, VSOE is based upon the pricing in comparable transactions when the element is sold separately. We determine VSOE based on our pricing and discounting practices for the specific product or service when sold separately, considering geographical, customer, and other economic or marketing variables, as well as renewal rates or stand-alone prices for the service element(s). |
| TPE If we cannot establish VSOE of selling price for a specific product or service included in a multiple-element arrangement, we use third-party evidence of selling price. We determine TPE based on sales of comparable amounts of similar products or services offered by multiple third parties considering the degree of customization and similarity of the product or service sold. |
| ESP The estimated selling price represents the price at which we would sell a product or service if it were sold on a stand-alone basis. When VSOE or TPE does not exist for an element, we determine ESP for the arrangement element based on sales, cost and margin analysis, pricing practices and potential market constraints. Adjustments for other market and Company-specific factors are made as deemed necessary in determining ESP. |
F-13
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
Under the accounting principles retroactively adopted, certain contracts include multiple elements for which we determine whether the various elements meet the applicable criteria to be accounted for as separate elements and make estimates regarding their relative selling price. We use ESP when allocating arrangement consideration to each separate deliverable as we do not have VSOE or TPE of selling price for our various applicable tangible products containing essential software products and services. We allocate the total transaction price of an arrangement based on each separate unit of accounting relative to ESP. Revenue for elements that cannot be separated is recognized once the revenue recognition criteria for the entire arrangement has been met or over the period that our last remaining obligation to perform is fulfilled. Consideration for elements that are deemed separable is allocated to the separate elements at the inception of the arrangement on the basis of their relative selling price and recognized based on meeting authoritative criteria. The adoption of the amended revenue recognition rules significantly changed the timing of revenue recognition and had a material impact on the consolidated financial statements for the years ended December 31, 2010, 2011 and 2012 and for the six months ended June 30, 2013. The Company cannot reasonably estimate the effect of adopting these standards on future financial periods as the impact will vary depending on the nature and volume of new or materially modified sales arrangements in any given period. We consider the installation and delivery of our software products to be part of a single unit of accounting for software products revenue due to the complexity of the installation and nature of the contracts.
The related costs associated with the delivered product which does not yet meet the criteria to be recognized as revenue are deferred. The cost of such products is charged to cost of revenue on a proportionate basis similar to the manner in which the related revenue is recognized. Deferred cost represents the cost of direct and incremental items purchased for contracts not yet delivered to customers. Costs of revenue principally consist of the costs of payroll-related costs for service personnel, third-party hardware, third-party licenses and shipping and installation costs to any customer.
In cases where final acceptance has occurred but the Company has not as yet invoiced the customer, the Company has accounted for the amount to be invoiced as unbilled revenue. Customers are billed in accordance with specific contract terms, which may differ from the rate at which revenue is earned. We had no revenue recognized in excess of the amount billed at December 31, 2011 and 2012. Amounts received from customers pursuant to the terms specified in contracts, but for which revenue has not yet been recognized, are recorded as deferred revenue. The Company also evaluates its revenue recognition in accordance with ASC 605-45, Principal Agent Consideration, regarding gross versus net revenue reporting. The Company believes that it meets the criteria for the gross recognition and reports revenue on a gross basis.
Maintenance
Maintenance consists of PCS agreements and our customers generally enter into PCS agreements when they purchase our products. Our PCS agreements range from one to three years and are typically renewable on an annual basis thereafter at the option of the customer. Revenue allocated to PCS is recognized ratably on a straight-line basis over the period the PCS is provided, assuming all other criteria for revenue recognition has been met. All significant costs and expenses associated with PCS are expensed as incurred. For our software products, we have established VSOE of fair value for the PCS. Rates for maintenance, including subsequent renewal rates, are typically established based upon a specific percentage of the products provided, as set forth in the arrangement with the customer. For our tangible products (which all contain essential software), our customers generally enter into PCS arrangements when they purchase these tangible products. Relative selling price for the maintenance and support obligations for tangible products is based upon the ESP.
F-14
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
Shipping Costs
Outbound shipping and handling costs are included in cost of revenues, in the accompanying consolidated statements of operations and comprehensive loss.
Inventories
Inventories consist of finished goods and are stated at the lower of cost (first-in, first-out method) or market, net of reserve for obsolete inventory. The Company maintains a small warranty stock however; substantially all inventories at period end are related to actual or planned customer orders. The reserve for obsolescence at December 31, 2011 and 2012, and June 30, 2013, was $171, $284, and $172 respectively.
Our costs of sales also include overhead costs, including capitalized inventory costs, deferred contract costs, and other direct and allocated support costs related to equipment and installation when sold.
Inventory shipped to customers is generally covered under a twelve month warranty and returns have historically been nominal.
Long-lived Assets, Goodwill and Intangible Assets
Property and Equipment
Property and equipment are stated at cost and depreciated over their respective estimated useful lives of two to five years, using the straight-line method. Maintenance and repairs are charged to expense when incurred.
When events or changes in circumstances indicate that the carrying amount of our property and equipment might not be recoverable, the expected future undiscounted cash flows from the assets are estimated and compared with the carrying amount of the assets. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the assets, an impairment loss is recorded. The impairment loss is measured by comparing the fair value of the assets with their carrying amounts. Fair value is determined based on discounted cash flows or appraised values, as appropriate. We did not record any impairment losses related to our property and equipment during 2010, 2011, 2012 and for the six months ended June 30, 2013.
Intangible Assets
Our intangible assets are primarily comprised of the intangible assets that we acquired in the Airwide Acquisition. Specifically, we recognized intangible assets for (i) contractual backlog; (ii) customer relationships; and (iii) technology. At December 31, 2011, the contractual backlog intangible assets were fully amortized.
The intangible asset related to customer relationships is amortized for six years over a method that reflects an appropriate allocation of the costs of these intangible assets to earnings in proportion to the amount of economic benefits obtained in each reporting period. The intangible asset related to technology is amortized on a straight-line basis with estimated useful lives of six years from the date of the Airwide Acquisition.
Intangible assets are tested for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when the carrying amount of the asset exceeds the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. The impairment loss to be recorded would be the excess of the assets carrying value over its fair value. Fair value is generally determined using a discounted cash flow analysis or other valuation technique. We have not recorded any impairment charges to our intangible assets through December 31, 2012.
F-15
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired. Goodwill and other intangible assets with indefinite lives are not amortized to operations, but instead are reviewed for impairment at least annually, or when there is an indicator of impairment. The Company has no intangible assets with indefinite useful lives, other than goodwill.
The goodwill impairment test is a two-step test. Under the first step, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the entity must perform step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting units goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed. An impairment loss shall be recognized to the extent that the carrying amount of goodwill exceeds its implied fair value.
The Company determines fair value using widely accepted valuation techniques, including discounted cash flows and market multiple analyses. These types of analyses contain uncertainties because they require management to make assumptions and to apply judgment to estimate industry economic factors and the profitability of future business strategies. It is Companys policy to conduct impairment testing based on its current business strategy in light of present industry and economic conditions, as well as its future expectations.
The Companys valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and projections of future operating performance. If these assumptions differ materially from future results, the Company may record impairment charges in the future.
In connection with the Companys annual goodwill impairment test, we have not recorded any impairment of such assets through June 30, 2013.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities related to a change in tax rates is recognized in operations in the period that includes the enactment date.
The Company provides a valuation allowance for its deferred tax assets when it is more likely than not that its deferred tax assets will not be realized, based on expectations of generating future taxable income. Due to the Companys historical losses, the net deferred tax assets have been fully reserved with the establishment of a valuation allowance.
The Company recognizes the effect of an income tax position only if it is more likely than not (a likelihood of greater than 50%) that such position will be sustained upon examination by the relevant taxing authorities.
F-16
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company recognized an uncertain tax positions liability of $3,053 as of December 31, 2011 and 2012 and June 30, 2013, as a result of related party foreign transactions. The Company recognizes both interest and penalties related to uncertain tax positions as part of the income tax provision. Based on the nature of foreign transactions, the Company does not believe there are any material interest and penalties due.
Fair Value Measurements
The Company accounts for financial instruments in accordance with FASB ASC 820, Fair Value Measurements and Disclosures (ASC 820), which provides a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1 Quoted prices in active markets for identical assets or liabilities.
Level 2 Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable.
Level 3 Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.
The Companys financial instruments consist primarily of cash and cash equivalents, billed and unbilled accounts receivable, accounts payable and debt. The carrying amounts of financial instruments, other than the debt instruments, are representative of their fair values due to their short maturities. The Companys debt agreements bear interest at market rates and thus management believes their carrying amounts approximate fair value.
The Company does not have any other financial or non-financial assets or liabilities that would be characterized as Level 2 or Level 3 instruments.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains cash and cash equivalent balances in the USA, Australia, Canada, China, Croatia, Finland, India, Malaysia, Singapore, Spain and the UK. The balances in the USA are FDIC insured. The Company maintains cash deposits with financial institutions with balances that often exceed federally insured amounts. The Company has experienced no losses related to these deposits.
Foreign Currency Translation
The functional currency for each foreign subsidiary of the Company is the applicable local currency. Assets and liabilities of the foreign subsidiary are translated to U.S. dollars at year-end exchange rates. Income and expense
F-17
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
items are translated at the rates of exchange prevailing during the period. Currency translation adjustments are recorded as a component of other comprehensive income (loss).
Net Income Per Common Share
Basic net income/(loss) per common share is computed by dividing the net income/(loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per common share is computed by dividing the net income available to common shareholders by the weighted average number of common shares outstanding and potentially dilutive securities outstanding during the period. Potentially dilutive securities include stock options, warrants, and convertible preferred stock during the period, using the treasury stock method. Potentially dilutive securities are excluded from the computations of diluted earnings per share if their effect would be anti-dilutive. Note 9 provides additional information regarding loss per common share.
Research, Development and Engineering Costs
Costs related to research, design and development of service infrastructure technology are charged to research and development expense as incurred. Financial accounting standards provide for the capitalization of certain software development costs once technological feasibility has been established and for the evaluation of the recoverability of any capitalized costs on a periodic basis. The Companys software products have historically reached technological feasibility late in the developmental process, and developmental costs incurred after technological feasibility and prior to product release have been insignificant to date. Accordingly, no development costs have been capitalized to date and all research and product development expenditures have been expensed as incurred.
Restructuring Charges
Restructuring charges consist primarily of severance and benefits cost resulting from strategic management decisions to consolidate operations supporting our business during 2011 following the acquisition of Airwide described in Note 2. Restructuring charges represent costs related to the realignment and restructuring of our business operations. These charges include expenses incurred in connection with strategic planning, certain cost reduction programs and acquisition integrations that we have implemented and consist of the cost of involuntary termination benefits, facilities charges, asset write-offs and other costs of exiting activities or geographies.
The charges for involuntary termination costs and associated expenses often require the use of estimates, primarily related to the number of employees to be paid severance and the amounts to be paid, largely based on years of service and statutory requirements. Assumptions to estimate facility exit costs include the ability to secure sublease income largely based on market conditions, the likelihood and amounts of a negotiated settlement for contractual lease obligations and other exit costs. Other estimates for restructuring charges consist of the realizable value of assets including associated disposal costs and termination fees with third parties for other contractual commitments.
Restructuring charges incurred and paid during 2011 totaled $514, which is included in general and administration in the consolidated statements of operations and comprehensive loss.
F-18
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
Stock-based Compensation
Stock-based compensation represents the cost related to stock-based awards granted to employees. The Company measures stock-based compensation cost at the grant date, based on the estimated fair value of the award and recognizes the cost as an expense on a straight-line basis over the employee requisite service period. The Company estimates the fair value of stock options without market-based performance conditions using the Black-Scholes valuation model with the following weighted average assumptions:
| Risk-free interest rate U.S. Federal Reserve treasury constant maturities rate consistent vesting period; |
| Expected dividend yield measured as the average annualized dividend estimated to be paid by the Company over the expected life of the award as a percentage of the share price at the grant date; |
| Expected term the average of the vesting period and the expiration period from the date of issue of the award; and |
| Weighted average expected volatility measured using historical volatility of similar public entities for which share or opinion price information is available. |
The expense is recorded in general and administrative expense in the consolidated statement of operations and comprehensive loss.
Use of Estimates
The preparation of the Companys consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results could differ from those estimates.
Recent Accounting Pronouncements
In July 2012, the FASB issued ASU 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, allowing entities the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test. If the qualitative assessment indicates it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, the quantitative impairment test is required. Otherwise, no testing is required. This ASU is effective for the Company in the period beginning January 1, 2013. The adoption of this guidance did not affect our financial position, results of operations or cash flows.
In October 2012, the FASB issued ASU 2012-04, Technical Corrections and Improvements (ASU 2012-04). These amendments are presented in two sections Technical Corrections and Improvements (Section A) and Conforming Amendments Related to Fair Value Measurements (Section B). The amendments in this update represent changes to clarify the Codification, correct unintended application of guidance or make minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. Additionally, the amendments will make the Codification easier to understand and the fair value measurement guidance easier to apply by eliminating inconsistencies and providing needed clarifications. This update is not intended to significantly change U.S. GAAP. The Company does not expect the adoption of this update to have a material effect on the consolidated financial statements.
F-19
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02). ASU 2013-02 requires registrants to provide information about the amounts reclassified out of AOCI by component. In addition, an entity is required to present significant amounts reclassified out of AOCI by the respective line items of net income. ASU 2013-02 is effective for fiscal years,
and interim periods within those years, beginning after December 15, 2012. The Company will reflect the impact of these amendments beginning with the Companys Quarterly Report on Form 10-Q for the period ending March 31, 2013. As the new standard does not change the current requirements for reporting net income or other comprehensive income in the financial statements, the Companys financial position, results of operations or cash flows were not impacted.
In March 2013, the FASB issued ASU No. 2013-05, Parents Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (ASU 2013-05). ASU 2013-05 provides guidance on releasing Cumulative Translation Adjustments when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. In addition, these amendments provide guidance on the release of Cumulative Translation Adjustment in partial sales of equity method investments and in step acquisitions. For public entities, the amendments are effective on a prospective basis for fiscal years and interim reporting periods within those years, beginning after December 15, 2013. The amendments must be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted. Early adoption is permitted. The adoption of ASU No. 2013-05 is not expected to have a material impact on our consolidated financial statements.
In May 2013, the FASB issued ASU No. 2013-07, Liquidation Basis of Accounting (ASU 2013-07). ASU 2013-07 requires an entity to prepare its financial statements using the liquidation basis of accounting (LBA) when liquidation is imminent. Among the requirements of LBA financial statements is that they present relevant information about an entitys expected resources in liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation; include in its presentation of assets any items not previously recognized under U.S. GAAP but that it expects to either sell in liquidation or use in settling liabilities; recognize and measure an entitys liabilities in accordance with U.S. GAAP that otherwise applies to those liabilities; and disclose an entitys plan for liquidation, the methods and significant assumptions used to measure assets and liabilities, the type and amount of costs and income accrued, and the expected duration of the liquidation process. These amendments are effective for public entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. Entitles should apply the requirements prospectively from the day that liquidation becomes imminent. Early adoption is permitted. The adoption of ASU No. 2013-07 is not expected to have a material impact on our consolidated financial statements.
In June 2013, the FASBs Emerging Issues Task Force (EITF) issued Issue 13-C, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward of Tax Credit Carryforward Exists (EITF Issue 13-C), which requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in deferred tax asset for a net operation loss carryforward or a tax credit carryforward. However, to the extent that a net operating loss carryforward or tax credit carryforwards at the reporting date is not available under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, the unrecognized tax benefit is to be presented in the statement of financial position as a liability. The amendment is effective for public entities for annual periods beginning after December 15, 2013 and interim periods therein. We are still evaluating the impact this guidance.
F-20
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
2. Business Combination
On May 27, 2011, the Company acquired all of the outstanding capital stock of Airwide Solutions, Inc. for $16,901. The Airwide Acquisition was funded with a portion of the proceeds from the issuance of Series E preferred stock (see Note 10). Prior to the acquisition, Airwide was a provider of messaging and content delivery software to mobile operators with revenues and expenses mainly being generated in EMEA (Europe, Middle East and Africa), APAC (Asia- Pacific) and Canada. This acquisition marks our initial entry into the countries in which Airwide operates in and provides the Company with additional global presence and access to additional customers.
The Airwide Acquisition was accounted for under the acquisition method of accounting. The assets acquired and the liabilities assumed by the Company were recognized at their fair values at the acquisition date. The Company recorded goodwill of $941, which is attributable to expected growth and cost synergies resulting from the acquisition. The goodwill is not deductible for income tax purposes. The Company incurred approximately $700 of acquisition-related costs, all of which were expensed and included in general and administrative expenses on the consolidated statements of operations and comprehensive loss.
The allocation of the total purchase price of Airwides net tangible and identifiable intangible assets was based upon the estimated fair value of those assets as of May 27, 2011. The following table presents the allocation of the total purchase price to the assets acquired and liabilities assumed at the date of the acquisition:
May 27, 2011 | ||||
Cash and cash equivalent |
$ | 2,404 | ||
Accounts receivables |
8,112 | |||
Unbilled revenue |
6,624 | |||
Other current assets |
2,612 | |||
Property and equipment |
441 | |||
Intangibles |
7,322 | |||
Goodwill |
941 | |||
Accounts payable |
(2,901 | ) | ||
Deferred revenue |
(2,427 | ) | ||
Accrued expense and other current liabilities |
(4,198 | ) | ||
Uncertain tax position liabilities |
(2,029 | ) | ||
|
|
|||
Total |
$ | 16,901 | ||
|
|
As part of the purchase price allocation, the Company has determined that the identifiable intangible assets are contractual backlog, customer relationship and technology. Backlog consists of existing contracts. The Company valued contractual backlog and customer relationships using the excess earnings method. The Company applied the relief-from-royalty method to estimate the fair value of technology. These intangible assets are amortized with estimated useful lives ranging from seven months to six years from the date of acquisition over a method
F-21
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
that reflects an appropriate allocation of the costs of these intangible assets to earnings in proportion to the amount of economic benefits obtained in each reporting period.
Acquired intangible assets |
Fair Value | Weighted Average Useful Life (in months) |
||||||
Contractual backlog |
$ | 1,411 | 7 | |||||
Customer relationship |
5,120 | 72 | ||||||
Technology |
791 | 72 | ||||||
|
|
|||||||
Total |
$ | 7,322 | ||||||
|
|
Below are selected unaudited pro forma results of the Company for the years ended December 31, 2010 and 2011 as if the acquisition occurred as of January 1, 2010. These results are not intended to reflect the actual operations of the Company had the acquisition occurred at January 1, 2010.
Year Ended December 31, |
||||||||
2010 | 2011 | |||||||
Revenues |
$ | 59,159 | $ | 66,831 | ||||
Net loss |
$ | (37,937 | ) | $ | (26,716 | ) |
3. Accounts Receivable
The following table presents the detail of accounts receivable for the periods presented:
December 31, | June 30, | |||||||||||
2011 | 2012 | 2013 | ||||||||||
(unaudited) | ||||||||||||
Accounts receivable |
$ | 16,753 | $ | 15,541 | $ | 19,895 | ||||||
Less allowance for doubtful accounts |
(641 | ) | (382 | ) | (603 | ) | ||||||
|
|
|
|
|
|
|||||||
Total accounts receivable, net |
$ | 16,112 | $ | 15,159 | $ | 19,292 | ||||||
|
|
|
|
|
|
4. Property and Equipment
The following table presents the detail of property and equipment for the periods presented:
Estimated Useful Life |
December 31, | June 30, | ||||||||||||||
2011 | 2012 | 2013 | ||||||||||||||
(unaudited) | ||||||||||||||||
Computer software |
3 years | $ | 3,080 | $ | 4,540 | $ | 5,048 | |||||||||
Computer and lab equipment |
3 years | 6,646 | 7,770 | 8,090 | ||||||||||||
Other equipment |
2-5 years | 141 | 1,578 | 1,412 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Property and equipment, gross |
9,867 | 13,888 | 14,550 | |||||||||||||
Less: accumulated depreciation |
(6,441 | ) | (7,969 | ) | (8,993 | ) | ||||||||||
|
|
|
|
|
|
|||||||||||
Property and equipment, net |
$ | 3,426 | $ | 5,919 | $ | 5,557 | ||||||||||
|
|
|
|
|
|
F-22
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
Property and equipment depreciation expense totaled $807, $949, $1,527, $685 and $1,082 for the years ended December 31, 2010, 2011, 2012, and for the six months ended June 30, 2012 and 2013, respectively.
5. Intangible Assets and Goodwill
Intangible assets primarily include the intangible assets that the Company acquired in the Airwide Acquisition (see Note 2 to the consolidated financial statements for further information). The intangible assets are being amortized on a straight-line basis. The amortization methods reflect an appropriate allocation of the costs of these intangible assets to earnings in proportion to the amount of economic benefits obtained in reporting period.
Intangible assets as of December 31, 2011 are as follows:
Weighted Average Amortization Period (in months) |
Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
|||||||||||||
Contractual backlog |
7 | $ | 1,411 | $ | 1,411 | $ | | |||||||||
Customer relationships |
72 | 5,120 | 712 | 4,408 | ||||||||||||
Technology |
72 | 781 | 105 | 676 | ||||||||||||
Certifications |
36 | 859 | 39 | 820 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Total intangible assets |
$ | 8,171 | $ | 2,267 | $ | 5,904 | ||||||||||
|
|
|
|
|
|
Intangible assets as of December 31, 2012 are as follows:
Weighted Average Amortization Period (in months) |
Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
|||||||||||||
Contractual backlog |
7 | $ | 1,462 | $ | 1,462 | $ | | |||||||||
Customer relationships |
72 | 5,280 | 1,568 | 3,712 | ||||||||||||
Technology |
72 | 825 | 249 | 576 | ||||||||||||
Certifications and licenses |
36 | 1,833 | 407 | 1,426 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Total intangible assets |
$ | 9,400 | $ | 3,686 | $ | 5,714 | ||||||||||
|
|
|
|
|
|
Intangible assets as of June 30, 2013 are as follows:
Description |
Weighted Average Amortization period (in months) |
Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount as of June 30, 2013 |
||||||||||||
(unaudited) |
||||||||||||||||
Contractual backlog |
7 | $ | 1,314 | $ | 1,314 | $ | | |||||||||
Customer relationships |
72 | 4,764 | 1,654 | 3,110 | ||||||||||||
Technology |
72 | 737 | 256 | 481 | ||||||||||||
Certifications and licenses |
36 | 2,474 | 649 | 1,825 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Total |
$ | 9,289 | $ | 3,873 | $ | 5,416 | ||||||||||
|
|
|
|
|
|
F-23
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
Total amortization expense for the years ended December 31, 2010, 2011, 2012, and for the six months ended June 30, 2012 and 2013, was $0, $1,984, $2,521, $1,000 and $712, respectively, of which $0, $1,382, $0, $0 and $242, respectively, was included in cost of revenues related to software products and $0, $602,$2,521, $1,000 and $470, respectively, was included in operating expenses on the consolidated statements of operations and comprehensive loss. The following table presents the expected amortization expense for each of the next five years ending December 31 for those intangible assets with remaining carrying values as of June 30, 2013:
Years Ending December 31, |
Amortization of Intangible Assets |
|||
2013 (July 1, 2013 through December 31, 2013) |
$ | 871 | ||
2014 |
1,703 | |||
2015 |
1,377 | |||
2016 |
1,083 | |||
2017 |
382 | |||
|
|
|||
Total |
$ | 5,416 | ||
|
|
A summary of changes in the Companys carrying value of goodwill is as follows:
December 31, | June 30, | |||||||||||
2011 | 2012 | 2013 | ||||||||||
(unaudited) | ||||||||||||
Balance, beginning of period |
$ | | $ | 901 | $ | 923 | ||||||
Acquired goodwill |
941 | | | |||||||||
Foreign currency exchange translation |
(40 | ) | 22 | (49 | ) | |||||||
|
|
|
|
|
|
|||||||
Balance, end of period |
$ | 901 | $ | 923 | $ | 874 | ||||||
|
|
|
|
|
|
6. Accrued Liabilities
The following table presents the detail of accrued liabilities for the periods presented:
December 31, | June 30, | |||||||||||
2011 | 2012 | 2013 | ||||||||||
(unaudited) | ||||||||||||
Accrued payroll |
$ | 2,352 | $ | 4,323 | $ | 5,051 | ||||||
Accrued expenses on contracts |
2,393 | 1,996 | 1,600 | |||||||||
Uncertain tax positions |
3,053 | 3,053 | 3,053 | |||||||||
Accrued professional fees |
267 | 997 | 127 | |||||||||
Other |
1,388 | 3,698 | 2,574 | |||||||||
|
|
|
|
|
|
|||||||
Total accrued liabilities |
$ | 9,453 | $ | 14,067 | $ | 12,405 | ||||||
|
|
|
|
|
|
F-24
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
7. Long-term Debt
The following table presents the detail of long-term debt for the periods presented:
December 31, | June 30, | |||||||||||
2011 | 2012 | 2013 | ||||||||||
(unaudited) | ||||||||||||
Comerica revolving line of credit |
$ | 814 | $ | | $ | | ||||||
Silicon Valley Bank senior loan |
| 10,000 | 15,000 | |||||||||
Silicon Valley Bank subordinated loan |
| 5,000 | 10,000 | |||||||||
Silver Lake subordinated loan |
| | 15,000 | |||||||||
Discount related to issuance of warrants |
| (300 | ) | (1,847 | ) | |||||||
Less current portion |
(814 | ) | | | ||||||||
|
|
|
|
|
|
|||||||
Long-term debt, less current portion |
$ | | $ | 14,700 | $ | 38,153 | ||||||
|
|
|
|
|
|
The Company had $814, $15,000 and $40,000 gross of debt discount of $0, $300, and $1,847 outstanding under its revolving credit facility and senior and subordinated loans as of December 31, 2011 and 2012, and June 30, 2013, respectively.
Silicon Valley Bank Subordinated and Senior Loans
On October 18, 2012, the Company entered into loan agreements with Silicon Valley Bank. Under the agreements, the Company obtained two loans totaling $32,500 (the SVB Loans). In February 2013, we amended the SVB Loans (the Amendment) to join certain of our subsidiaries, including our non-U.S. subsidiaries, as co-borrowers. We also amended our minimum tangible net worth covenant. The term loan and LOC with Comerica Bank were repaid on October 19, 2012 with the partial proceeds of the loans from Silicon Valley Bank. The SVB Loans include a $22,500 Senior Loan secured by substantially all of the assets of the Company, including intellectual property. The Senior Loan has a three-year term at a floating rate of 1% above the U.S. prime rate, subject to a minimum interest rate of 4.25%. Under the terms of the agreement, the Company can draw up to 80% of eligible trade receivables up to $15,000, with the remaining $7,500 generally available for working capital and cash management purposes. The Company also obtained a $10,000 Subordinated Loan, also secured by substantially all of the assets of the Company, including intellectual property, that has a three-year term at a fixed rate of 11%. Both loans require the payment of interest only on the outstanding balance through the term of the loan, with all principal payable in October 2015. Both loans may be prepaid at any time without penalty.
In connection with the SVB Loans, the Company issued warrants to purchase a total of 900,000 shares of the Companys common stock at a price of $0.73 per share. In accordance with the guidance to account for debt issued with a warrant, the Company allocated the total proceeds between the loans and the warrant based on the relative fair value of the two instruments. Out of the total proceeds of $15,000, the Company allocated approximately $14,683 to the loans and approximately $317 to the warrant based on their relative fair values. The fair value of the common stock warrant was recorded to APIC, with a reduction to the loans as a debt discount. See Note 11 for further discussion of the valuation methodology and assumptions. The discount on the debt is being amortized over the terms of the loans and the amortization charge recorded as interest expense in the consolidated statements of operations. The unamortized discount on the SVB Loans debt is $247 at June 30, 2013.
F-25
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
The Silicon Valley Bank loan agreements contain certain restrictive covenants, and the Senior Loan requires us to maintain a minimum tangible net worth at all times. At June 30, 2013, we are in compliance all covenants applicable to us under the SVB Loans, as amended. The agreements also contain usual and customary events of default, the occurrence of which may result in all outstanding amounts under the loan agreements becoming due and payable immediately, and they also impose an interest penalty of an additional 5% above the otherwise applicable interest rate at any time when an event of default is continuing.
Silver Lake Waterman Growth Capital Loan
On June 4, 2013, we entered into a growth capital loan agreement with Silver Lake Waterman Fund, L.P. (Silver Lake Loan), for a $15 million subordinated term loan. The Silver Lake Loan is subordinated to our senior and subordinated loans with Silicon Valley Bank described above, and is secured by substantially all of our assets. The Silver Lake Loan matures on June 30, 2017 and bears interest at 12% annually. The accrued interest on the loan is payable monthly, with the principal amount due and payable on the loans maturity on June 30, 2017. The subordinated term loan includes a prepayment penalty of 5% for prepayment in the first year, 4% in the second year, 3% in the third year and 2% thereafter, except that if we choose to repay this subordinated term loan with the proceeds of this offering the prepayment penalty will not apply.
The subordinated term loan agreement with Silver Lake Waterman Fund contains restrictive covenants. One such covenant provides that we must use substantially all of the proceeds of the loan for our United States operations and may not use them for non-U.S. operations. Other covenants limit our ability to, among other things, incur liens on our assets, pay dividends, make investments or engage in acquisitions, and prevent dissolution, liquidation, merger or a sale of our assets outside of the ordinary course of business without the prior consent of the lender. The agreement also contains customary events of default, the occurrence of which may result in all outstanding amounts under the loan agreements becoming due and payable immediately, and they also impose an interest penalty of an additional 5% above the otherwise applicable interest rate at any time when an event of default is continuing.
In connection with the Silver Lake Loan, we issued warrants to purchase a total of 1,362,858 shares of our common stock at an exercise price of $0.001 per share. In accordance with the guidance to account for debt issued with a warrant, the Company allocated total proceeds between the loan and the warrant based on the relative fair value of the two instruments. Out of the total proceeds of $15,000, the Company allocated approximately $13,366 to the loan and $1,634 to the warrant based on their relative fair values. The fair value of the common stock warrant was recorded to APIC, with a reduction to the loan as a debt discount. The discount on the debt is being amortized over the terms of the loan and the amortization charge recorded as interest expense in the consolidated statements of operations. For the six months ended June 30, 2013, we recorded $34 of amortization into interest expense related to these warrants and the unamortized discount on the debt is $1,600 at June 30, 2013.
8. Commitments and Contingencies
Lease Commitments
The Company leases office space and equipment under operating leases expiring in various years through 2017 or later. Rent expense for the years ended December 31, 2010, 2011, 2012 and for the six months ended June 30, 2012 and 2013, was $481, $2,227, $2,405 $1,148 and $1,036, respectively.
F-26
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
Future minimum lease payments under the non-cancelable operating leases as of December 31, 2012 are as follows:
Years ending December 31, |
||||
2013 |
$ | 1,701 | ||
2014 |
1,393 | |||
2015 |
1,306 | |||
2016 |
807 | |||
2017 and thereafter |
1,052 | |||
|
|
|||
Total |
$ | 6,259 | ||
|
|
Future minimum sublease rentals to be received under non-cancelable operating leases as of December 31, 2012 are $1,232.
Legal Proceedings
From time to time, we, our customers and our competitors are subject to various litigation and claims arising in the ordinary course of business. The software and communications infrastructure industries are characterized by frequent litigation and claims, including claims regarding patent and other intellectual property rights, claims for damages or indemnification for alleged breach under commercial supply or service contracts and claims regarding alleged improper hiring practices. From time to time we may be involved in various additional legal proceedings or claims.
We were one of 16 remaining defendants in Eon Corp. IP Holdings, LLC v. Sensus USA, Inc. et al. The plaintiff Eon Corp. IP Holdings, LLC, or Eon, a non-operating entity, alleges that each of the defendants has infringed, and continues to infringe, Eons U.S. Patent No. 5,592,491. The suit was originally filed in October 2010 in the United States District Court for the Eastern District of Texas. In January 2012, the court granted defendants motion to transfer the suit to the United States District Court for the Northern District of California. In June 2013, we entered into a settlement agreement with Eon. This had no material impact on our consolidated financial statements. In July 2013, the court dismissed all claims against us.
We are not aware of any pending or threatened legal proceeding against us that could have a material adverse effect on our business, operating results or financial condition.
F-27
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
9. Loss per Common Share Applicable to Common Shareholders
The following table presents the detail with respect to basic and diluted net loss per common share for the periods presented:
Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||
2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||
(unaudited) | ||||||||||||||||||||
Net loss |
$ | (10,394 | ) | $ | (21,758 | ) | $ | (15,569 | ) | $ | (5,650 | ) | $ | (7,935 | ) | |||||
Loss per common share |
$ | (1.35 | ) | $ | (2.69 | ) | $ | (1.73 | ) | $ | (0.65 | ) | $ | (0.85 | ) | |||||
Weighted average number of shares outstanding |
7,726,175 | 8,091,861 | 9,015,901 | 8,752,420 | 9,376,175 | |||||||||||||||
Potentially dilutive securities: |
||||||||||||||||||||
Outstanding stock options |
4,790,670 | 6,759,166 | 10,315,424 | 10,518,868 | 13,582,859 | |||||||||||||||
Redeemable convertible preferred stock |
83,282,211 | 115,167,418 | 115,167,418 | 115,167,418 | 115,167,418 | |||||||||||||||
Warrants |
| | | | 8,649,446 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
88,072,881 | 121,926,584 | 125,482,842 | 125,686,286 | 137,399,723 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
The effects of redeemable convertible preferred stock and options outstanding were excluded from the computation of diluted loss per common share in 2010, 2011, 2012, and for the six months ended June 30, 2012 and 2013, respectively, because these securities would have been anti-dilutive. The weighted average common shares for basic and diluted loss for common shares were the same due to the loss in the years ended December 31, 2010, 2011, 2012, and for the six months ended June 30, 2012 and 2013.
10. Redeemable Convertible Preferred Stock
In 2005, the Company issued $2,500 of convertible promissory notes that were convertible into the Companys Series A Redeemable Convertible Preferred Stock (the Series A Preferred Stock). The notes accrued interest at an annual rate of 7%, which interest was also convertible into Series A Preferred Stock. In April 2006, all of the outstanding principal and interest under the notes (approximately $2,609) were converted at $0.40125 per share into 6,502,249 shares of Series A Preferred Stock. Additionally in conjunction with the conversion of the notes, the Company sold 19,635,509 shares of Series A Preferred Stock at a price of $0.535 per share for $10,502 in cash (which excludes the principal and interest due under the notes discussed above).
In 2007, the Company issued 26,727,506 shares of Series B Redeemable Convertible Preferred Stock at $0.767 per share for $20,500 in cash, which was used for general corporate purposes.
In October 2008, the Company issued 18,316,941 shares of Series C Redeemable Convertible Preferred Stock at $0.9542 per share for $17,478 in cash, which was used for general corporate purposes.
In June 2010, the Company issued 12,100,007 shares of Series D Redeemable Convertible Preferred Stock at $1.1219 per share for $13,575 in cash, which was used for general corporate purposes.
In May and July 2011, the Company issued an aggregate of 31,885,207 shares of Series E Redeemable Convertible Preferred Stock at $1.2545 per share for $40,000 in cash, which was used for the Airwide Acquisition and restructuring and for general corporate purposes.
F-28
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
Holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock are entitled to receive dividends at a rate of $0.0428, $0.0614, $0.0763, $0.0898 and $0.1004 per share per annum, respectively, for each share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, as and if declared by the Board of Directors, prior to and in preference to any declaration or payment of any dividend on
the common stock of the Company. As of December 31, 2011 and 2012, the Company had declared no dividends on either its common stock or Preferred Stock. The dividends on the Preferred Stocks are not cumulative. Each holder of each outstanding share of each series of Preferred Stock is entitled to the number of votes equal to the number of shares of common stock into which the shares of Preferred Stock are convertible. Except as provided by provisions establishing any other series of Preferred Stock and except in certain other limited circumstances, holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall vote together with the holders of Common Stock as a single class on all action to be taken by the stockholders of the Company, including, but not limited to actions necessary to amend the certificate of incorporation to increase the number of authorized shares of Common Stock.
Upon the occurrence of a liquidation, dissolution or winding up of the Company, before any distribution or payment shall be made to the holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Common Stock or any other capital stock of the Company ranking junior to the Preferred Stock, each holder of Series E Preferred Stock will be entitled to receive an amount equal to $1.2545 per share, as adjusted, plus any declared but unpaid dividends for such shares. Upon completion of the distribution to the holders of the Series E Preferred Stock, before any distribution or payment shall be made to the holders of Common Stock or any other capital stock of the Company ranking junior to the Preferred Stock, each holder of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock will be entitled to receive an amount equal to $0.535, $0.767, $0.9542 and $1.1219 per share, respectively, as adjusted, plus any declared but unpaid dividends for such shares. After payment of the full liquidation preference to the holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, the remaining assets and funds of the Company legally available for distribution, if any, shall be distributed ratably among all of the holders of Common Stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, on an as-converted basis, until such time as the holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock receive an additional $0.535, $0.767, $0.9542, $1.1219 and $2.509 per share, respectively. After payment of the full liquidation preference to the holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, the remaining assets and funds of the Company legally available for distribution, if any, shall be distributed ratably among all of the holders of Common Stock. Notwithstanding the foregoing, for the purposes of determining the amount each holder of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred and Series E Preferred Stock are entitled to receive with respect to a liquidation, dissolution or winding up of the Company, each series of Preferred Stock shall be treated as if all holders of such series had converted such holders shares of Preferred Stock into shares of Common Stock immediately prior to such liquidation, dissolution or winding up of the Company if, as a result of an actual conversion of such series of Preferred Stock, holders of such series of Preferred Stock would receive, in the aggregate, an amount greater than the amount that would be distributed to holders of series of Preferred Stock if such holders had not converted such shares of Preferred Stock into shares of Common Stock.
The shares of each series of Preferred Stock are convertible into Common Stock at any time at the option of the holder. Additionally, all shares of Preferred Stock are subject to automatic conversion upon the closing of a
F-29
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
public offering of the Companys Common Stock in which the aggregate proceeds to the Company equal or exceed $50,000. All shares of Preferred Stock are also automatically convertible into Common Stock, at the applicable Conversion Rate, upon the written consent or agreement of a majority of (i) the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock, voting together as a single class, and (ii) the Series E Preferred Stock, voting as a separate class. The conversion rate is initially one share of Common Stock for each share of Preferred Stock, subject to adjustment for certain stock issuances and stock splits, reverse stock-splits, stock combinations and the like.
Upon receipt of a written request from the holders of a majority of the then outstanding shares of (i) Series E Preferred Stock, voting as a separate series, and (ii) Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, voting as a single class, at any time on or after the fourth (4th) anniversary of the date on which the Corporation first issues shares of its Series E Preferred Stock (that is, May 26, 2011) the Company shall redeem all, but not less than all, of the shares of Preferred Stock then outstanding in three equal annual installments beginning on a date not more than forty-five (45) days after the receipt of the redemption request. The redemption prices for the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock are equal to $0.535, $0.767, $0.9542, $1.1219 and $1.2545 per share, respectively, plus declared but unpaid dividends. If the number of shares of Preferred Stock that may then be legally redeemed by the Company is less than the number of such shares to be redeemed, then all of the shares of Series E Preferred Stock shall be redeemed for the applicable redemption price prior to the redemption of the shares of any other series of Preferred Stock, and then the remaining shares of any other series of Preferred Stock that should have been redeemed, but were not, will be redeemed on a pro rata basis from any additional legally available funds or as soon as the Company has legally available funds therefore.
The Company classifies conditionally redeemable convertible preferred shares, which includes shares of Preferred Stock subject to redemption upon the occurrence of uncertain events not solely within the Companys control, as temporary equity. Shares of Preferred Stock classified as temporary equity are measured initially at fair value. If such shares are subject to redemption at a higher value that is outside of the Companys control, such shares are accreted to the mandatory redemption value, with such accretion recorded as dividends. As of December 31, 2011 and 2012, the Company had recorded as temporary equity shares of Series A, B, C, D and E Preferred Stock totaling $13,005, $20,500, $17,478, $13,575 and $40,000, respectively. Shares of Preferred Stock remain recorded at the issuance date valuation amounts on the balance sheet, as they do not become redeemable automatically, only through the intent of the preferred shareholders, and the preferred shareholders have not shown any plan to redeem the preferred shares. Dividends on shares of Preferred Stock included in temporary equity are recorded as Dividends on Preferred Stock below Net Loss on the Consolidated Statement of Operations and Comprehensive Loss.
None of the Companys Series A, B, C, D or E Preferred stock has any contractual rights or obligations to share in the current losses of the Company.
11. Shareholders Deficit
Common Stock
In 2011, the Board of Directors and shareholders approved an increase in the number of authorized shares of common stock of the Company from 113,827,759 to 155,203,902.
F-30
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
Stock Option Plan
The Company has two stock option plans: the Amended and Restated 2005 Stock Plan (the 2005 Plan), and the 2013 Stock Plan (the 2013 Plan). In January 2013, the Company terminated the 2005 Plan and provided that no further stock awards were to be granted under the 2005 Plan and adopted the 2013 Plan as a continuation of and successor to the 2005 Plan. Upon the IPO, all shares that were reserved under the 2005 Plan but not issued were assumed by the 2013 Plan and no further shares will be granted pursuant to the 2005 Plan. All outstanding stock awards under the 2005 Plan will continue to be governed by the existing terms. Under the 2013 Plan, the Company has the ability to issue incentive stock options (ISOs), nonstatutory stock options (NSOs), stock appreciation rights, restricted stock, restricted stock units (RSUs), performance units and/or performance shares. Additionally, the 2013 Plan provides for the grant of performance cash awards to employees, directors and consultants. The ISOs and NSOs will be granted at a price per share not less than the fair value at date of grant. Options granted to date generally vest over a four-year period with 25% vesting at the end of one year and the remaining vest monthly thereafter. Options granted generally are exercisable up to 10 years. Restricted stock awards generally vest over a four-year period with 25% vesting at the end of one year and the remaining vest monthly thereafter.
Unvested options can be exercised into shares of restricted stock. Awards granted under the Plan may be immediately exercisable, but not vested, and are subject to a right of repurchase by the Company (at its option) at the lower of the original exercise price or fair market value for all unvested restricted shares at the termination of service. At June 30, 2013, there were 11,723,202 common shares available for future grants under the 2013 Plan.
To determine the weighted average fair value of stock options granted the Company used the Black-Scholes option-pricing model with the following weighted average assumptions during the periods presented:
Year Ended December 31, | Six Months Ended June 30, |
|||||||||||||||
2010 | 2011 | 2012 | 2013 | |||||||||||||
(unaudited) | ||||||||||||||||
Expected dividends |
0 | % | 0 | % | 0 | % | 0 | % | ||||||||
Risk-free interest rate (U.S. Treasury) |
2.8 | % | 2.1 | % | 1.7 | % | 2.0 | % | ||||||||
Expected term |
6.1 years | 6.2 years | 6.3 years | 6.3 years | ||||||||||||
Expected volatility |
47.0 | % | 60.0 | % | 62.0 | % | 58.0 | % |
The fair value of all the awards granted is amortized to expense on a straight-line basis over the requisite service periods, which are generally the vesting periods.
The following tables summarize the stock option activity for the periods presented:
Shares | Weighted Average Exercise Price per Share |
Weighted Average Remaining Contractual Term |
||||||||||
Outstanding January 1, 2010 |
9,172,510 | $ | 0.07 | |||||||||
Granted |
4,591,654 | 0.10 | ||||||||||
Exercised |
(229,625 | ) | 0.07 | |||||||||
Forfeited or expired |
(686,605 | ) | 0.08 | |||||||||
|
|
|
|
|
|
|||||||
Outstanding, December 31, 2010 |
12,847,934 | $ | 0.08 | 7.9 years | ||||||||
|
|
|
|
|
|
|||||||
Exercisable, December 31, 2010 |
12,847,934 | $ | 0.08 | 7.9 years | ||||||||
|
|
|
|
|
|
F-31
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
Shares | Weighted Average Exercise Price per Share |
Weighted Average Remaining Contractual Term |
||||||||||
Outstanding January 1, 2011 |
12,847,934 | $ | 0.08 | |||||||||
Granted |
7,202,917 | 0.29 | ||||||||||
Exercised |
(631,994 | ) | 0.08 | |||||||||
Forfeited or expired |
(886,153 | ) | 0.10 | |||||||||
|
|
|
|
|
|
|||||||
Outstanding, December 31, 2011 |
18,532,704 | $ | 0.16 | 8.1 years | ||||||||
|
|
|
|
|
|
|||||||
Exercisable, December 31, 2011 |
18,532,704 | $ | 0.16 | 8.1 years | ||||||||
|
|
|
|
|
|
Shares | Weighted Average Exercise Price per Share |
Weighted Average Remaining Contractual Term |
||||||||||
Outstanding January 1, 2012 |
18,532,704 | $ | 0.16 | |||||||||
Granted |
3,416,775 | 0.68 | ||||||||||
Exercised |
(849,946 | ) | 0.08 | |||||||||
Forfeited or expired |
(2,228,478 | ) | 0.16 | |||||||||
|
|
|
|
|
|
|||||||
Outstanding, December 31, 2012 |
18,871,055 | $ | 0.26 | 7.3 years | ||||||||
|
|
|
|
|
|
|||||||
Exercisable, December 31, 2012 |
18,871,055 | $ | 0.26 | 7.3 years | ||||||||
|
|
|
|
|
|
Shares | Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term |
Aggregate Intrinsic Value |
|||||||||||||
(unaudited) |
||||||||||||||||
Outstanding as of January 1, 2013 |
18,871,055 | $ | 0.26 | |||||||||||||
Granted |
1,793,968 | 1.16 | ||||||||||||||
Exercised |
(25,185 | ) | 0.27 | |||||||||||||
Forfeited or expired |
(379,546 | ) | 0.54 | |||||||||||||
|
|
|||||||||||||||
Outstanding as of June 30, 2013 |
20,260,292 | $ | 0.33 | 7.0 | $ | 17,591 | ||||||||||
|
|
|||||||||||||||
Exercisable as of June 30, 2013 |
20,260,292 | $ | 0.33 | 7.0 | 17,591 | |||||||||||
|
|
The following table summarizes additional information about stock options at December 31, 2012:
Exercise Price |
Options Outstanding |
Options Exercisable |
Weighted Average Remaining Contractual Term (in years) |
|||||||||
$0.01 |
150,000 | 150,000 | 2.9 | |||||||||
$0.06 |
3,808,221 | 3,808,221 | 3.7 | |||||||||
$0.08 |
1,759,810 | 1,759,810 | 4.8 | |||||||||
$0.09 |
2,468,000 | 2,468,000 | 6.7 | |||||||||
$0.11 |
1,215,333 | 1,215,333 | 8.0 | |||||||||
$0.30 |
6,487,666 | 6,487,666 | 9.0 | |||||||||
$0.73 |
2,982,025 | 2,982,025 | 9.7 | |||||||||
|
|
|
|
|
|
|||||||
18,871,055 | 18,871,055 | 7.3 | ||||||||||
|
|
|
|
|
|
The total intrinsic value of options exercised during the years ended December 31, 2010, 2011, 2012, and the six months ended June 30, 2013 and 2012, was $21, $190, $527, and $23 and $389, respectively. The Company
F-32
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
recorded $71, $138, $291, $105 and $300 of non-cash charges for stock compensation related to amortization of the fair value of unvested stock options for the years ended December 31, 2010, 2011, 2012, and the six months ended June 30, 2012 and 2013, respectively. At June 30, 2013, there was $1,208 of total unrecognized cost related to unvested stock options granted under the stock option plan, which is expected to be recognized over a weighted average period of 1.7 years.
Warrants
Common Stock
On November 1, 2006, the Company issued warrants to the Communities Foundation of Texas to purchase 20,000 shares of its common stock at a price of $0.06 per share. The warrants were to expire in November 2011. On September 11, 2012, the Company reissued the warrants at a price of $0.73 per share. The reissued warrants have a term of five years, but will terminate earlier upon the closing of an initial public offering or the closing of a change of control of the Company. The fair value of the warrants was insignificant.
In connection with the SVB Loans on October 28, 2012, the Company issued warrants to Silicon Valley Bank and WestRiver Mezzanine Loans, LLC exercisable for a total of 900,000 shares of common stock at a price of $0.73 per share. The warrants have a term of the earliest of the tenth anniversary of the issue date or three years following the effective date of the registration statement filed in connection with an IPO. The Company will provide the holders of the warrants with written notice of at least seven business days prior to the closing of a cash/public acquisition. Upon the closing of other than a cash/public acquisition, the acquiring, surviving or successor entity assumes the obligation of the warrants. The fair value of the warrants of $317 was determined using the Black-Scholes pricing model. The Company used a risk-free interest rate of 1.72%, stock price volatility of 62%, a term of four years and expected dividends of 0%. The average remaining life of the Common Stock warrants as of June 30, 2013 was 9.3 years.
In connection with the Silver Lake Loan, we issued warrants to purchase a total of 1,362,858 shares of our common stock at an exercise price of $0.001 per share. The warrants have a term of the earlier of the seventh anniversary of the Date of Grant, the third anniversary of the effective date of the registration statement filed in connection with the Companys IPO or the consummation of an acquisition of the Company. The fair value of the warrants of $1.6 million was determined using the Black-Scholes pricing model. The Company used a risk-free interest rate of 1.99%, stock price volatility of 58%, a term of three years and expected dividends of 0%. The average remaining life of the common stock warrants as of June 30, 2013 was 6.9 years.
Series C Redeemable Convertible Preferred Stock
At December 31, 2011 and 2012, and June 30, 2013, the Company had 6,366,588 warrants outstanding to acquire its Series C Redeemable Convertible Preferred stock outstanding at $0.9542 per share issued in connection with debt financing and to an investor. The warrants were issued in October 2008 and have a term of seven years. The fair value on the date of issuance of all these warrants was insignificant. No warrants were exercised during the years ended December 31, 2010, 2011, 2012 and for the six months ended June 30, 2013. The average remaining life of the Series C Redeemable Convertible Preferred Stock warrants, as of June 30, 2013, was 2.3 years.
F-33
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
12. Employee Benefit Plan
In the United States, the Company maintains a defined contribution plan consisting of a 401(k) retirement savings plan, which covers substantially all eligible U.S. employees. Participants can, in accordance with Internal Revenue Service (IRS) guidelines, set aside both pre- and post-tax savings in this account. In addition to participants savings, the Company has the option of making discretionary matching contributions to plan participants accounts; however, no contributions were made to date as of June 30, 2013. Eligible employees can participate in the plan on the first day following their hire date.
The Companys employees in Canada and the United Kingdom have defined contribution plans. The cost of the plans for the years ended December 31, 2010, 2011, 2012, and for the six months ended June 30, 2012 and 2013 was $0, $544, $791, $418 and $314 respectively, and is included in operating expenses.
13. Income Taxes
The following table summarizes the income tax expense:
Year Ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
Current: |
||||||||||||
Federal |
$ | | $ | | $ | | ||||||
State |
| | | |||||||||
Foreign |
131 | 1,330 | 1,152 | |||||||||
|
|
|
|
|
|
|||||||
Total current |
131 | 1,330 | 1,152 | |||||||||
Deferred: |
||||||||||||
Federal |
| | | |||||||||
State |
| | | |||||||||
Foreign |
| | | |||||||||
|
|
|
|
|
|
|||||||
Total deferred |
| | | |||||||||
|
|
|
|
|
|
|||||||
Income tax expense |
$ | 131 | $ | 1,330 | $ | 1,152 | ||||||
|
|
|
|
|
|
The components of income (loss) before income tax expense consisted of the following:
Year Ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
Domestic |
$ | (10,035 | ) | $ | (17,576 | ) | $ | (18,941 | ) | |||
Foreign |
(228 | ) | (2,852 | ) | 4,524 | |||||||
|
|
|
|
|
|
|||||||
Total |
$ | (10,263 | ) | $ | (20,428 | ) | $ | (14,417 | ) | |||
|
|
|
|
|
|
F-34
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax assets and liabilities are as follows:
As of December 31, | ||||||||
2011 | 2012 | |||||||
Deferred tax assets |
||||||||
Net operating loss carryforwards |
$ | 36,993 | $ | 43,196 | ||||
Deferred revenue |
4,264 | 1,038 | ||||||
Accrued expenses |
666 | 1,159 | ||||||
Allowance for bad debt |
266 | 102 | ||||||
Start-up costs |
1,369 | 1,239 | ||||||
Depreciation of property and equipment |
26 | | ||||||
Unrealized gain/loss on foreign currency translations |
| 165 | ||||||
Research and development credit |
833 | 833 | ||||||
Other |
| 316 | ||||||
|
|
|
|
|||||
Total deferred tax assets |
44,417 | 48,048 | ||||||
Deferred tax liabilities |
||||||||
Amortization of intangible assets |
(1,451 | ) | (1,178 | ) | ||||
Unrealized gain/loss on foreign currency translations |
(359 | ) | | |||||
Prepaid items |
(378 | ) | | |||||
Other |
(109 | ) | (72 | ) | ||||
|
|
|
|
|||||
Total deferred tax liabilities |
(2,297 | ) | (1,250 | ) | ||||
|
|
|
|
|||||
Net deferred tax assets |
42,120 | 46,798 | ||||||
Valuation allowance |
(42,120 | ) | (46,798 | ) | ||||
|
|
|
|
|||||
Net deferred tax assets |
$ | | $ | | ||||
|
|
|
|
A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows:
As of December 31, | ||||||||||||||||||||||||
2010 | 2011 | 2012 | ||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||
Computed tax at statutory rates: |
$ | (3,592 | ) | 35.0 | % | $ | (7,150 | ) | 35.0 | % | $ | (5,046 | ) | 35.0 | % | |||||||||
Permanent differences |
25 | (0.2 | )% | 683 | (3.3 | )% | 362 | (2.5 | )% | |||||||||||||||
Difference resulting from state income taxes, net of federal income tax benefits |
| | (661 | ) | 3.2 | % | (337 | ) | 2.3 | % | ||||||||||||||
Change in valuation allowance |
3,788 | (36.9 | )% | 8,115 | (39.7 | )% | 4,678 | (32.4 | )% | |||||||||||||||
Tax credits |
| | (1,076 | ) | 5.3 | % | (100 | ) | 0.7 | % | ||||||||||||||
Foreign tax rate differential |
(24 | ) | 0.2 | % | 900 | (4.4 | )% | 922 | (6.4 | )% | ||||||||||||||
Uncertain tax positions |
53 | (0.5 | )% | 819 | (4.0 | )% | | | ||||||||||||||||
Other, net |
(119 | ) | 1.1 | % | (300 | ) | 1.4 | % | 673 | (4.7 | )% | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 131 | (1.3 | )% | $ | 1,330 | (6.5 | )% | $ | 1,152 | (8.0 | )% | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2012, we had U.S. federal net operating loss carryforwards of $82,474 ($30,581 tax affected). These losses expire in various years between 2024 and 2032, and are subject to limitations on their utilization. We had total foreign net operating loss carryforwards of $51,162 ($12,615 tax affected), which are subject to limitations on their utilization. Of these tax-affected foreign net operating losses, $1,190 are not currently subject to expiration dates. The remainder, $11,425, expires beginning in 2016 through 2022. These net operating losses of the Company may in addition be limited under applicable provisions of the U.S. tax laws. In addition, the
F-35
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
Company has research and development expenditures carried forward of $833 which can be used to reduce U.S. federal taxable income and expire between 2026 and 2031. The Company has recorded a full valuation allowance for the net deferred tax assets at December 31, 2011 and 2012 due to the uncertainty of future operating results. The valuation allowance will be reduced at such time as management is able to determine that the realization of the deferred tax assets is more likely than not to occur.
The Company applies a two-step process for the evaluation of uncertain income tax positions based on a more likely than not threshold to determine if a tax position will be sustained upon examination by the taxing authorities. The recognition threshold in step one permits the benefit from an uncertain position to be recognized only if it is more likely than not, or 50% assured that the tax position will be sustained upon examination by the taxing authorities. The measurement methodology in step two is based on cumulative probability, resulting in the recognition of the largest amount that is greater than 50% likely of being realized upon settlement with the taxing authority.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2011 and 2012 is as follows:
Balance at January 1, 2011 |
$ | 205 | ||
Deferred tax items related to Airwide Acquisition |
2,029 | |||
Additions related to deferred tax items |
819 | |||
|
|
|||
Balance at December 31, 2011 and 2012 |
$ | 3,053 | ||
|
|
The total amount of these unrecognized tax benefits would affect the effective tax rate, if recognized. It is reasonably possible that certain of the uncertain tax positions disclosed in the table above could increase or decrease within the next 12 months as a result of further developing issues or examination closings. The Company is not able to make an estimate of the range of the reasonably possible change. The Company has elected to recognize accrued interest and penalties related to income tax matters as income taxes.
Any undistributed earnings of the Companys foreign subsidiaries are considered to be indefinitely reinvested and, accordingly, no provision for U.S. federal and state income taxes has been provided thereon and the Company expects that future earnings will also be reinvested in foreign operations indefinitely. Upon repatriation of these earnings, in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign credits) and withholding taxes payable to various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable due to the complexities associated with its hypothetical calculation. Income taxes have not been provided on $10,348 of undistributed earnings of foreign subsidiaries as of December 31, 2012.
14. Financial Instruments
The majority of the Companys operations are international, giving rise to significant exposure to market risks from changes in foreign exchange rates. The Companys results of operations would generally be adversely affected by an increase in the value of the U.S. dollar relative to the currencies of the countries in which the Company is profitable and a decrease in the value of the U.S. dollar relative to the currencies of the countries in which the Company is not profitable. In the future, the Company may use derivative financial instruments to reduce these risks, but does not hold or issue financial instruments for trading purposes. These financial instruments are subject to normal credit standards, financial controls, risk management and monitoring procedures.
F-36
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
Currency Risk
The Company has currency exposure arising from significant operations and contracts in multiple jurisdictions. The Company has limited its currency exposure to freely-tradable and liquid currencies of first world countries.
Concentration of Credit Risk
Accounts receivable are generally with diversified customers and dispersed across many geographical regions. As of December 31, 2011 and 2012, and June 30, 2013 three customer balances, one customer balance, and two customer balances, respectively, represented more than 10% of the overall account receivable balance. The Company believes no significant concentration of credit risk exists with respect to these accounts receivable. For the year ended December 31, 2010, two customers represented 69.7% and 27.1% of the total revenues, for the year ended December 31, 2011, three customers represented 28.1%, 11.6% and 10.0%, of the total revenues and for the year ended December 31, 2012, four customers represented 20.7%, 12.5%, 11.2% and 10.3% of the total revenues, respectively. For the six months ended June 30, 2012 four customers represented 54.7% of the total revenues and for the six months ended June 30, 2013, two customers represented 36.1% of the total revenues, three customers represented 49.5% of total revenues, and four customers represented 61.8%, of the total revenues.
The Company is required to estimate the collectability of its accounts receivable each accounting period and records a reserve for bad debts. A considerable amount of judgment is required in assessing the realization of these receivables, including the current creditworthiness of each customer, current and historical collection history and the related aging of past due balances. The Company evaluates specific accounts when it becomes aware of information indicating that a customer may not be able to meet its financial obligations due to the deterioration of its financial condition, lower credit ratings, bankruptcy or other factors, affecting the ability to render payment. Reserve requirements are based on the facts available and are re-evaluated and adjusted as additional information is received.
15. Segment and Geographic Information
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision makers, in deciding how to allocate resources and in assessing performance. Our chief operating decision-makers (i.e., chief executive officer and his direct reports) review financial information presented on a consolidated basis, accompanied by disaggregated information about revenues by geographic region for purposes of allocating resources and evaluating financial performance. The Company has concluded that it operates in one segment and has provided the required enterprise-wide disclosures.
F-37
Mavenir Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Information as of June 30, 2013 and for the six months ended June 30, 2012 and 2013 is unaudited)
Revenues by geographic area are based on the deployment site location of the end customers. The following tables present revenue and long-lived assets by geographic area:
For the years ended December 31, | For the six months ended June 30, |
|||||||||||||||||||
2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Revenue: |
||||||||||||||||||||
North America |
$ | 8,142 | $ | 26,820 | $ | 37,314 | $ | 20,284 | $ | 21,363 | ||||||||||
EMEA (or Europe, Middle East and Africa) |
0 | 13,665 | 20,547 | 12,485 | 17,669 | |||||||||||||||
APAC (or Asia-Pacific) |
109 | 9,019 | 15,979 | 7,180 | 9,158 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Consolidated Total |
$ | 8,251 | $ | 49,504 | $ | 73,840 | $ | 39,949 | $ | 48,190 | ||||||||||
As of | ||||||||||||||||||||
December 31, 2012 |
June 30, 2013 |
|||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Long-lived Assets: |
||||||||||||||||||||
North America |
$ | 9,627 | $ | 9,182 | ||||||||||||||||
EMEA (or Europe, Middle East and Africa) |
2,314 | 2,004 | ||||||||||||||||||
APAC (or Asia-Pacific) |
615 | 661 | ||||||||||||||||||
|
|
|
|
|||||||||||||||||
Consolidated Total |
$ | 12,556 | $ | 11,847 |
16. Related Parties
Our channel partner, Cisco (directly and through a subsidiary) is considered to be a related party because of their ownership in our preferred stock and certain warrants. Total revenue generated through our related party was $5,754, $23,340 $25,725, $8,214 and $17,874 for the years ended December 31, 2010, 2011 and 2012, and for the six months ended June 30, 2012 and 2013, respectively. As of December 31, 2012 and June 30, 2013 accounts receivable due from our related party was $308 and $361 respectively. We recognize revenue upon final acceptance by our end-customers.
17. Subsequent Events (unaudited)
On August 7, 2013, our Board of Directors approved the grant of options to purchase 750,000 shares of our common stock with an exercise price equal to the initial public offering price set forth on the cover page of this prospectus.
F-38
To the Board of Directors of
Mavenir Systems, Inc.
We have audited the accompanying consolidated balance sheets of Airwide Solutions, Inc. and subsidiaries (the Company) as of December 31, 2010 and May 26, 2011 and the related consolidated statements of operations and comprehensive loss, shareholders equity (deficit), and cash flows for the year ended December 31, 2010 and the period from January 1, 2011 through May 26, 2011. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Airwide Solutions, Inc. and subsidiaries as of December 31, 2010 and May 26, 2011 and the results of its operations and its cash flows for the year ended December 31, 2010 and the period from January 1, 2011 through May 26, 2011 in conformity with accounting principles generally accepted in the United States of America.
/s/ BDO USA, LLP
Dallas, TX
December 20, 2012
F-39
Airwide Solutions, Inc. and Subsidiaries
(in thousands, except share and per share amounts)
As of December 31, | As of May 26, | |||||||
2010 | 2011 | |||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 4,369 | $ | 2,404 | ||||
Accounts receivable, net |
12,429 | 8,112 | ||||||
Unbilled revenue |
6,632 | 5,698 | ||||||
Other assets |
2,020 | 2,495 | ||||||
Prepaid expenses |
1,262 | 1,043 | ||||||
|
|
|
|
|||||
Total current assets |
26,712 | 19,752 | ||||||
Property and equipment, net |
366 | 441 | ||||||
Intangible assets, net |
7,507 | 7,139 | ||||||
|
|
|
|
|||||
Total assets |
$ | 34,585 | $ | 27,332 | ||||
|
|
|
|
F-40
Airwide Solutions, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
As of December 31, 2010 |
As of May 26, 2011 |
|||||||
Liabilities and Shareholders Equity (Deficit) |
||||||||
Current Liabilities |
||||||||
Accounts payable |
$ | 5,328 | $ | 2,901 | ||||
Accrued liabilities |
6,236 | 7,553 | ||||||
Deferred revenue |
11,236 | 7,319 | ||||||
Current portion of long-term debt |
4,955 | 7,547 | ||||||
Income tax payable |
164 | 472 | ||||||
|
|
|
|
|||||
Total Current Liabilities |
27,919 | 25,792 | ||||||
Long-term debt, less current portion |
2,830 | | ||||||
Series CC junior non-voting preferred stock |
2,019 | 2,084 | ||||||
|
|
|
|
|||||
Total Liabilities |
32,768 | 27,876 | ||||||
Commitments and Contingencies |
||||||||
Shareholders Equity (Deficit) |
||||||||
Common stock, $0.001 par value, voting, 65,000 shares authorized, 5,284 shares issued and 5,284 shares outstanding |
5 | 5 | ||||||
Series C preferred stock, $0.001 par value, voting, convertible. 16,475 shares authorized, issued and outstanding |
27,488 | 28,362 | ||||||
Series D preferred stock, $0.001 par value, voting, convertible to common stock at redemption value; 9,619 shares authorized, 8,747 shares issued and outstanding |
36,594 | 37,758 | ||||||
Series E preferred stock, $0.001 par value, voting, convertible to common stock at redemption value; 7,230 shares authorized, issued and outstanding |
22,558 | 22,558 | ||||||
Series F preferred stock, $0.001 par value, voting, convertible to common stock at redemption value; 7,445 shares authorized, issued and outstanding |
8,614 | 8,887 | ||||||
Additional paid-in capital |
21,727 | 21,779 | ||||||
Accumulated deficit |
(114,357 | ) | (120,320 | ) | ||||
Accumulated other comprehensive income (loss) |
(812 | ) | 427 | |||||
|
|
|
|
|||||
Total Shareholders Equity (Deficit) |
1,817 | (544 | ) | |||||
|
|
|
|
|||||
Total Liabilities and Shareholders Equity (Deficit) |
$ | 34,585 | $ | 27,332 | ||||
|
|
|
|
See accompanying notes to the Consolidated Financial Statements.
F-41
Airwide Solutions, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
Year Ended December 31, 2010 |
Period from January 1, 2011 through May 26, 2011 |
|||||||
Revenue |
||||||||
Software products |
$ | 34,586 | $ | 10,743 | ||||
Maintenance |
16,322 | 7,402 | ||||||
|
|
|
|
|||||
50,908 | 18,145 | |||||||
|
|
|
|
|||||
Cost of Revenue |
||||||||
Software products |
17,286 | 5,198 | ||||||
Maintenance |
6,862 | 2,758 | ||||||
|
|
|
|
|||||
24,148 | 7,956 | |||||||
|
|
|
|
|||||
Gross Profit |
26,760 | 10,189 | ||||||
Operating Expenses |
||||||||
Research and development |
8,446 | 4,254 | ||||||
Sales and marketing |
10,728 | 3,800 | ||||||
General and administrative |
13,317 | 4,799 | ||||||
Impairment of long-lived assets |
17,985 | | ||||||
|
|
|
|
|||||
Total Operating Expenses |
50,476 | 12,853 | ||||||
|
|
|
|
|||||
Operating Loss |
(23,716 | ) | (2,664 | ) | ||||
|
|
|
|
|||||
Interest income |
(98 | ) | (36 | ) | ||||
Interest expense |
1,884 | 817 | ||||||
|
|
|
|
|||||
Total Other Expenses |
1,786 | 781 | ||||||
|
|
|
|
|||||
Loss Before Income Tax Expense |
(25,502 | ) | (3,445 | ) | ||||
Income Tax Expense |
2,041 | 207 | ||||||
|
|
|
|
|||||
Net Loss |
(27,543 | ) | (3,652 | ) | ||||
Other Comprehensive Income |
||||||||
Foreign currency translation adjustment |
297 | 1,239 | ||||||
|
|
|
|
|||||
Total Comprehensive Loss |
$ | (27,246 | ) | $ | (2,413 | ) | ||
|
|
|
|
See accompanying notes to the Consolidated Financial Statements.
F-42
Airwide Solutions, Inc. and Subsidiaries
Consolidated Statements of Shareholders Equity (Deficit)
Year Ended December 31, 2010 and Period From January 1, 2011 through May 26, 2011
(in thousands, except share and per share amounts)
Common | Common | Series C Convertible Preferred Stock |
Series D Convertible Preferred Stock |
Series E Convertible Preferred Stock |
Series F Convertible Preferred Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Income (Losses) |
Total | |||||||||||||||||||||||||||||||||||||||||||||||
Shares | Stock | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2009 |
5,284 | $ | 5 | 16,475 | $ | 25,461 | 8,747 | $ | 33,883 | 7,230 | $ | 22,558 | 7,445 | $ | 7,950 | $ | 21,512 | $ | (81,412 | ) | $ | (1,109 | ) | $ | 28,848 | |||||||||||||||||||||||||||||||
Stock-based compensation expense |
| | | | | | | | | | 215 | | | 215 | ||||||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | | (27,543 | ) | | (27,543 | ) | ||||||||||||||||||||||||||||||||||||||||
Cash dividends accrued ($1.546 per preferred share of Series C) |
| | | 2,027 | | | | | | | | (2,027 | ) | | | |||||||||||||||||||||||||||||||||||||||||
Cash dividends accrued ($3.874 per preferred share of Series D) |
| | | | | 2,711 | | | | | | (2,711 | ) | | | |||||||||||||||||||||||||||||||||||||||||
Cash dividends accrued ($1.068 per preferred share of Series F) |
| | | | | | | | | 664 | | (664 | ) | | | |||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment |
| | | | | | | | | | | | 297 | 297 | ||||||||||||||||||||||||||||||||||||||||||
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|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
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|
|
|
|
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Balance, December 31, 2010 |
5,284 | 5 | 16,475 | 27,488 | 8,747 | 36,594 | 7,230 | 22,558 | 7,445 | 8,614 | 21,727 | (114,357 | ) | (812 | ) | 1,817 | ||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense |
| | | | | | | | | | 52 | | | 52 | ||||||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | | (3,652 | ) | | (3,652 | ) | ||||||||||||||||||||||||||||||||||||||||
Cash dividends accrued ($1.546 per preferred share of Series C) |
| | | 874 | | | | | | | | (874 | ) | | | |||||||||||||||||||||||||||||||||||||||||
Cash dividends accrued ($3.874 per preferred share of Series D) |
| | | | | 1,164 | | | | | | (1,164 | ) | | | |||||||||||||||||||||||||||||||||||||||||
Cash dividends accrued ($1.068 per preferred share of Series F) |
| | | | | | | | | 273 | | (273 | ) | | | |||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment |
| | | | | | | | | | | | 1,239 | 1,239 | ||||||||||||||||||||||||||||||||||||||||||
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Balance, May 26, 2011 |
5,284 | $ | 5 | 16,475 | $ | 28,362 | 8,747 | $ | 37,758 | 7,230 | $ | 22,558 | 7,445 | $ | 8,887 | $ | 21,779 | $ | (120,320 | ) | $ | 427 | $ | (544 | ) | |||||||||||||||||||||||||||||||
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See accompanying notes to the Consolidated Financial Statements.
F-43
Airwide Solutions, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands, except share and per share data)
Year Ended December 31, 2010 |
Period from January 1, 2011 through May 26, 2011 |
|||||||
Cash Flows From Operating Activities |
||||||||
Net loss |
$ | (27,543 | ) | $ | (3,652 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
Depreciation and amortization |
2,934 | 579 | ||||||
Impairment of long-lived assets |
17,985 | | ||||||
Stock-based compensation expense |
215 | 52 | ||||||
Gain on debt extinguishment |
(258 | ) | | |||||
Unrealized foreign currency exchange loss (gain) |
2,825 | (1,934 | ) | |||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable, net |
4,602 | 6,651 | ||||||
Other assets |
2,648 | (782 | ) | |||||
Unbilled revenue |
4,123 | 1,287 | ||||||
Prepaid expenses |
(400 | ) | 270 | |||||
Deferred income tax |
(265 | ) | | |||||
Accounts payable and accrued liabilities |
(2,456 | ) | (1,251 | ) | ||||
Deferred revenue |
(4,656 | ) | (2,625 | ) | ||||
|
|
|
|
|||||
Net Cash Used in Operating Activities |
(246 | ) | (1,405 | ) | ||||
|
|
|
|
|||||
Cash Flows From Investing Activities |
||||||||
Purchase of property and equipment |
(306 | ) | (122 | ) | ||||
|
|
|
|
|||||
Net Cash Used in Investing Activities |
(306 | ) | (122 | ) | ||||
|
|
|
|
|||||
Cash Flows From Financing Activities |
||||||||
Repayment of long-term debt |
(3,712 | ) | (539 | ) | ||||
|
|
|
|
|||||
Net Cash Used in Financing Activities |
(3,712 | ) | (539 | ) | ||||
|
|
|
|
|||||
Exchange Rate Effect on Cash and Cash Equivalents |
6 | 101 | ||||||
Net Decrease in Cash and Cash Equivalents |
(4,258 | ) | (1,965 | ) | ||||
Cash and Cash Equivalents, Beginning of Period |
8,627 | 4,369 | ||||||
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|
|||||
Cash and Cash Equivalents, End of Period |
$ | 4,369 | $ | 2,404 | ||||
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|
|||||
Supplemental Cash Flow Disclosure |
||||||||
Cash paid for interest |
$ | 826 | $ | 84 | ||||
|
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|
|
See accompanying notes to the Consolidated Financial Statements.
F-44
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
1. Basis of Presentation
Nature of Business
Airwide Solutions, Inc. (Airwide, the Company or we) was initially formed on September 29, 2000, for the purpose of designing service-infrastructure technology for current and next generation wireless networks. Airwide was acquired by Mavenir Systems, Inc. on May 27, 2011 (the Airwide Acquisition).
Airwide and its consolidated subsidiaries (collectively the Company), design, develop, and support messaging and content systems. The majority of the Companys revenues and expenses are incurred outside the United States. The Company has operations in the United Kingdom, Finland, Australia, and Canada. In addition, there are operations in India, Malaysia, Spain, and Singapore.
2. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).
The consolidated financial statements include the accounts of Airwide Solutions, Inc. and its wholly-owned subsidiaries as follows:
Airwide Solutions UK Ltd.
Airwide Solutions (North America) Ltd.
Airwide Solutions Holdings Ltd.
Airwide Solutions Australia Pty Ltd.
Airwide Solutions India Private Limited
Airwide Solutions (Malaysia) Sdn. Bhd.
Airwide Solutions Oy
Airwide Solutions S.L.
Airwide Solutions Pte. Ltd.
All intercompany transactions and balances have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Accordingly, actual results could differ from those estimates.
Revenue Recognition
The Company generates revenue from the sale of hardware, software product licenses, and professional services and maintenance. Professional services consist primarily of software development and implementation services, but also can include training of customer personnel. The Companys products and services are generally sold as part of a contract, the terms of which are examined as a whole to determine the appropriate revenue recognition.
F-45
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sale price is fixed or determinable and collectability is reasonably assured. Revenue for hardware is recognized when the installation is complete and the related services are completed. The Company also evaluates its revenue recognition in accordance with Financial Accounting Standards Board Accounting Standards Codification 605-045, Principal Agent Consideration, regarding gross versus net revenue reporting.
The Company recognizes revenue principally in accordance with the provisions of ASC 605-985, Software Revenue Recognition, as amended, with consideration to ASC 605-025 Multiple Element Arrangements and ASC 605-035 Construction-Type and Production-Type Contracts.
The Companys software products are delivered under contracts, which generally require significant integration within a customers production and business system environment. As the Companys agreements generally require significant production, modification or customization of the software, the Company accounts for these agreements under the percentage-of-completion method on the basis of hours incurred to date compared to total hours expected under the contract. The percentage-of-completion method generally results in the recognition of consistent profit margins over the life of the contract since management has the ability to produce dependable estimates of contract billings and contract costs. We use the level of profit margin that is most likely to occur on a contract. If the most likely profit margin cannot be precisely determined, the lowest probable level of profit in the range of estimates is used until the results can be estimated more precisely. Under percentage-of-completion accounting, management must also make key judgments in areas such as the percentage-of-completion, estimates of project revenue, costs and margin, estimates of total and remaining project hours and liquidated damages assessments. Changes in job performance, job conditions, estimated profitability, final contract settlements and resolution of claims may result in revision to job costs and income that are different from the amount originally estimated. At the time a loss on a contract is known, the entire amount of the estimated loss is accrued.
Contracts that do not qualify for use of the percentage-of-completion method, as reasonable estimates of percentage of completion are not available, are accounted for using the completed-contract method. Under the completed-contract method, all billings and related costs, net of anticipated losses, are deferred until completion of the contract. For the year ended December 31, 2010 and the period from January 1, 2011 through May 26, 2011, we had no contracts under the completed-contracts method.
In certain situations, the Company sells software that does not require significant modification of services considered essential to the softwares functionality. Such software, generally consisting of capacity license upgrades and is recognized upon delivery.
For multiple element arrangements, each element of the arrangement is analyzed and we allocate a portion of the total arrangement fee to each of the elements based on the fair value of the element using vendor-specific objective evidence of fair value (VSOE), regardless of any separate prices stated within the contract for each element. Fair value is considered to be the price a customer would be required to pay if the element was sold separately based on our historical experience of stand-alone sales of these elements to third parties. For post contract support such as maintenance (PCS), we use renewal rates for continued support arrangements to determine fair value. For software services, we use the fair value we charge our customers when those services are sold separately. We monitor our transactions to insure we maintain and periodically revise VSOE to reflect fair value. Some of our software arrangements include services not considered essential for the customer to use the software for the customers purpose, such as training. When software services are not considered essential, the fee allocable to the service element is recognized as revenue as we perform the services.
F-46
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
Customers are billed in accordance with specific contract terms, which may differ from the rate at which revenue is recognized. Revenue recognized in excess of the amount billed of $6,632 and $6,624 at December 31, 2010 and May 26, 2011, respectively, are classified as unbilled revenue within current assets. The Company anticipates that unbilled revenues will be billed and collected within one year of the balance sheet date. Amounts received from customers pursuant to the terms specified in contracts, but for which revenue has not yet been recognized, are recorded as deferred revenue.
Included in unbilled revenue are other deferred costs of $696 which represent items purchased for contracts not yet delivered to customers. Costs of revenue principally consist of payroll-related costs for service personnel, third-party licenses and the cost of third-party hardware.
On January 1, 2010, the Company adopted an accounting update regarding revenue recognition for multiple deliverable arrangements and an accounting update for certain revenue arrangements that include software elements.
The Company adopted the above accounting updates on a prospective basis for applicable transactions originating or materially modified on or after January 1, 2010. The amended update for multiple deliverable arrangements did not change the units of accounting for the Companys revenue transactions, and most products and services qualify as separate units of accounting.
The adoption of the amended revenue recognition rules did not significantly change the timing of revenue recognition and did not have a material impact on the consolidated financial statements for the year ended December 31, 2010 and the period from January 1, 2011 through May 26, 2011. The Company cannot reasonably estimate the effect of adopting these standards on future financial periods as the impact will vary depending on the nature and volume of new or materially modified sales arrangements in any given period.
Research and Development
Costs related to research, design and development of service infrastructure technology are charged to research and development expense as incurred. Financial accounting standards provide for the capitalization of certain software development costs once technological feasibility has been established and for the evaluation of the recoverability of any capitalized costs on a periodic basis. The Companys software products have historically reached technological feasibility late in the developmental process, and developmental costs incurred after technological feasibility and prior to product release have been insignificant to date. Accordingly, no development costs have been capitalized to date and all research and product development expenditures have been expensed as incurred.
Research and Development Tax Credits
The Company qualifies for research and development credits from two sources, including a tax credit for expenditures incurred by the Company (tax credits) and credits to reimburse the Company for research and development costs that it incurs (cost reimbursement). The tax credits are accounted for using the flow through method, whereby the tax credits are recorded as a reduction to income tax expense in the consolidated statement of operations and comprehensive loss. The cost reimbursements are accounted for under the cost reduction method, whereby the credits are recorded as a reduction to the Companys expenditures in the period in which they are incurred, provided that realization is probable. The tax credit for expenditures incurred by the Company for the year ended December 31, 2010 and the period ended May 26, 2011 were $1,181 and $658, respectively.
F-47
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for differences between the carrying amounts of existing assets and liabilities in the consolidated financial statements and the tax basis of assets and liabilities that will result in future taxable or deductible amounts. The deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded against any deferred tax asset when, in the opinion of management, it is more likely than not that the asset will not be realized. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest related to unrecognized tax benefits in interest expense and penalties in selling, general, and administrative expenses. Deferred tax assets and liabilities offset within jurisdictions where legally enforceable offset arrangements are available.
Cash and Cash Equivalents
Cash and cash equivalents consist of short-term highly liquid investments with original maturities of ninety days or less.
Cash and cash equivalents are maintained at high credit-quality financial institutions. Balances may exceed the limits of government provided insurance, if applicable or available. The Company has never experienced any losses resulting from a financial institution failure or default. All non-interest bearing cash balances in the United States were fully insured by the FDIC at December 31, 2011 due to a temporary federal program in effect from December 31, 2010 through December 31, 2012. Under the program, there is no limit to the amount of insurance for eligible accounts. Beginning 2013, FDIC insurance coverage will revert to $250,000 per depositor at each financial institution, and the Companys non-interest bearing cash balances in the United States may again exceed federally insured limits. There were no interest-bearing amounts on deposit in the United States in excess of federally insured limits at December 31, 2010 and May 26, 2011, respectively.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation. Depreciation and amortization is calculated using the straight-line method over their estimated useful lives as follows:
Computer equipment |
3 years | |||
Software |
3 years | |||
Furniture and fixtures |
3 years | |||
Office equipment |
3 to 5 years | |||
Leasehold improvements |
The shorter of the lease term or estimated useful life |
Expenditures for maintenance and repairs are charged to operations as incurred. The costs of major renewals and improvements are capitalized. At the time property and equipment is retired, or otherwise disposed of, the cost and accumulated depreciation are eliminated from the asset and accumulated depreciation accounts. The profit or loss of such disposal is reflected in operating income.
F-48
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
Intangible Assets
Intangible assets are accounted for at cost. Amortization is based on their estimated useful lives using the straight-line method, and over the following periods:
Software solutions |
4 to 8 years | |
Customer relationships |
10 years | |
Distribution agreements |
7 years |
Impairment of Long-Lived Assets
Long-lived assets, such as property, plant, and equipment, and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.
During the year ended December 31, 2010 and for the period from January 1, 2011 through May 26, 2011, based on Companys continuing operating losses, the Company considered the need for an impairment test. Management considered the market approach to be the best estimate of fair value for the long-lived assets, such as property and equipment and purchased intangible assets subject to amortization. As a result, as of December 31, 2010, we recorded non-cash impairment charges relating to the intangible assets acquired in the amount of $2,592. Also, the carrying values of the equipment were reduced to fair value, resulting in an impairment charge of $1,099 recorded in the Companys consolidated statements of operations and comprehensive loss. Management estimated the fair value of the equipment based on observable market transactions involving sales of comparable equipment. No impairment charges were recorded in 2011.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired.
Goodwill and other intangible assets with indefinite lives are not amortized to operations, but instead are reviewed for impairment at least annually, or when there is an indicator of impairment. The Company has no intangible assets with indefinite useful lives, other than goodwill.
The goodwill impairment test is a two-step test. Under the first step, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the entity must perform step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting units goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed. An impairment loss shall be recognized to the extent that the carrying amount of goodwill exceeds its implied fair value.
F-49
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
Also, if an entity sells or disposes of a reporting unit, an amount of goodwill may need to be charged off as part of measuring the gain or loss on the sale or disposal. More specifically; if the entire reporting unit is disposed of, all of the goodwill of that reporting unit is included in the carrying amount in determining the gain or loss on disposal.
The Company determines fair value using widely accepted valuation techniques, including discounted cash flows and market multiple analyses. These types of analyses contain uncertainties because they require management to make assumptions and to apply judgment to estimate industry economic factors and the profitability of future business strategies. It is the Companys policy to conduct impairment testing based on its current business strategy in light of present industry and economic conditions, as well as its future expectations.
The Companys valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and projections of future operating performance. If these assumptions differ materially from future results, the Company may record impairment charges in the future.
In connection with the Companys annual goodwill impairment test as of December 31, 2010, Management considered the market approach to be the best estimate of fair value for its reporting unit. The decision to sell the Company was made during 2010 and based on the valuations and offers received, including the sale to Mavenir Systems, Inc. subsequent to year-end, it was determined that the carrying value of the Companys net assets exceeded its fair value, resulting in an impairment. Based on this analysis, the Company recorded an estimated non-cash pre-tax goodwill impairment charge of $14,294 in 2010. This charge is recorded as Goodwill Impairment in the Companys consolidated statements of operations and comprehensive loss.
Stock Option Plan
Stock-based compensation represents the cost related to stock-based awards granted to employees. The Company measures stock-based compensation cost at the grant date, based on the estimated fair value of the award and recognizes the cost as an expense on a straight-line basis over the employee requisite service period. The Company estimates the fair value of stock options without market-based performance conditions using the Black-Scholes valuation model with the following weighted average assumptions:
| Risk-free interest rate U.S. Federal Reserve treasury constant maturities rate consistent vesting period; |
| Expected dividend yield measured as the average annualized dividend estimated to be paid by the Company over the expected life of the award as a percentage of the share price at the grant date; |
| Expected term the average of the vesting period and the expiration period from the date of issue of the award; and |
| Weighted average expected volatility measured using historical volatility of similar public entities for which share or opinion price information is available. |
The expense is recorded in the operating expense category of the consolidated statement of operations and comprehensive loss associated with the function performed by the recipient. The Company records deferred tax assets for awards that result in deductions on the Companys income tax returns, based on the amount of compensation cost recognized and the Companys statutory tax rate in the jurisdiction in which it will receive a deduction. Differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deductions reported on the Companys income tax returns are recorded in additional paid-in capital (if the tax deduction exceeds the deferred tax asset) or in the consolidated statement of operations and comprehensive loss (if the deferred tax asset exceeds the tax deduction and no additional paid-in capital exists from previous awards).
F-50
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
Fair Value of Financial Instruments
Fair value is an exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Accounting guidance also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 inputs are inputs other than quoted prices included with Level 1 that are directly or indirectly observable for the asset or liability. Level 3 inputs are inputs that are not observable in the market.
The Companys financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, debt instruments. The carrying amounts of financial instruments, other than the debt instruments are representative of their fair values due to their short maturities. The Companys long-term debt agreement bears interest at market rates, and thus management believes their carrying amounts approximate fair value of the Companys financial instruments.
Foreign Currency Translation
The functional and reporting currency of Airwide Solutions, Inc., the parent company, is the U.S. dollar. The functional currency of the subsidiaries is their respective local currency.
The results of operations, where the functional currency is not the U.S. dollars, are translated at the average rates of exchange during the period and the balance sheet at rates prevailing at the balance sheet date. Translation adjustments are accumulated and reported as a component of accumulated other comprehensive loss. Transaction gains (losses) are included in selling, general and administrative expenses and amounted to $3,495 for the year ended December 31, 2010 and $(1,295) for the period from January 1, 2011 through May 26, 2011. The foreign currency transaction gains and losses are primarily due to the decrease in the value of the U.S. dollar compared to the functional currencies in the countries the Company operates in internationally.
Comprehensive Loss
Comprehensive loss includes all changes in equity during a period except those resulting from investments by and distributions to owners. The Company records the components of comprehensive loss, foreign currency translation adjustments in the consolidated balance sheet as a component of shareholders equity.
Advertising Costs
Costs associated with advertising and marketing are expensed as incurred. Advertising expense in the year ended December 31, 2010 and the period from January 1, 2011 through May 26, 2011 was $25 and $16, respectively.
Recently Issued Accounting Standards
In June 2011, the Financial Accounting Standards Board (FASB) issued ASU No. 2011-05, Comprehensive Income (ASU 2011-05) which changes the options when presenting comprehensive income. The update gives companies the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in separate but consecutive statements. The amendments in the update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. This amendment also required an entity to present on the face of the financial statements adjustments
F-51
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
for items that are reclassified from accumulated other comprehensive income to net income; however, in December 2011 the FASB issued ASU 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05 (ASU 2011-12). The update defers the specific requirement to present items that are reclassified from accumulated other comprehensive income to net income separately with their respective components of net income and other comprehensive income. The provisions of ASU 2011-05 will be applied retrospectively for interim and annual periods beginning after December 15, 2012 for nonpublic entities. The Company has early adopted the provisions of ASU 2011-05 and ASU 2011-12, effective January 1, 2010.
In September 2011, the FASB issued amended guidance that will simplify how entities test goodwill for impairment. After an assessment of certain qualitative factors, if it is determined to be more likely than not that the fair value of a reporting unit is less than its carrying amount, entities must perform the quantitative analysis of the impairment test. Otherwise, the quantitative test becomes optional. The guidance is effective after September 15, 2012, with early adoption permitted.
3. Accounts Receivable
Accounts receivable consists of the following:
December 31, 2010 |
May 26, 2011 |
|||||||
Trade |
$ | 13,548 | $ | 8,605 | ||||
Less: allowance for doubtful accounts |
1,119 | 493 | ||||||
|
|
|
|
|||||
Accounts receivable, net |
$ | 12,429 | $ | 8,112 | ||||
|
|
|
|
4. Property and Equipment
Property and equipment consist of the following:
December 31, 2010 |
May 26, 2011 |
|||||||
Computer equipment |
$ | 459 | $ | 582 | ||||
Software |
35 | 65 | ||||||
Furniture and fixtures |
29 | 29 | ||||||
Office equipment |
7 | 7 | ||||||
|
|
|
|
|||||
530 | 683 | |||||||
Less: accumulated depreciation |
164 | 242 | ||||||
|
|
|
|
|||||
Property and equipment, net |
$ | 366 | $ | 441 | ||||
|
|
|
|
Depreciation expense for the year ended December 31, 2010 and period from January 1, 2011 through May 26, 2011 was $656 and $211, respectively and is included in general and administrative expenses.
F-52
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
5. Intangible Assets and Goodwill
Intangible assets consist of the following:
December 31, 2010 | ||||||||||||||||||||
Gross Carrying Amount |
Current Amortization |
Accumulated Amortization |
Impairment | Net Carrying Amount |
||||||||||||||||
Software solutions |
$ | 7,258 | $ | 1,150 | $ | 2,447 | $ | 2,217 | $ | 2,594 | ||||||||||
Customer relationships |
9,839 | 869 | 4,983 | | 4,856 | |||||||||||||||
Distribution agreements |
2,165 | 259 | 1,733 | 375 | 57 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total intangible assets |
$ | 19,262 | $ | 2,278 | $ | 9,163 | $ | 2,592 | $ | 7,507 | ||||||||||
|
|
|
|
|
|
|
|
|
|
May 26, 2011 | ||||||||||||||||||||
Gross Carrying Amount |
Current Amortization |
Accumulated Amortization |
Impairment | Net Carrying Amount |
||||||||||||||||
Software solutions |
$ | 5,041 | $ | 158 | $ | 2,605 | $ | | $ | 2,436 | ||||||||||
Customer relationships |
9,839 | 198 | 5,181 | | 4,658 | |||||||||||||||
Distribution agreements |
1,790 | 12 | 1,745 | | 45 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total intangible assets |
$ | 16,670 | $ | 368 | $ | 9,531 | $ | | $ | 7,139 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Amortization expense for the year ended December 31, 2010 and the period from January 1, 2011 through May 26, 2011 was $2,278 and $368, respectively, and is included in general and administrative expenses.
The following table projects the estimated amortization expense for the five succeeding years and thereafter:
December 31, | ||||
2011 (remainder) |
$ | 1,093 | ||
2012 |
1,652 | |||
2013 |
1,507 | |||
2014 |
1,507 | |||
2015 and thereafter |
1,380 | |||
|
|
|||
$ | 7,139 | |||
|
|
A summary of changes in the Companys carrying value of goodwill is as follows:
Goodwill | ||||
Balance at December 31, 2009 |
$ | 14,479 | ||
Foreign currency exchange translation |
(185 | ) | ||
Impairment losses |
(14,294 | ) | ||
|
|
|||
Balance at December 31, 2010 |
$ | | ||
|
|
F-53
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
6. Accrued Liabilities
Accrued liabilities consist of the following:
December 31, 2010 |
May 26, 2011 |
|||||||
Accrued compensation |
$ | 2,213 | $ | 3,835 | ||||
Accrued expenses on contracts |
2,146 | 1,689 | ||||||
Uncertain tax positions |
1,877 | 2,029 | ||||||
|
|
|
|
|||||
$ | 6,236 | $ | 7,553 | |||||
|
|
|
|
7. Long-Term Debt
Long-term debt consists of the following:
December 31, 2010 |
May 26, 2011 |
|||||||
Working capital loan, payable in 36 monthly payments starting October 1, 2008, bearing interest at prime rate 3.25% as of May 26, 2011, plus 175 basis points maturing February 1, 2012 |
$ | 7,785 | $ | 7,547 | ||||
Current portion |
(4,955 | ) | (7,547 | ) | ||||
|
|
|
|
|||||
Long-term debt, less current portion |
$ | 2,830 | $ | | ||||
|
|
|
|
In May 2010, the Company amended its Loan Security Agreement (the Amendment), which was associated with the working capital loan. The Loan Security Agreement is secured by substantially all of the Companys assets. Among other changes, the Amendment (i) called for interest only payments from May 2010 through August 2010, (ii) extended the term of the loan from August 1, 2010 for 18 months, (iii) increased the total restructure fee by an additional $12 to $300, and (iv) required the Company to make a final payment of $1,238 to the lender at the maturity date. The Company determined that the modification of the terms of the working capital loan qualified as a debt extinguishment and recognized a gain on the extinguishment of the working capital loan of $257 in the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2010. In connection with the Airwide Acquisition, the working capital loan was paid off on May 27, 2011. The Loan Security Agreement contains affirmative and negative covenants and will, among other things, (i) require the maintenance of certain financial ratios, (ii) limit the Companys ability to incur additional debt and lease, pay dividends, repurchase its common stock, sell certain assets, and make capital expenditures; and (iii) restrict mergers, consolidations and similar transactions. As of May 26, 2011, the Company was in compliance with its covenants.
8. Series CC Junior Non-Voting Preferred Stock
In connection with the issuance of the Series C stock, the Company allowed the exchange of $19,681 of promissory notes and associated accrued interest, issued prior to April 1, 2004, into 2,058 shares of Series CC junior non-voting preferred stock and 3,392 shares of common stock. The $19,681 includes the principal amount, plus the premium equivalent to nine times the principal.
The Series CC junior non-voting preferred stock does not have any dividend rights. In the event of any liquidation or winding up of the Company, the holders of the Series CC junior non-voting preferred stock are entitled to receive in preference to the holders of common stock, but only after holders of shares of Series C, F and D preferred stock have received their full liquidation preference and any unpaid dividends.
F-54
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
The Series CC junior non-voting preferred stock is redeemable in whole upon the earlier of (i) the consummation of a Qualified Public Offering or (ii) April 16, 2014. The redemption price shall be equal to $1.00 per share. In the event of a Qualified Public Offering, each holder of the Series CC junior non-voting preferred stock may elect to receive, in lieu of cash, a number of shares of common stock determined by dividing $1 by the average daily trading prices of the common stock during the three business days immediately preceding the Qualified Public Offering.
Due to the mandatory redemption feature contained within the Series CC junior non-voting preferred stock, the Company has determined that the instrument should be recorded as a liability. The Company recorded this liability at fair value as of the issuance date. The liability is being accreted up to the redemption value through recognition of an interest expense in the statement of operations and comprehensive loss in future periods. Interest expense related to the accretion to redemption value on preferred shares for the year ended December 31, 2010 and the period from January 1, 2011 through May 26, 2011 was $133 and $65, respectively.
9. Shareholders Equity
Series C Convertible Participating Preferred Stock
On July 20, 2004, the Company completed a round of financing in which approximately 9,799,000 shares of Series C convertible participating preferred stock (Series C stock) were issued for $10,000 in cash. On the same day, approximately 517,000 shares of Series C stock were exchanged for $5,277 in promissory notes issued after March 31, 2004. The $5,277 includes the principal amount, plus the premium equivalent to nine times the principal.
On October 20, 2004, the Company completed a second round of financing in which approximately 6,159,000 shares of Series C stock were issued for cash consideration of $6,285. Of this amount, 50% was paid to Schlumberger Investments Ltd. on November 2, 2004 in line with the terms of the Share the Business Sale Agreement for the acquired companies, thus reducing the balance of purchase payable.
Holders of Series C stock are entitled to receive, prior to the payment of any dividend of the common stock, a cumulative dividend of 8% per share on the sum of (i) the purchase price of the Series C stock and (ii) all accumulated and unpaid dividends accrued thereon from the date of issuance (Series C Liquidation Preference), compounded annually in arrears, which shall be accrued whether or not declared by the Board of Directors. In addition to the Series C stock dividends, all holders of the Series C stock are also entitled to participate in all dividends and distributions that are declared and paid on common stock on the same basis as if each share of Series C stock had been converted into common stock prior to the record date established for such dividends.
As of December 31, 2010 and May 26, 2011, the cumulative dividend was approximately $10,616 and $11,489 respectively.
In the event of any liquidation or winding up of the Company, the holders of the Series C stock are entitled to receive in preference to the holders of common stock and Series CC junior non-voting preferred stock, an amount equal to the Series C Liquidation Preference. After payment of such sum to the holders of the Series C stock, the holders of Series CC junior non-voting preferred stock are entitled to receive their liquidation preference. After payment of such liquidation preference, holders of Series C stock and holders of common stock are entitled to receive, pro rata on an as-converted basis, the remaining assets of the Company available for distribution to its stockholders.
F-55
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
The Series C stock has the following conversion features:
i. | the holders of the Series C stock have the right to convert, at the option of the holder, at any time, into common stock by the per share formula of the purchase price for Series C shares divided by the conversion price of $1.02 which is subject to adjustment. |
ii. | the Series C stock shall automatically be converted into common stock at the then applicable conversion rate in the event either: |
| the closing of an underwritten initial public offering with net offering proceeds to the Company of at least $40,000 and a per share price to the public derived from a pre-money valuation of the Company of not less than $175,000 (Qualified Public Offering); or |
| the election of the holders of at least 67% of the issued and outstanding Series C stock. |
In the event that the Company, subject to certain exceptions, issues additional shares of common stock or any right or option to purchase common stock or any other security convertible into common stock, at a purchase price less than the then applicable conversion price of the Series C stock (Series C Conversion Price), the Series C Conversion Price shall be adjusted according to a weighted average antidilution formula. The Series C Conversion Price is also subject to adjustment in the event of stock splits, stock dividends, recapitalizations and the like.
If the Company issues shares of its capital stock in a future financing for a consideration per share less than the applicable Series C Conversion Price in effect immediately prior to such issuance (a Dilutive Issuance) and a holder of Series C stock has the right to purchase its pro rata share of such Dilutive Issuance and if such holder does not purchase such pro rata share, then a portion of the shares of Series C stock then held by such holder shall be converted into common stock.
Series D Convertible Participating Preferred Stock
On January 4, 2006, the Company completed a round of financing in which approximately 8,747,000 shares of Series D convertible participating preferred stock (Series D stock) were issued for a cash consideration of approximately $25,000,000.
Holders of Series D stock are entitled to receive, prior to the payment of any dividend on the common stock, a cumulative dividend of 8% per share on the sum of (i) the purchase price of the Series D stock and (ii) all accumulated and unpaid dividends accrued thereon from the date of issuance (Series D Liquidation Preference), compounded annually in arrears, which shall be accrued whether or not declared by the Board of Directors. In addition to the Series D stock dividends, all holders of Series D stock are also entitled to participate in all dividends and distributions that are declared and paid on common stock on the same basis as if each share of Series D stock had been converted into common stock prior to the record date established for such dividends.
As of December 31, 2010 and May 26, 2011, the cumulative dividend payable was approximately $12,037 and $13,200 respectively.
In the event of any liquidations or winding up of the Company, the holders of Series D stock are entitled to receive in preference to the holders of common stock and Series CC junior non-voting preferred stock, an amount equal to the Series D Liquidation Preference. After payment of such sum to the holders of the Series D stock, the holders of Series CC junior non-voting preferred stock are entitled to receive their liquidation preference. After payment of such liquidation preference, holders of common stock are entitled to receive, pro rata on an as-converted basis, the remaining assets of the Company available for distribution to its stockholders.
F-56
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
In the event that the Company, subject to certain exceptions, issues additional shares of common stock or any right or option to purchase common stock or any other security convertible into common stock, at a purchase price less than the then applicable conversion price of the Series D stock (Series D Conversion Price), the Series D Conversion Price shall be adjusted according to a weighted average antidilution formula. The Series D Conversion Price, $2.60, is also subject to adjustment in the event of stock splits, stock dividends, recapitalizations and the like.
If the Company issues shares of its capital stock in a future financing for a consideration per share less than the applicable Series D Conversion Price in effect immediately prior to such issuance (a Dilutive Issuance), and a holder of Series D stock has the right to purchase its pro rata share of such Dilutive Issuance and if such holder does not purchase such pro rata share, then a portion of the shares of Series D stock then held by such holder shall be converted into common stock.
Shares of Series D stock are conditionally redeemable in whole or in part on or after the maturity date in April, 2014 at the election of holder of at least a majority of the issued and outstanding Series D stock. The redemption price shall be equal to the sum of (i) the Series D Liquidation Preference per share on the day the redemption is completed and (ii) the fair market value of a share of common stock as of the day of redemption notice. Each share of Series D stock has voting rights equal to the number of shares of common stock issuable on conversion of a share of Series D stock.
Series E Convertible Junior Preferred Stock
On November 26, 2007, the Company completed a round of financing in which 7,230 shares of Series E convertible junior preferred stock (Series E stock) were issued for the acquisition of all outstanding shares of the previous acquisition, for a total of approximately $22,500.
The Series E stock does not have any dividend rights. In the event of any liquidation or winding up of the Company, the holders of the Series E stock are entitled to receive in preference to the holders of common stock, but only after holders of shares of Series C, D, and CC junior non-voting preferred stock have received their full liquidation preference, an amount equal to the Series E Liquidation Preference. After payment of such liquidation preference, holders of Series D, holders of Series E stock and holders of common stock are entitled to receive, pro rata on an as-converted basis, the remaining assets of the Company available for distribution to its stockholders.
The Series E stock has the following conversion features:
The Series E stock shall automatically be converted into common stock at the then applicable conversion rate in the event either:
| the closing of an underwritten initial public offering with net offering proceeds to the Company of at least $40,000 and a per share price to the public derived from a pre-money valuation of the Company of not less than $175,000 (Qualified Public Offering); or |
| the election of the holders of at least a majority of the issued and outstanding Series E stock. |
In the event that the Company, subject to certain exceptions, issues additional shares of common stock or any right or option to purchase common stock or any other security convertible into common stock, at a purchase price less than the then applicable conversion price of the Series E stock (Series E Conversion Price), the Series E Conversion Price shall be adjusted according to a weighted average antidilution formula. The Series E Conversion Price is also subject to adjustment in the event of stock splits, stock dividends, recapitalizations and the like.
F-57
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
If the Company issues shares of its capital stock in a future financing for a consideration per share less than the applicable Series E Conversion Price in effect immediately prior to such issuance (a Dilutive Issuance) and a holder of Series E stock has the right to purchase its pro rata share of such Dilutive Issuance and if such holder does not purchase such pro rata share, then a portion of the shares of Series E stock then held by such holder shall be converted into common stock.
Shares of Series E stock are redeemable in whole at the option of at least the majority of the then outstanding Series E stockholders on or after the maturity date, being later on April 16, 2014 and the date upon which all shares of Series CC junior non-voting preferred stock have been redeemed. The redemption price shall be equal to the sum of (i) the Series E Liquidation.
Preference per share on the day of the redemption is completed and (ii) the fair market value of a share of common stock as of the day of redemption notice.
Each share of Series E stock has voting rights equal to the number of shares of common stock issuable on conversion of a share of Series E stock.
Series F Preferred Stock
On April 16, 2009, the Company converted approximately $7,449 of debt into 7,445 shares of Series F convertible participating preferred stock shares. The shares earn dividends of 8% that are compounding and cumulative and are calculated on December 31 each year. Series F, D, and C shares participate equally in the event of liquidation.
Holders of Series F stock are entitled to receive, prior to the payment of any dividend of the common stock, a cumulative dividend of 8% per share on the sum of (i) the purchase price of the Series F stock and (ii) all accumulated and unpaid dividends accrued thereon from the date of issuance (Series F Liquidation Preference), compounded annually in arrears, which shall be accrued whether or not declared by the Board of Directors. In addition to the Series F stock dividends, all holders of the Series F stock are also entitled to participate in all dividends and distributions that are declared and paid on common stock on the same basis as if each share of Series F stock had been converted into common stock prior to the record date established for such dividends.
As of December 31, 2010 and May 26, 2011, the cumulative dividend was approximately $664 and $936, respectively.
In the event of any liquidations or winding up of the Company, the holders of Series F stock are entitled to receive in preference to the holders of common stock and Series CC junior non-voting preferred stock, an amount equal to the Series F Liquidation Preference. After payment of such sum to the holders of the Series F stock, the holders of Series CC junior non-voting preferred stock are entitled to receive their liquidation preference. After payment of such liquidation preference, holders of common stock are entitled to receive, pro rata on an as-converted basis, the remaining assets of the Company available for distribution to its stockholders.
In the event that the Company, subject to certain exceptions, issues additional shares of common stock or any right or option to purchase common stock or any other security convertible into common stock, at a purchase price less than the then applicable conversion price of the Series F stock (Series F Conversion Price), the Series F Conversion Price shall be adjusted according to a weighted average antidilution formula. The Series F Conversion Price, $1.0154, is also subject to adjustment in the event of stock splits, stock dividends, recapitalizations and the like.
F-58
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
If the Company issues shares of its capital stock in a future financing for a consideration per share less than the applicable Series F Conversion Price in effect immediately prior to such issuance (a Dilutive Issuance), and a holder of Series F stock has the right to purchase its pro rata share of such Dilutive Issuance and if such holder does not purchase such pro rata share, then a portion of the shares of Series F stock then held by such holder shall be converted into common stock.
Shares of Series F stock are conditionally redeemable in whole or in part on or after the maturity date in April 2014 at the election of holder of majority of the issued and outstanding Series F stock. The redemption price shall be equal to the sum of (i) the Series F Liquidation Preference per share on the day the redemption is completed and (ii) the fair market value of a share of common stock as of the day of redemption notice.
Each share of Series F stock has voting rights equal to the number of shares of common stock issuable on conversion of a share of Series F stock.
Stock Option Plan
Under the Companys stock option plan, an aggregate of up to 12,366 options to purchase common stock may be granted to employees, directors and consultants. Stock options are granted with an exercise price equal to the stocks estimated fair value at the date of grant as determined by the Board of Directors and the maximum term of an option is ten years. In general, 25% of the options vest on the anniversary of the date of grant, while 2.0833% of the options granted vest on the first day of every month commencing on the first day of the month following the first anniversary of the grant.
Total compensation expense for stock-based compensation awards was $215 for the year ended December 31, 2010 and $52 for the period from January 1, 2011 to May 26, 2011.
At December 31, 2010 and May 26, 2011, there was $267 and $131, respectively of total unrecognized cost related to unvested stock options granted under the stock option plan. In connection with the Airwide Acquisition, the stock option plan was terminated and outstanding options were cancelled or terminated.
The weighted average fair value of stock options granted during 2010 was $ .19 on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:
Expected dividends |
| |||
Risk-free interest rate(U.S. Treasury) |
5.50 | % | ||
Expected term |
7 years | |||
Volatility |
55 | % |
At December 31, 2010 and May 26, 2011, the weighted average remaining contractual life of the outstanding options was 5.73 years and 5.2 years, respectively.
F-59
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
The following table summarizes the stock option activity during the year ended December 31, 2010:
Shares | Weighted Average Exercise Price per Share |
Weighted Average Remaining Contractual Term (in years) |
||||||||||
Outstanding January 1, 2010 |
7,197,990 | $ | .42 | |||||||||
Granted |
310,000 | .33 | ||||||||||
Exercised |
| | ||||||||||
Cancelled |
(87,500 | ) | .59 | |||||||||
|
|
|
|
|
|
|||||||
Outstanding, December 31, 2010 |
7,420,490 | .43 | 5.73 | |||||||||
|
|
|
|
|
|
|||||||
Exercisable, December 31, 2010 |
4,082,011 | $ | .25 | 1.98 | ||||||||
|
|
|
|
|
|
The following table summarizes the stock option activity during the period from January 1, 2011 through May 26, 2011:
Shares | Weighted Average Exercise Price per Share |
Weighted Average Remaining Contractual Term (in years) |
||||||||||
Outstanding January 1, 2011 |
7,420,490 | $ | .43 | |||||||||
Granted |
| | ||||||||||
Exercised |
| | ||||||||||
Cancelled |
(2,334,697 | ) | .50 | |||||||||
|
|
|
|
|
|
|||||||
Outstanding May 26, 2011 |
5,085,793 | $ | .39 | 5.2 | ||||||||
|
|
|
|
|
|
|||||||
Exercisable May 26, 2011 |
3,710,397 | $ | .29 | 3.16 | ||||||||
|
|
|
|
|
|
Common Stock Purchase Warrants
In 2005, the Company signed a loan and a security agreement. This loan was repaid in January 2006. However, in conjunction with the issuance of this loan and security agreement, the Company issued 315 common stock purchase warrants. The warrants entitled the holders to purchase common stock of the Company at an exercise price of $0.15 per share, exercisable at any time and expiring on July 27, 2012. All of the warrants expired as none were exercised.
The fair value of the warrants issued to the convertible promissory note holders is $23. The fair value of the warrants was calculated using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of nil, risk-free interest rate of 5.5%, expected volatility of 40% and an expected life of seven years.
F-60
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
10. Income Taxes
The following table summarizes the income tax expense:
Year Ended December 31, 2010 |
Period from January 1, 2011 through May 26, 2011 |
|||||||
Current: |
||||||||
Federal |
$ | | $ | | ||||
State |
| | ||||||
Foreign |
2,041 | 207 | ||||||
|
|
|
|
|||||
Total current |
2,041 | 207 | ||||||
Deferred: |
||||||||
Federal |
| | ||||||
State |
| | ||||||
Foreign |
| | ||||||
|
|
|
|
|||||
Total deferred |
| | ||||||
|
|
|
|
|||||
Income tax expense |
$ | 2,041 | $ | 207 | ||||
|
|
|
|
The significant components of the Companys deferred tax assets and liabilities are as follows:
December 31, 2010 |
May 26, 2011 |
|||||||
Deferred income tax assets: |
||||||||
Accrued expenses |
$ | 73 | $ | 203 | ||||
Stock options |
| 16 | ||||||
Allowance for bad debts |
303 | 125 | ||||||
Net operating loss carry forwards |
20,191 | 21,390 | ||||||
Tax credit carry forwards |
1,514 | 1,123 | ||||||
Depreciation expense |
31 | 67 | ||||||
|
|
|
|
|||||
22,112 | 22,924 | |||||||
|
|
|
|
|||||
Deferred income tax liabilities: |
||||||||
Amortization expense |
(2,755 | ) | (2,621 | ) | ||||
Unrealized foreign exchange loss |
(648 | ) | (433 | ) | ||||
|
|
|
|
|||||
(3,403 | ) | (3,054 | ) | |||||
|
|
|
|
|||||
Deferred income tax assets, net |
18,709 | 19,870 | ||||||
Valuation allowance |
(18,709 | ) | (19,870 | ) | ||||
|
|
|
|
|||||
Deferred income tax assets, net |
$ | | $ | | ||||
|
|
|
|
F-61
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows:
Year
Ended December 31, 2010 |
Period from January 1, 2011 through May 26, 2011 |
|||||||||||||||
Amount | Percent | Amount | Percent | |||||||||||||
Computed tax at statutory rates: |
$ | (8,926 | ) | 35.0 | % | $ | (1,206 | ) | 35.0 | % | ||||||
State taxes, net of federal benefits |
(610 | ) | 2.4 | % | (373 | ) | 10.8 | % | ||||||||
Effect of foreign tax rates of subsidiaries |
429 | (1.7 | %) | 329 | (9.5 | %) | ||||||||||
Change in valuation allowance |
1,523 | (6.0 | %) | 1,220 | (35.4 | %) | ||||||||||
U.S./foreign settlements |
1,000 | (3.9 | %) | (425 | ) | 12.3 | % | |||||||||
Goodwill impairment |
5,813 | (22.8 | %) | 5 | (0.1 | %) | ||||||||||
Nondeductible penalties |
131 | (0.5 | %) | 226 | (6.6 | %) | ||||||||||
Uncertain tax positions |
1,877 | (7.4 | %) | 152 | (4.4 | %) | ||||||||||
Meals and entertainment |
23 | (0.1 | %) | 14 | (0.4 | %) | ||||||||||
Other, net |
781 | (3.0 | %) | 265 | (7.7 | %) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 2,041 | (8.0 | %) | $ | 207 | (6.0 | %) | ||||||||
|
|
|
|
|
|
|
|
At May 26, 2011, we had federal net operating loss carryforwards of approximately $5,600. These losses expire in various years between 2024 and 2030, and are subject to limitations on their utilization. We had total foreign net operating loss carryforwards of approximately $15,800, which are subject to limitations on their utilization. Approximately $5,500 of these net operating losses are not currently subject to expiration dates. The remainder, approximately $10,300, expires in 2020.
In addition, the Company has research and development expenditures carried forward of approximately $119 and investment tax credits of approximately $1,005, which can be used to reduce Canadian federal taxable income, expiring in 2029. The benefits of these items have not been recognized in the consolidated financial statements, except to the extent required to reduce the future income tax and liabilities to nil.
Based on the level of historic taxable income and projections for future taxable income over the periods in which the temporary differences are anticipated to reverse, the Company has recorded a full valuation allowance of $18,709 and $19,870 as of December 31, 2010 and May 26, 2011, respectively, sufficient to reduce the deferred tax assets to the amount more-likely-than-not to be realized. The amount of the deferred tax assets considered realizable may be adjusted in the future if the estimated taxable income is modified.
In the past year, there were no undistributed earnings of the Companys foreign subsidiaries. To the extent that any undistributed earnings would have arisen, these earnings are considered to be indefinitely reinvested and, accordingly, no provision for U.S. federal and state income taxes has been provided thereon. Upon repatriation of these earnings, in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign credits) and withholding taxes payable to various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable due to the complexities associated with its hypothetical calculation; however, unrecognized foreign tax credit carry forwards would be available to reduce a portion of the U.S. liability.
The gross amount of unrecognized tax benefits as of May 26, 2011 includes $2,029 of net unrecognized tax benefits that, if recognized, would affect the effective income tax rate. The Company recognized both interest
F-62
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
and penalties related to uncertain tax positions as part of the reserve for uncertain tax positions. At May 26, 2011, the Company had accrued an additional $152 for the uncertain tax positions. The Company is not able to estimate the total amounts of unrecognized tax benefits that will change in the next twelve months.
11. Financial Instruments
The Companys financial instruments consist primarily of cash and cash equivalents, billed and unbilled accounts receivable, accounts payable and debt. The carrying amount of financial instruments is representative of their fair value due to their short maturities.
The majority of the Companys operations are international, giving rise to significant exposure to market risks from changes in foreign exchange rates. In the future, the Company may use derivative financial instruments to reduce these risks, but does not hold or issue financial instruments for trading purposes. These financial instruments are subject to normal credit standards, financial controls, risk management and monitoring procedures.
Currency Risk
The Company has currency exposure arising from significant operations and contracts in multiple jurisdictions. The Company has limited currency exposure to freely-tradable and liquid currencies of first world countries.
Concentration of Credit Risk
Financial instruments that potentially expose the Company to concentration of credit risk consist primarily of cash investments and accounts receivable. The Company places its cash investments with high-credit quality financial institutions and invests primarily in money market funds placed with major banks and financial institutions. The Company believes no significant concentrations of credit risk exist with respect to these cash investments.
Accounts receivable are generally with diversified customers and dispersed across many geographical regions. As of December 31, 2010 and May 26, 2011, there were one and two customer balances, respectively, that comprised more than 10% of the overall account receivable balance. The Company believes no significant concentration of credit risk exists with respect to these accounts receivable. During 2010 and 2011, none of these customers represented more than 10% of the total revenue.
The Company is required to estimate the collectability of its accounts receivable each accounting period and records a reserve for bad debts. A considerable amount of judgment is required in assessing the realization of these receivables, including the current creditworthiness of each customer, current and historical collection history and the related aging of past due balances. The Company evaluates specific accounts when it becomes aware of information indicating that a customer may not be able to meet its financial obligations due to the deterioration of its financial condition, lower credit ratings, bankruptcy or other factors, affecting the ability to render payment. Reserve requirements are based on the facts available and are re-evaluated and adjusted as additional information is received.
F-63
Airwide Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
12. Commitments
The Company leases office space under operating leases that expire on or before December 31, 2012. Future lease payments aggregate $3,665 and include the following amounts payable over the next four years:
December 31, |
||||
2011 (remainder) |
$ | 1,013 | ||
2012 |
1,144 | |||
2013 |
730 | |||
2014 |
389 | |||
2015 |
389 | |||
|
|
|||
$ | 3,665 | |||
|
|
Rent expense for the Company was $1,792 and $1,055 for the year ended December 31, 2010 and period from January 1, 2011 through May 26, 2011, respectively.
13. Profit Sharing Plan
The Company maintains a defined contribution 401(k) plan (the Plan). There were no contributions to the Plan for the year ended December 31, 2010 and the period from January 1, 2011 through May 26, 2011.
The Companys employees in Finland and the UK have defined contribution plans. The cost of the plans for the year ended December 31, 2010 and period from January 2011 through May 26, 2011 was approximately $1,529 and $591, respectively, and is included in operating expenses.
14. Subsequent Events
The Company has evaluated subsequent events from the balance sheet through December 20, 2012, the date at which the consolidated financial statements were available to be issued, and determine that there are no other items to disclose except for the following:
On May 27, 2011 the Company merged with a subsidiary of Mavenir Systems, Inc., and the Company became a wholly-owned subsidiary of Mavenir Systems, Inc., for a total purchase price of $16,901. The transaction was accounted for under the acquisition method of accounting.
F-64
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the estimated costs and expenses, other than underwriting discounts and commissions, to be paid by us in connection with the sale of the shares of common stock being registered hereby.
SEC registration fee |
$ | 11,109 | ||
FINRA filing fee |
13,438 | |||
Listing fee |
* | |||
Printing and engraving expenses |
* | |||
Legal fees and expenses |
* | |||
Accounting fees and expenses |
* | |||
Blue Sky fees and expenses (including legal fees) |
* | |||
Transfer agent and registrar fees and expenses |
* | |||
Miscellaneous |
* | |||
|
|
|||
Total |
* | |||
|
|
* | To be provided by amendment. |
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporations board of directors to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities, including reimbursement for expenses incurred, arising under the Securities Act of 1933, as amended, or the Securities Act. Our amended and restated certificate of incorporation to be in effect upon the completion of this offering provides for indemnification of our directors, officers, employees and other agents to the maximum extent permitted by the Delaware General Corporation Law, and our amended and restated bylaws to be in effect upon the completion of this offering provide for indemnification of our directors, officers, employees and other agents to the maximum extent permitted by the Delaware General Corporation Law. In addition, we have entered into indemnification agreements with our directors, officers and some employees containing provisions that may be in some respects broader than the specific indemnification provisions contained in the Delaware General Corporation Law. The indemnification agreements may require us, among other things, to indemnify our directors against certain liabilities that may arise by reason of their status or service as directors, officers and employees and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified.
We maintain a directors and officers insurance policy.
The underwriting agreement to be entered into in connection with this offering will provide that the underwriters will indemnify us, our directors and certain of our officers against liabilities resulting from information furnished by or on behalf of the underwriters specifically for use in the Registration Statement.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. Please read Item 17. Undertakings for more information on the SECs position regarding such indemnification provisions.
II-1
Item 15. Recent Sales of Unregistered Securities
Since January 1, 2010, we have made sales of the following unregistered securities:
| Between January 1, 2010 and June 30, 2013, we granted stock options under our amended and restated 2005 Stock Plan and 2013 Equity Incentive Plan to purchase an aggregate of 17,005,314 shares of our common stock at exercise prices ranging between $0.09 and $1.20 to a total of 661 employees, directors and consultants. Of these, stock options to purchase an aggregate of 3,167,543 shares have been cancelled without being exercised, 104,510 have been exercised and 13,733,261 remain outstanding as of June 30, 2013. |
| In August 2013, we granted options under our 2013 Equity Incentive Plan to purchase 750,000 shares of our common stock at an exercise price to be equal to the final offering price, of which all remain outstanding. |
| Since January 1, 2010, we issued and sold an aggregate of 1,726,750 shares of our common stock to employees, directors and consultants at exercise prices ranging between $0.06 and $0.73 upon the exercise of stock options granted under our amended and restated 2005 Stock Plan and 2013 Equity Incentive Plan. Of these, no shares have been repurchased and all 1,726,750 shares remain outstanding as of June 30, 2013. |
| In June 2010, we issued an aggregate of 12,100,007 shares of our Series D redeemable convertible preferred stock to ten accredited investors at a per share price of $1.1219, for aggregate consideration of approximately $13.6 million. |
| Between May 2011 and July 2011, we issued an aggregate of 31,885,207 shares of our Series E redeemable convertible preferred stock to fifteen accredited investors at a per share price of $1.2545, for aggregate consideration of approximately $40.0 million. |
| In September and October 2012, we issued warrants to purchase an aggregate of 920,000 shares of our common stock at an exercise price of $0.73 per share. |
| In June 2013, we issued warrants to purchase an aggregate of 1,362,858 shares of our common stock at an exercise price of $0.001 per share. |
Unless otherwise stated, the sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions 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 placed upon the stock certificates issued in these transactions.
II-2
Item 16. Exhibits and Financial Statement Schedules
Exhibit |
Exhibit Table | |
1.1* | Form of Underwriting Agreement. | |
3.1 | Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect. | |
3.2 | Form of Amended and Restated Certificate of Incorporation of the Registrant, to be effective upon completion of the offering. | |
3.3 | Bylaws of the Registrant, as currently in effect. | |
3.4 | Form of Amended and Restated Bylaws of the Registrant, to be effective upon completion of the offering. | |
4.1 | Amended and Restated Investors Rights Agreement, dated May 26, 2011. | |
4.2 | Warrant to Purchase Series C Redeemable Convertible Preferred Stock issued to Comerica Bank on October 3, 2008. | |
4.3 | Warrant to Purchase Series C Redeemable Convertible Preferred Stock issued to Starent Networks Corp. (now a wholly-owned subsidiary of Cisco Systems, Inc.) on October 29, 2008. | |
4.4 | Warrant to Purchase Common Stock issued to Silicon Valley Bank on October 18, 2012. | |
4.5 | Warrant to Purchase Common Stock issued to Westriver Mezzanine Loans, LLC on October 18, 2012. | |
4.6 | Warrant to Purchase Common Stock issued to the Community Foundation of North Texas on September 11, 2012. | |
4.7 | Warrant to Purchase Common Stock issued to Silver Lake Waterman Fund, L.P. on June 4, 2013. | |
5.1* | Opinion of Andrews Kurth LLP. | |
10.1 | Form of Indemnification Agreement for Directors and Officers of the Registrant, as currently in effect. | |
10.2 | Amended and Restated 2005 Stock Plan, as amended. | |
10.3 | Form of Stock Option Agreement Early Exercise for 2005 Stock Plan. | |
10.4 | Form of Stock Option Agreement Standard Exercise for 2005 Stock Plan. | |
10.5 | Form of U.K. Stock Option Agreement for 2005 Stock Plan. | |
10.6 | Form of International Stock Option Agreement for 2005 Stock Plan. | |
10.7 | 2013 Equity Incentive Plan. | |
10.8 | Form of Notice of Grant Early Exercise Option for 2013 Equity Incentive Plan. | |
10.9 | Form of Notice of Grant Standard Exercise Option for 2013 Equity Incentive Plan. | |
10.10 | Form of Notice of Grant Non-Employee Director Option for 2013 Equity Incentive Plan. | |
10.11 | Form of Notice of Grant Restricted Stock Unit for 2013 Equity Incentive Plan. | |
10.12 | Form of Notice of Grant International Option for 2013 Equity Incentive Plan. | |
10.13 | Form of Notice of Grant International Restricted Stock Unit for 2013 Equity Incentive Plan. | |
10.14 | 2013 Employee Stock Purchase Plan. |
II-3
Exhibit |
Exhibit Table | |
10.15 | 2012 Executive Bonus Plan. | |
10.16 | 2012 Sales Commission Plan. | |
10.17.1 | Form of Omnibus Option Amendment for Certain Executive Officers (six months acceleration). | |
10.17.2 | Form of Omnibus Option Amendment for Certain Executive Officers (twelve months acceleration). | |
10.18 | Amended and Restated Executive Employment Agreement, dated December 18, 2012, between the Registrant and Pardeep Kohli. | |
10.19 | Form of Pardeep Kohli Option Agreement for 2005 Stock Plan. | |
10.20 | Amended and Restated Executive Employment Agreement, dated December 18, 2012, between the Registrant and Terry Hungle. | |
10.21 | Executive Employment Agreement, dated December 18, 2012, between the Registrant and Bahram Jalalizadeh. | |
10.22 | Participation Agreement, dated June 27, 2011, between the Registrant and Terence McCabe. | |
10.23 | Separation Agreement, dated August 12, 2013, by and between the Registrant and Matt Dunnett. | |
10.24 | Form of Employment, Confidential Information, and Invention Assignment Agreement. | |
10.25 | Commercial Lease Agreement, dated July 20, 2012, by and between the Registrant and Telecom Commerce III, Ltd. | |
10.26 | Senior Loan and Security Agreement, dated October 18, 2012, by and among the Registrant, Mavenir Holdings, Inc. and Silicon Valley Bank. | |
10.26.1 | Joinder and First Loan Modification to Senior Loan and Security Agreement, dated February 13, 2013, by and among the Registrant, Silicon Valley Bank and certain subsidiaries of the Registrant | |
10.26.2 | Second Loan Modification to Senior Loan and Security Agreement, dated June 4, 2013, by and among the Registrant, Silicon Valley Bank and certain subsidiaries of the Registrant. | |
10.27 | Subordinated Loan and Security Agreement, dated October 18, 2012, by and among the Registrant, Mavenir Holdings, Inc. and Silicon Valley Bank. | |
10.27.1 | Joinder and First Loan Modification to Subordinated Loan and Security Agreement, dated February 13, 2013, by and among the Registrant, Silicon Valley Bank and certain subsidiaries of the Registrant | |
10.27.2 | Second Loan Modification to Subordinated Loan and Security Agreement, dated June 4, 2013, by and among the Registrant, Silicon Valley Bank and certain subsidiaries of the Registrant. | |
10.28 | Intellectual Property Security Agreement, dated October 18, 2012, by and among the Registrant, Mavenir Holdings, Inc. and Silicon Valley Bank. | |
10.29** | Reseller OEM Agreement, dated October 28, 2008, by and between the Registrant and Starent Networks Corp., assigned to Cisco Systems, Inc. as of September 3, 2010 (including amendments and addendums to date). | |
10.29.1 | Extension of Reseller OEM Agreement, dated August 27, 2013, by Cisco Systems, Inc. | |
10.30 | Loan and Security Agreement (Growth Capital Loan), dated as of June 4, 2013, by and among the Registrant, Silver Lake Waterman Fund, L.P. and certain subsidiaries of the Registrant. | |
10.31 | Executive Bonus Plan | |
21.1 | Subsidiaries of the Registrant. |
II-4
Exhibit |
Exhibit Table | |
23.1 | Consent of BDO USA, LLP. | |
23.2* | Consent of Andrews Kurth LLP (included in Exhibit 5.1). | |
24.1 | Power of Attorney (included on the signature pages herein). |
* | To be filed by amendment. |
** | Confidential treatment has been requested for portions of this exhibit. These portions have been omitted from the Registration Statement and submitted separately to the Securities and Exchange Commission. |
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 for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, 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 such director, officer or controlling person in connection with the securities being registered, 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-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, Mavenir Systems, Inc. has duly caused this registration statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Richardson, State of Texas, on the 4th day of October, 2013.
Mavenir Systems, Inc. | ||
By: |
/s/ Pardeep Kohli | |
Pardeep Kohli | ||
President and Chief Executive Officer |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Pardeep Kohli, Terry Hungle and Sam Garrett, and each of them, any of whom may act without the joinder of any other, as his or her true and lawful attorneys-in-fact and agents with full power of substitution and re-substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to sign any registration statement for the same offering covered by the registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done or by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended this registration statement has been signed by the following persons in the capacities indicated on the 4th day of October, 2013.
Signature |
Title | |
/s/ Pardeep Kohli Pardeep Kohli |
President, Chief Executive Officer and Director (Principal Executive Officer) | |
/s/ Terry Hungle Terry Hungle |
Chief Financial Officer (Principal Financial Officer) | |
/s/ David Lunday David Lunday |
Controller (Principal Accounting Officer) | |
/s/ Benjamin L. Scott Benjamin L. Scott |
Chairman of the Board | |
/s/ Ammar H. Hanafi Ammar H. Hanafi |
Director | |
/s/ Jeffrey P. McCarthy Jeffrey P. McCarthy |
Director |
II-6
Signature |
Title | |
/s/ Vivek Mehra Vivek Mehra |
Director | |
/s/ Hubert de Pesquidoux Hubert de Pesquidoux |
Director | |
/s/ Venu Shamapant Venu Shamapant |
Director |
II-7
EXHIBIT INDEX
Exhibit |
Exhibit Table | |
1.1* | Form of Underwriting Agreement. | |
3.1 | Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect. | |
3.2 | Form of Amended and Restated Certificate of Incorporation of the Registrant, to be effective upon completion of the offering. | |
3.3 | Bylaws of the Registrant, as currently in effect. | |
3.4 | Form of Amended and Restated Bylaws of the Registrant, to be effective upon completion of the offering. | |
4.1 | Amended and Restated Investors Rights Agreement, dated May 26, 2011. | |
4.2 | Warrant to Purchase Series C Redeemable Convertible Preferred Stock issued to Comerica Bank on October 3, 2008. | |
4.3 | Warrant to Purchase Series C Redeemable Convertible Preferred Stock issued to Starent Networks Corp. (now a wholly-owned subsidiary of Cisco Systems, Inc.) on October 29, 2008. | |
4.4 | Warrant to Purchase Common Stock issued to Silicon Valley Bank on October 18, 2012. | |
4.5 | Warrant to Purchase Common Stock issued to Westriver Mezzanine Loans, LLC on October 18, 2012. | |
4.6 | Warrant to Purchase Common Stock issued to the Community Foundation of North Texas on September 11, 2012. | |
4.7 | Warrant to Purchase Common Stock issued to Silver Lake Waterman Fund, L.P. on June 4, 2013. | |
5.1* | Opinion of Andrews Kurth LLP. | |
10.1 | Form of Indemnification Agreement for Directors and Officers of the Registrant, as currently in effect. | |
10.2 | Amended and Restated 2005 Stock Plan, as amended. | |
10.3 | Form of Stock Option Agreement Early Exercise for 2005 Stock Plan. | |
10.4 | Form of Stock Option Agreement Standard Exercise for 2005 Stock Plan. | |
10.5 | Form of U.K. Stock Option Agreement for 2005 Stock Plan. | |
10.6 | Form of International Stock Option Agreement for 2005 Stock Plan. | |
10.7 | 2013 Equity Incentive Plan. | |
10.8 | Form of Notice of Grant Early Exercise Option for 2013 Equity Incentive Plan. | |
10.9 | Form of Notice of Grant Standard Exercise Option for 2013 Equity Incentive Plan. | |
10.10 | Form of Notice of Grant Non-Employee Director Option for 2013 Equity Incentive Plan. | |
10.11 | Form of Notice of Grant Restricted Stock Unit for 2013 Equity Incentive Plan. | |
10.12 | Form of Notice of Grant International Option for 2013 Equity Incentive Plan. | |
10.13 | Form of Notice of Grant International Restricted Stock Unit for 2013 Equity Incentive Plan. | |
10.14 | 2013 Employee Stock Purchase Plan. | |
10.15 | 2012 Executive Bonus Plan. |
Exhibit |
Exhibit Table | |
10.16 | 2012 Sales Commission Plan. | |
10.17.1 | Form of Omnibus Option Amendment for Certain Executive Officers (six months acceleration). | |
10.17.2 | Form of Omnibus Option Amendment for Certain Executive Officers (twelve months acceleration). | |
10.18 | Amended and Restated Executive Employment Agreement, dated December 18, 2012, between the Registrant and Pardeep Kohli. | |
10.19 | Form of Pardeep Kohli Option Agreement for 2005 Stock Plan. | |
10.20 | Amended and Restated Executive Employment Agreement, dated December 18, 2012, between the Registrant and Terry Hungle. | |
10.21 | Executive Employment Agreement, dated December 18, 2012, between the Registrant and Bahram Jalalizadeh. | |
10.22 | Participation Agreement, dated June 27, 2011, between the Registrant and Terence McCabe. | |
10.23 | Separation Agreement, dated August 12, 2013, by and between the Registrant and Matt Dunnett. | |
10.24 | Form of Employment, Confidential Information, and Invention Assignment Agreement. | |
10.25 | Commercial Lease Agreement, dated July 20, 2012, by and between the Registrant and Telecom Commerce III, Ltd. | |
10.26 | Senior Loan and Security Agreement, dated October 18, 2012, by and among the Registrant, Mavenir Holdings, Inc. and Silicon Valley Bank. | |
10.26.1 | Joinder and First Loan Modification to Senior Loan and Security Agreement, dated February 13, 2013, by and among the Registrant, Silicon Valley Bank and certain subsidiaries of the Registrant | |
10.26.2 | Second Loan Modification to Senior Loan and Security Agreement, dated June 4, 2013, by and among the Registrant, Silicon Valley Bank and certain subsidiaries of the Registrant. | |
10.27 | Subordinated Loan and Security Agreement, dated October 18, 2012, by and among the Registrant, Mavenir Holdings, Inc. and Silicon Valley Bank. | |
10.27.1 | Joinder and First Loan Modification to Subordinated Loan and Security Agreement, dated February 13, 2013, by and among the Registrant, Silicon Valley Bank and certain subsidiaries of the Registrant | |
10.27.2 | Second Loan Modification to Subordinated Loan and Security Agreement, dated June 4, 2013, by and among the Registrant, Silicon Valley Bank and certain subsidiaries of the Registrant. | |
10.28 | Intellectual Property Security Agreement, dated October 18, 2012, by and among the Registrant, Mavenir Holdings, Inc. and Silicon Valley Bank. | |
10.29** | Reseller OEM Agreement, dated October 28, 2008, by and between the Registrant and Starent Networks Corp., assigned to Cisco Systems, Inc. as of September 3, 2010 (including amendments and addendums to date). | |
10.29.1 | Extension of Reseller OEM Agreement, dated August 27, 2013, by Cisco Systems, Inc. | |
10.30 | Loan and Security Agreement (Growth Capital Loan), dated as of June 4, 2013, by and among the Registrant, Silver Lake Waterman Fund, L.P. and certain subsidiaries of the Registrant. | |
10.31 | Executive Bonus Plan | |
21.1 | Subsidiaries of the Registrant. | |
23.1 | Consent of BDO USA, LLP. |
Exhibit |
Exhibit Table | |
23.2* | Consent of Andrews Kurth LLP (included in Exhibit 5.1). | |
24.1 | Power of Attorney (included on the signature pages herein). |
* | To be filed by amendment. |
** | Confidential treatment has been requested for portions of this exhibit. These portions have been omitted from the Registration Statement and submitted separately to the Securities and Exchange Commission. |
Exhibit 3.1
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Mavenir Systems, Inc., a corporation organized and existing under the laws of the State of Delaware (the Corporation), hereby certifies as follows:
A. The name of the Corporation is Mavenir Systems, Inc.
B. The Certificate of Incorporation of this Corporation was originally filed on March 30, 2006.
C. This Amended and Restated Certificate of Incorporation (the Restated Certificate) was duly adopted by the Corporations directors and stockholders in accordance with the applicable provisions of Sections 228, 242 and 245 of the Delaware General Corporation Law (the DGCL).
D. This Restated Certificate restates, integrates and amends the provisions of the Certificate of Incorporation of this Corporation, as heretofore amended.
E. The text of the Certificate of Incorporation, as heretofore amended, is hereby amended and restated in its entirety to read as follows:
ARTICLE I
The name of this Corporation is Mavenir Systems, Inc.
ARTICLE II
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.
ARTICLE III
The address of the corporations registered office in the State of Delaware is 2711 Centerville Road, Suite 400, City of Wilmington, County of New Castle, State of Delaware 19808. The name of its registered agent at such address is the Corporation Service Company.
ARTICLE IV
The Corporation is authorized to issue two classes of stock to be designated, respectively, Common Stock and Preferred Stock. The total number of shares of capital stock that the Corporation shall have authority to issue is 276,987,915. The total number of shares of Common Stock the Corporation shall have authority to issue is 155,203,902 with a par value of $0.001 per share. The total number of shares of Preferred Stock the Corporation shall have authority to issue is 121,784,013 with a par value of $0.001 per share, 26,137,758 of which shares shall be designated Series A Preferred Stock (the Series A Preferred Stock), 26,727,505 of which shares shall be designated Series B Preferred Stock (the Series B Preferred Stock), 24,683,530 of which shares
shall be designated Series C Preferred Stock (the Series C Preferred Stock), 12,100,007 of which shares shall be designated Series D Preferred Stock (the Series D Preferred Stock) and 32,135,213 of which shares shall be designated Series E Preferred Stock (the Series E Preferred Stock).
The relative rights, preferences, privileges, limitations and restrictions granted to or imposed on the respective classes and series of the shares of capital stock or the holders thereof are as follows:
4.1 Dividends. The holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall be entitled to receive dividends, on a pari passu basis, when, as and if declared by the Corporations Board of Directors, out of any assets legally available therefor, prior and in preference to any declaration or payment of any dividend on the Corporations Common Stock or any other class or series of stock (payable other than in Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (Common Stock Equivalents)) at the rate of (i) $0.0428 per share of Series A Preferred Stock (as adjusted for any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event with respect to such share) per annum, (ii) $0.0614 per share of Series B Preferred Stock (as adjusted for any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event with respect to such share) per annum, (iii) $0.0763 per share of Series C Preferred Stock (as adjusted for any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event with respect to such share) per annum, (iv) $0.0898 per share of Series D Preferred Stock (as adjusted for any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event with respect to such share) per annum and (v) $0.1004 per share of Series E Preferred Stock (as adjusted for any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event with respect to such share) per annum. The right to receive dividends on shares of any series of Preferred Stock shall not be cumulative, and no right to such dividends shall accrue to holders of any series of Preferred Stock by reason of the fact that dividends on such shares are not declared or paid in any year. Upon conversion of any share of any series of Preferred Stock pursuant to subsection (A) or (B) of Section 4.3, all dividends declared but unpaid on such share at the time of conversion shall be paid in cash or shares of Common Stock at the option of the Corporations Board of Directors at the then fair market value as determined in good faith by the Corporations Board of Directors. Except as permitted in this Section 4.1, no dividends shall be declared or paid, and no distribution shall be made, on any shares of Common Stock or any other class or series of stock (other than a dividend payable solely in Common Stock or Common Stock Equivalents) unless (A) a dividend in an amount equal to the dividend described in the first sentence of this Section 4.1 for the current year is paid or set aside for payment on each outstanding share of each series of Preferred Stock and (B) any additional dividends declared or paid in any year are declared or paid, or any distributions made on any shares of Common Stock, among the holders of Preferred Stock and Common Stock then outstanding based on the number of shares of Common Stock held by each such holder (assuming full conversion of each series of Preferred Stock).
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4.2 Liquidation Preference.
(A) Preferred Stock Preference. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the holders of shares of Series E Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the Corporations assets or funds to the holders of the other series of the Preferred Stock, the Corporations Common Stock or any other capital stock of the Corporation ranking junior to the Preferred Stock by reason of their ownership thereof, an amount equal to $1.2545 per share (as adjusted for any stock dividend, stock split or combination with respect to such share after the date upon which the Restated Certificate is filed with the Secretary of State of the State of Delaware (the Filing Date)) (the Series E Original Issue Price) for each share of Series E Preferred Stock held by them, plus an additional amount equal to any dividends declared but unpaid on each such share. If, upon such liquidation, dissolution or winding up, the assets and funds distributed are insufficient to permit the payment to each holder of Series E Preferred Stock of the full aforesaid preferential amounts, the entire assets and funds legally available for distribution shall be distributed ratably to such holders in proportion to the preferential amount each such holder is otherwise entitled to receive with respect to the shares of Series E Preferred Stock held by such holder. Upon the completion of the distribution to the holders of Series E Preferred Stock required by this subsection (A) of Section 4.2, the holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be entitled to receive, on a pari passu basis, prior and in preference to any distribution of any of the Corporations assets or funds to the holders of the Corporations Common Stock or any other capital stock of the Corporation ranking junior to the Preferred Stock by reason of their ownership thereof, an amount equal to (i) $0.535 per share (as adjusted for any stock dividend, stock split or combination with respect to such share after the Filing Date) (the Series A Original Issue Price) for each share of Series A Preferred Stock held by them, plus an additional amount equal to any dividends declared but unpaid on each such share, (ii) $0.767 per share (as adjusted for any stock dividend, stock split or combination with respect to such share after the Filing Date) (the Series B Original Issue Price) for each share of Series B Preferred Stock held by them, plus an additional amount equal to any dividends declared but unpaid on each such share, (iii) $0.9542 per share (as adjusted for any stock dividend, stock split or combination with respect to such share after the Filing Date) (the Series C Original Issue Price) for each share of Series C Preferred Stock held by them, plus an additional amount equal to any dividends declared but unpaid on each such share, and (iv) $1.1219 per share (as adjusted for any stock dividend, stock split or combination with respect to such share after the Filing Date) (the Series D Original Issue Price) for each share of Series D Preferred Stock held by them, plus an additional amount equal to any dividends declared but unpaid on each such share. If, upon such liquidation, dissolution or winding up, the assets and funds distributed are insufficient to permit the payment to each holder of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock of the full aforesaid preferential amounts, the entire assets and funds legally available for distribution shall be distributed ratably to such holders in proportion to the preferential amount each such holder is otherwise entitled to receive with respect to the shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock held by such holder. The Series A Original Issue Price, Series B Original Issue Price, Series C Original Issue Price, Series D Original Issue Price and Series E Original Issue Price are sometimes referred to herein as the Original Issue Price.
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(B) Remaining Assets. Upon the completion of the distribution required by subsection (A) of this Section 4.2, the Corporations remaining assets or funds available for distribution to stockholders shall be distributed ratably to the holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Common Stock, on a pari passu basis, based on the number of shares of Common Stock held by each such holder (assuming full conversion of each series of Preferred Stock) until (i) with respect to the holders of Series A Preferred Stock, such holders shall have received an aggregate of $1.07 per share (as adjusted for any stock dividend, stock split or combination with respect to such share and including amounts paid pursuant to subsection (A) of this Section 4.2), (ii) with respect to the holders of Series B Preferred Stock, such holders shall have received an aggregate of $1.534 per share (as adjusted for any stock dividend, stock split or combination with respect to such share and including amounts paid pursuant to subsection (A) of this Section 4.2), (iii) with respect to the holders of Series C Preferred Stock, such holders shall have received an aggregate of $1.908 per share (as adjusted for any stock dividend, stock split or combination with respect to such share and including amounts paid pursuant to subsection (A) of this Section 4.2), (iv) with respect to the holders of Series D Preferred Stock, such holders shall have received an aggregate of $2.2438 per share (as adjusted for any stock dividend, stock split or combination with respect to such share and including amounts paid pursuant to subsection (A) of this Section 4.2) and (v) with respect to the holders of Series E Preferred Stock, such holders shall have received an aggregate of $3.7635 per share (as adjusted for any stock dividend, stock split or combination with respect to such share and including amounts paid pursuant to subsection (A) of this Section 4.2). After the payment or setting aside for payment to the holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock of the full amounts specified in this Section 4.2(B), the entire remaining assets of the Corporation legally available for distribution shall be distributed ratably to holders of the Common Stock of the Corporation in proportion to the number of shares of Common Stock held by them.
(C) Notwithstanding subsections (A) and (B) of this Section 4.2, solely for purposes of determining the amount each holder of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock is entitled to receive with respect to a liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, each series of Preferred Stock shall be treated as if all holders of such series had converted such holders shares of Preferred Stock into shares of Common Stock immediately prior to such liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, if, as a result of an actual conversion of such series of Preferred Stock (including taking into account the operation of subsection (B) of this Section 4.2 with respect to all Preferred Stock), holders of such series of Preferred Stock would receive (with respect to the shares of such series of Preferred Stock), in the aggregate, an amount greater than the amount that would be distributed to holders of such series of Preferred Stock if such holders had not converted such shares of Preferred Stock into shares of Common Stock. If shares of any series of Preferred Stock are converted to Common Stock or are treated as if they had been converted into Common Stock pursuant to this subsection, then holders of such series of Preferred Stock shall not be entitled to receive any distributions pursuant to subsections (A) and (B) of this Section 4.2 that would otherwise be made to holders of such series of Preferred Stock.
(D) (1) Unless otherwise determined by the holders of (i) a majority of the Series E Preferred Stock, voting as a separate series and (ii) a majority of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock then outstanding, voting
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together as a single class on an as-converted basis, for the purposes of this Section 4.2, a liquidation, dissolution or winding up of the Corporation shall be deemed to include (Y) the acquisition of the Corporation by another entity by means of any transaction or series of related transactions (including, without limitation, any merger, consolidation or other form of reorganization in which outstanding shares of the Corporation are exchanged for securities or other consideration issued, or caused to be issued, by the acquiring entity or its subsidiary, but excluding any transaction effected primarily for the purpose of changing the Corporations jurisdiction of incorporation) that results in the transfer or acquisition of at least a majority of the Corporations voting power to such entity, or (Z) a sale of all or substantially all of the assets of the Corporation or the exclusive license of all or substantially all of the Corporations intellectual property by means of any transaction or series of related transactions (collectively, a Deemed Liquidation).
(2) If any assets of the Corporation distributed to stockholders in connection with any liquidation, dissolution or winding up of the Corporation are other than cash, then the value of such assets shall be their fair market value as determined in good faith by the Corporations Board of Directors; provided, however, any publicly-traded securities shall be valued as follows:
(a) If the securities are then traded on a national securities exchange, then the value of the securities shall be deemed to be the average of the closing prices of the securities on such exchange over the ten (10) trading day period ending five (5) trading days prior to the distribution; and
(b) If the securities are actively traded over-the-counter, then the value of the securities shall be deemed to be the average of the closing bid prices of the securities over the ten (10) trading day period ending five (5) trading days prior to the distribution.
The foregoing methods for valuing non-cash consideration to be distributed in connection with any liquidation, dissolution or winding up of the Corporation shall, with the appropriate approval of the definitive agreements governing such liquidation, dissolution or winding up of the Corporation by the stockholders under the DGCL and this subsection (D), be superseded by the determination of such value set forth in the definitive agreements governing such liquidation, dissolution or winding up of the Corporation.
(3) The Corporation shall give each holder of record of Preferred Stock written notice of a transaction described in subsection (D)(1) not later than twenty (20) days prior to the stockholders meeting called to approve such transaction, or twenty (20) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 4.2, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than twenty (20) days after the Corporation has given the first notice provided for herein or sooner than ten (10) days after the Corporation has given notice of any material changes provided for herein; provided, however, that, subject to compliance with the DGCL, all notice periods set forth in this subsection (D)(3) may be shortened or waived entirely, either prospectively or retroactively and either generally or in a particular instance, upon the written consent of the holders of a majority of the shares of Preferred Stock then outstanding (voting together as a single class, on an as-converted basis).
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(4) In the event the requirements of this subsection (D) are not complied with, the Corporation shall forthwith either:
(a) Cause the closing of the Deemed Liquidation to be postponed until such time as the requirements of this Section 4.2 have been complied with, or
(b) Cancel such transaction, in which event the rights, preferences, privileges and restrictions of the holders of the Preferred Stock shall revert to and be the same as such rights, preferences, privileges and restrictions existing immediately prior to the date of the first notice referred to in subsection (D)(3).
4.3 Conversion. The holders of Preferred Stock have conversion rights as follows:
(A) Right to Convert. Each share of each series of Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price for such series of Preferred Stock by the Conversion Price for such series of Preferred Stock, determined as hereinafter provided, in effect at the time of the conversion (the Conversion Rate). The initial Conversion Price per share for the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall be the Series A Original Issue Price, the Series B Original Issue Price, the Series C Original Issue Price, the Series D Original Issue Price and the Series E Original Issue Price, respectively. Such initial Conversion Price for each series of Preferred Stock shall be subject to adjustment as provided in subsection (D) of this Section 4.3.
(B) Automatic Conversion.
(1) Each share of each series of Preferred Stock shall automatically be converted into fully paid and nonassessable shares of Common Stock at its then effective Conversion Rate immediately prior to the closing of a firm commitment underwritten public offering pursuant to an effective registration statement on Form S-1 under the Securities Act of 1933, as amended (the Securities Act), covering the offer and sale of Common Stock to the public for the account of the Corporation in which the aggregate gross proceeds to the Corporation equal or exceed $50,000,000 (a Qualified IPO).
(2) Each share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall automatically be converted into fully paid and nonassessable shares of Common Stock at its then effective Conversion Rate on the date specified by written consent or agreement of the holders of a majority of the then outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, voting together as a single class on an as-converted basis, delivering written notice of such election to the Company. No series of Preferred Stock listed under this subsection (2) shall be automatically converted pursuant to this Section 4.3(B), unless all series of Preferred Stock listed under subsection (2) then outstanding shall be automatically converted into Common Stock, at the applicable Conversion Rate.
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(3) Each share of Series E Preferred Stock shall automatically be converted into fully paid and nonassessable shares of Common Stock at its then effective Conversion Rate on the date specified by written consent or agreement of the holders of a majority of the then outstanding Series E Preferred Stock, voting as a separate series, by delivering written notice of such election to the Company (each of the events causing conversion referred to in (1), (2) and (3) are referred to herein as an Automatic Conversion Event).
(C) Mechanics of Conversion.
(1) Before any holder of Preferred Stock shall be entitled to convert the same into shares of Common Stock pursuant to Section 4.3(A) above, such holder shall surrender the certificate or certificates therefor, duly endorsed, or an affidavit of loss in a form reasonably acceptable to the Corporation, at the office of the Corporation or of any transfer agent for such Preferred Stock, and shall give written notice to the Corporation at such office that such holder elects to convert the same and shall state therein the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of surrender of the shares of Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date; provided, however, that on the date of an Automatic Conversion Event, the outstanding shares of Preferred Stock to be converted in such Automatic Conversion Event shall be converted automatically without any further action by the holders of such shares and each holder of record of shares of Preferred Stock shall be deemed on such date to be the holder of record of the Common Stock issuable upon such conversion, whether or not (i) the certificates representing such shares are surrendered to the Corporation or its transfer agent, (ii) notice from the Corporation shall have been received by any holder of record of shares of Preferred Stock, or (iii) the certificates evidencing such shares of Common Stock shall not then be actually delivered to such holder; provided further, however, that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such Automatic Conversion Event unless either the certificates evidencing such shares of Preferred Stock are delivered to the Corporation or its transfer agent as provided above, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates. The Corporation shall, as soon as practicable after such delivery, or after such agreement and indemnification, issue and deliver at such office to such holder of Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which the holder shall be entitled as aforesaid and a check payable to the holder in the amount of any cash amounts payable as the result of a conversion into fractional shares of Common Stock, plus any declared and unpaid dividends on the converted Preferred Stock.
(2) If the conversion is in connection with an underwritten offer of securities registered pursuant to the Securities Act or a merger, sale, financing, or liquidation of the Corporation or other event, the conversion may, at the option of any holder tendering Preferred
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Stock for conversion, be conditioned upon the closing of such transaction or upon the occurrence of such event, in which case the person(s) entitled to receive the Common Stock issuable upon such conversion of the Preferred Stock shall not be deemed to have converted such Preferred Stock until immediately prior to the closing of such transaction or the occurrence of such event.
(D) Adjustment of Conversion Price. The Conversion Price for each series of Preferred Stock shall be subject to adjustment from time to time as follows:
(1) (a) If the Corporation shall issue, after the Filing Date, any Additional Stock (as defined in subsection (D)(2)) without consideration or for a consideration per share less than the Conversion Price for any series of Preferred Stock in effect immediately prior to the issuance of such Additional Stock, then (A) with respect to the Series A Preferred Stock, Series B Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, the Conversion Price for such series in effect immediately prior to each such issuance of Additional Stock shall forthwith (except as otherwise provided in this subsection (1)) be adjusted to a price equal to (calculated to the nearest one one-hundredth of one cent) the product obtained by multiplying the Conversion Price for such series of Preferred Stock in effect immediately prior to such issuance of Additional Stock by a fraction, the numerator of which is equal to the sum of (x) the total number of shares of Common Stock outstanding (including any shares of Common Stock deemed to be issued pursuant to subsection (D)(1)(e)(i) and (ii) of this Section 4.3) immediately prior to such issuance of Additional Stock plus (y) the number of shares of Common Stock that the aggregate consideration received by this Corporation for such issuance of Additional Stock would purchase at the Conversion Price for such series of Preferred Stock in effect immediately prior to such issuance of Additional Stock, and the denominator of which is equal to the sum of (x) the total number of shares of Common Stock outstanding (including any shares of Common Stock deemed to be issued pursuant to subsection (D)(1)(e)(i) and (ii) of this Section 4.3) immediately prior to such issuance of Additional Stock plus (y) the number of shares of Additional Stock issued and (B) with respect to the Series C Preferred Stock, the Conversion Price for such series in effect immediately prior to each such issuance of Additional Stock shall forthwith (except as otherwise provided in this subsection (1)) be adjusted to a price equal to the price paid per share for such Additional Stock, unless the price paid per share of such Additional Stock is less than the Series B Original Issue Price, in which case the Conversion Price of the Series C Preferred Stock shall be adjusted to a price equal to the Conversion Price of the Series B Preferred Stock as determined in clause (A) of this subsection (D)(1)(a).
(b) No adjustment in the Conversion Price for any series of Preferred Stock need be made if such adjustment would result in a change in the Conversion Price of less than $0.01. Any adjustment of less than $0.01 that is not made shall be carried forward and shall be made at the time of and together with any subsequent adjustment that, on a cumulative basis, amounts to an adjustment of $0.01 or more in the Conversion Price. Except to the limited extent provided for in subsections (D)(1)(e)(iii) or (iv), no adjustment of the Conversion Price for any series of Preferred Stock pursuant to this subsection (D)(1) shall have the effect of increasing such Conversion Price above the Conversion Price in effect immediately prior to such adjustment.
(c) In the case of the issuance of Additional Stock for cash, the consideration shall be deemed to be the amount of cash paid therefor before deducting any discounts, commissions or other expenses allowed, paid or incurred by the Corporation for any underwriting or otherwise in connection with the issuance and sale thereof.
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(d) In the case of the issuance of Additional Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as determined in good faith by the Corporations Board of Directors (including each of the Preferred Directors (as such term is defined in Section 4.5(C)) irrespective of any accounting treatment.
(e) In the case of the issuance (whether before, on or after the Filing Date) of (i) options to purchase or rights to subscribe for Common Stock, (ii) securities by their terms convertible into or exchangeable for Common Stock or (iii) options to purchase or rights to subscribe for securities by their terms convertible into or exchangeable for Common Stock, the following provisions shall apply for all purposes of subsections (D)(1) and (2):
(i) The aggregate maximum number of shares of Common Stock deliverable upon exercise (assuming the satisfaction of any conditions to exercisability, including without limitation, the passage of time, but without taking into account potential antidilution adjustments) of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in subsections (D)(1)(c) and (D)(1)(d)), if any, received by the Corporation upon the issuance of such options or rights plus the minimum exercise price provided in such options or rights (without taking into account potential antidilution adjustments) for the Common Stock covered thereby.
(ii) The aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange (assuming the satisfaction of any conditions to convertibility or exchangeability, including without limitation, the passage of time, but without taking into account potential antidilution adjustments) for any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a consideration equal to the consideration, if any, received by the Corporation for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the minimum additional consideration, if any, to be received by the Corporation (without taking into account potential antidilution adjustments) upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in subsections (D)(1)(c) and (D)(1)(d)).
(iii) In the event of any change in the number of shares of Common Stock deliverable or in the consideration payable to the Corporation upon exercise of such options or rights or upon conversion of or exchange for such convertible or exchangeable securities, including, but not limited to, a change resulting from the antidilution provisions thereof, the Conversion Price for each series of Preferred Stock, to the extent in any way affected by or computed using such options, rights or securities, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the exercise of any such options or rights or the conversion or exchange of such securities.
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(iv) Upon the expiration of any such options or rights, the termination of any such rights to convert or exchange or the expiration of any options or rights related to such convertible or exchangeable securities, the Conversion Price for each series of Preferred Stock, to the extent in any way affected by or computed using such options, rights or securities or options or rights related to such securities, shall be recomputed to reflect the issuance of only the number of shares of Common Stock (and convertible or exchangeable securities that remain in effect) actually issued upon the exercise of such options or rights, upon the conversion or exchange of such securities or upon the exercise of the options or rights related to such securities.
(v) The number of shares of Common Stock deemed issued and the consideration deemed paid therefor pursuant to subsections (D)(1)(e)(i) and (ii) shall be appropriately adjusted to reflect any change, termination or expiration of the type described in either subsection (D)(1)(e)(iii) or (iv).
(2) Additional Stock shall mean any shares of Common Stock issued (or deemed to have been issued pursuant to subsection (D)(1)(e) of this Section 4.3) by the Corporation after the Filing Date other than:
(a) Shares of Common Stock or Common Stock Equivalents issued pursuant to an event or transaction described in subsection (D)(3) of this Section 4.3;
(b) Shares of Common Stock issued or issuable upon conversion of any series of Preferred Stock, or as dividends or distributions on any series of Preferred Stock;
(c) Shares of Common Stock issued (or deemed to have been issued pursuant to subsection (D)(1)(e) of this Section 4.3) to the Corporations employees, officers, directors, consultants, advisors or services providers or for charitable purposes pursuant to and in accordance with Corporations 2005 Stock Plan or any other plan, agreement or similar arrangement approved by the Corporations Board of Directors, provided such issuance is approved by the Corporations Board of Directors;
(d) Shares of Common Stock issued (or deemed to have been issued pursuant to subsection (D)(1)(e) of this Section 4.3) to vendors, banks or equipment lessors, provided such issuance is approved by the Corporations Board of Directors with such approval including at least two (2) of the Preferred Directors and is primarily for non-equity financing purposes;
(e) Shares of Common Stock issued (or deemed to have been issued pursuant to subsection (D)(1)(e) of this Section 4.3) in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships, provided such issuance is approved by the Corporations Board of Directors with such approval including at least two (2) of the Preferred Directors and is primarily for non-equity financing purposes;
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(f) Shares of Common Stock issued (or deemed to have been issued pursuant to subsection (D)(1)(e) of this Section 4.3) in connection with a bona fide business acquisition of or by the Corporation (whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise), provided such acquisition is approved by the Corporations Board of Directors with such approval including at least two (2) of the Preferred Directors; or
(g) Shares of Common Stock issued in a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act pursuant to which all outstanding shares of each series of Preferred Stock are converted to Common Stock.
(3) Subdivision, etc. In the event the Corporation should at any time or from time to time after the Filing Date, fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or Common Stock Equivalents without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price for each series of Preferred Stock shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents.
(4) Combination. If the number of shares of Common Stock outstanding at any time after the Filing Date is decreased by a combination of the outstanding shares of Common Stock, then, on the effective date of such combination, the Conversion Price for each series of Preferred Stock shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of any shares of Preferred Stock shall be decreased in proportion to such decrease in outstanding shares.
(E) Other Distributions. In the event the Corporation shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by the Corporation or other persons, assets (excluding cash dividends) or options or rights not referred to in subsection (D)(3) of this Section 4.3, then, in each such case for the purpose of this subsection (E), the holders of Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock of the Corporation into which their respective shares of Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of the Corporation entitled to receive such distribution.
(F) Recapitalizations. If, at any time or from time to time after the Filing Date, there shall be a recapitalization of the Corporations Common Stock (other than (x) a subdivision or combination provided for in subsections (D)(3) or (D)(4) of this Section 4.3 or (y) a Deemed Liquidation as defined in Section 4.2(D)(1)) provision shall be made so that the holders of each series of Preferred Stock shall thereafter be entitled to receive upon conversion of each such series of Preferred Stock the number of shares of stock or other securities or property of the Corporation or
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otherwise, to which a holder of Common Stock deliverable upon conversion of such series of Preferred Stock would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4.3 with respect to the rights of the holders of each series of Preferred Stock after the recapitalization to the end that the provisions of this Section 4.3 (including adjustment of the Conversion Price then in effect and the number of shares issuable upon conversion of each series of Preferred Stock) shall be applicable after that event as nearly equivalent as prior to that event as may be practicable.
(G) No Impairment. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4.3 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of each series of Preferred Stock set forth in this Section 4.3 against impairment. Notwithstanding the foregoing, any action taken with the requisite stockholder consent pursuant to the terms of the Restated Certificate or the DGCL shall not be deemed to be an impairment.
(H) No Fractional Shares and Certificate as to Adjustment.
(1) No fractional shares shall be issued upon the conversion of any share of any series of Preferred Stock and, in lieu of any fractional shares to which any holder of Preferred Stock would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock on the date of conversion as determined in good faith by a majority of the Board of Directors. Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion.
(2) Upon the occurrence of each adjustment or readjustment of the Conversion Rate for any series of Preferred Stock pursuant to this Section 4.3, the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of such series of Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon written request at any time of any holder of any series of Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) all such adjustments and readjustments, (ii) the Conversion Rate at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property that at the time would be received upon the conversion of such holders shares of Preferred Stock.
(I) Notices of Record Date. In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property or to receive any other right, the Corporation shall mail to each holder of Preferred Stock
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at least fifteen (15) business days prior to such record date, a notice specifying the date on which any such record is to be taken for the purpose of such dividend or distribution or right, and the amount and character of such dividend, distribution or right; provided, however, that, subject to compliance with the DGCL, all notice periods set forth in this subsection (I) may be shortened or waived entirely, either prospectively or retroactively and either generally or in a particular instance, upon the written consent of the holders of a majority of the shares of Preferred Stock then outstanding (voting together as a single class, on an as-converted basis).
(J) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of Preferred Stock such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Preferred Stock, the Corporation will take such corporate action as may, based upon advice of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose, including, without limitation, engaging commercially reasonable efforts to obtain the requisite stockholder approval for any necessary amendment to these Restated Certificate.
(K) Special Mandatory Conversion.
(1) In the event that:
(a) the Corporation consummates one or more sales of its equity securities (each, a Financing) after the date that the Corporation first issues shares of Series E Preferred Stock (the Series E Original Issue Date) and:
(i) following the approval and determination that such Financing shall constitute a Mandatory Offering (as defined below) by the Corporations Board of Directors (with such approval including at least two (2) of the Preferred Directors), the Corporation shall have delivered a notice (Notice) to each holder of at least 1,000,000 shares (as adjusted for any stock dividend, stock split or combination with respect to such shares) of Preferred Stock and any of their transferees or assignees of Preferred Stock (each, a Major Holder): (1) stating the Corporations bona fide intention to consummate the Financing, (2) indicating the aggregate number of securities to be offered in the Financing and the number of such securities to be offered to the Major Holders, as determined by the Corporations Board of Directors in its sole discretion, (3) indicating the price and terms upon which it proposes to offer such securities, (4) identifying the Pro Rata Share (as defined below) of each Major Holder, and (5) offering each Major Holder the right to purchase such Major Holders Pro Rata Share within the time periods set forth in the Notice;
(ii) at least one (1) of the Major Holders participates in the Financing (a Financing that meets each of the requirements set forth in subsections (i) and (ii) of this subsection (K)(1)(a), a Mandatory Offering) in a portion not less than such Major Holders full Pro Rata Share; and
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(iii) a Major Holder does not acquire or cause an affiliate or partner of such Major Holder to acquire at least its Pro Rata Share within the time periods set forth in the Notice (a Non-Participating Major Holder);
(b) then a percentage of each Non-Participating Major Holders shares of each series of Preferred Stock equal to the percentage of such Non-Participating Major Holders Pro Rata Share not acquired by such Non-Participating Major Holder shall automatically and without further action on the part of such holder be converted, effective upon, subject to, and concurrently with, the consummation of the Mandatory Offering (the Mandatory Offering Date), into shares of Common Stock of the Corporation at the Conversion Rate in effect for such shares immediately prior to, and without giving effect to any adjustment to such Conversion Rate that may otherwise occur as a result of, the Mandatory Offering. For purposes of this Section 4.3(K), each Major Holders Pro Rata Share shall be an amount determined by multiplying the aggregate number of equity securities to be offered to the Major Holders as specified in the Notice by a fraction, the numerator of which shall be the number of shares of Common Stock then issued or issuable upon conversion of the Preferred Stock (and all securities convertible into, or exercisable or exchangeable for shares of Preferred Stock) then held by such Major Holder and the denominator of which shall be the total number of shares of Common Stock then issued or issuable upon conversion of the Preferred Stock (and all securities convertible into, or exercisable or exchangeable for shares of Preferred Stock) then held by all Major Holders. For purposes of calculating a Major Holders Pro Rata Share, the applicable number of shares of Common Stock then issued or issuable upon conversion of the Preferred Stock shall be calculated based on the number of shares of Preferred Stock (and all securities convertible into, or exercisable or exchangeable for shares of Preferred Stock) outstanding immediately prior to the closing of, and without giving effect to any adjustment to such Conversion Rate that may otherwise occur as a result of, the Mandatory Offering.
(2) The holder of any shares of any series of Preferred Stock converted pursuant to this Section 4.3(K) shall deliver to the Corporation during regular business hours at the office of any transfer agent of the Corporation for the Preferred Stock, or at such other place as may be designated by the Corporation, the certificate or certificates for the shares so converted, duly endorsed or assigned in blank or to the Corporation. As promptly as practicable thereafter, the Corporation shall issue and deliver to such holder, at the place designated by such holder, a certificate or certificates for the number of full shares of Common Stock to be issued and such holder shall be deemed to have become a stockholder of record of Common Stock on the Mandatory Offering Date, unless the transfer books of the Corporation are closed on that date, in which event such holder shall be deemed to have become a stockholder of record of Common Stock on the next succeeding date on which the transfer books are open.
(3) Notwithstanding the foregoing, paragraphs (1) and (2) of this Section 4.3(K) shall not apply to Starent Networks LLC, Cisco Systems, Inc., or any of their respective affiliates.
(L) Waiver of Adjustment of Conversion Price. The holders of a majority of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock then outstanding, voting as a single class on an as-converted basis (which determination may
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be either prospective or retroactive and either generally or in a particular instance, and shall bind all future holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock) may waive the rights provided by subsection (D) of this Section 4.3 with respect to the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock. The holders of a majority of the Series E Preferred Stock then outstanding (which determination may be either prospective or retroactive and either generally or in a particular instance, and shall bind all future holders of Series E Preferred Stock) may waive the rights provided by subsection (D) of this Section 4.3 with respect to the Series E Preferred Stock.
4.4 Redemption.
(A) Right to Redemption. Upon receipt of a written request from the holders of a majority of the then outstanding shares of (x) Series E Preferred Stock, voting as a separate series, and (y) Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, voting together as a single class (the Redemption Request), at any time on or after the fourth (4th) anniversary of the Series E Original Issue Date, the Corporation shall redeem all, but not less than all, of the shares of Preferred Stock then outstanding in three (3) equal annual installments (each installment date, a Redemption Date), commencing on a date not more than forty five (45) days after the receipt of the Redemption Request, for a price per share equal to the appropriate Original Issue Price plus any declared and unpaid dividends per share for such series of Preferred Stock (the Redemption Price). On each Redemption Date, the Corporation shall redeem, on a pro rata basis in accordance with the number of shares of each series of Preferred Stock owned by each holder (except as set forth in this Section 4.4(A)), that number of outstanding shares of each series of Preferred Stock determined by dividing (i) the total number of shares of such series of Preferred Stock outstanding immediately prior to such Redemption Date by (ii) the number of remaining Redemption Dates (including the Redemption Date to which such calculation applies) (such number, the Eligible Shares in respect of such series). The Corporation shall on each such Redemption Date redeem up to the maximum amount the Corporation may lawfully redeem out of funds legally available therefore in accordance with subsection (B) of this Section 4.4. If on any Redemption Date, the number of shares of Preferred Stock that may then be legally redeemed by the Corporation is less than the number of such shares to be redeemed, then all of the Eligible Shares of Series E Preferred Stock in respect of such Redemption Date shall be redeemed for the applicable Redemption Price prior to the redemption of the Eligible Shares of any other series of Preferred Stock in respect of such Redemption Date and then the remaining Eligible Shares that should have been redeemed in respect of such Redemption Date, but were not, will be redeemed on a pro rata basis from any additional legally available funds or as soon as the Corporation has legally available funds therefor.
(B) Redemption Procedure. Subject to subsection (A) of this Section 4.4, within fifteen (15) days of the receipt by the Corporation of the Redemption Request, with respect to the first Redemption Date, and not less than thirty (30) days prior to the second and third Redemption Dates, the Corporation shall mail, first class postage prepaid, written notice (the Notice of Redemption) to each holder of record (at the close of business on the business day preceding the day on which notice is given) of Preferred Stock, at the address last shown on the records of the Corporation for such holder or given by the holder to the Corporation, for the purpose of notifying such holder of the redemption to be effected. The Notice of Redemption shall specify the applicable
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Redemption Date, the number of shares of each series of Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date specified in the Notice of Redemption, and the place at which payment shall be made, which shall be the principal offices of the Corporation or such other place as shall be mutually agreeable to the Corporation and holders of a majority of the shares of Preferred Stock then outstanding, on an as-converted basis. The Notice of Redemption shall call upon each holder of Preferred Stock to either (i) surrender to the Corporation, in the manner and at the place designated, such holders certificate or certificates representing the shares to be redeemed or (ii) convert such Preferred Stock into Common Stock prior to the applicable Redemption Date in accordance with the provisions of Section 4.3 above. Subject to Section 4.4 (C), on each Redemption Date, the Corporation shall pay the Redemption Price in cash or by check to the order of the person whose name appears on the certificate or certificates of the Preferred Stock that (i) shall not have been converted pursuant to Section 4.3 hereof and (ii) shall have been surrendered to the Corporation in the manner and at the place designated in the Notice of Redemption and thereupon each surrendered certificate shall be canceled.
(C) Effect of Redemption. From and after each Redemption Date, unless there shall have been a default in payment of the Redemption Price, all rights of the holders of the shares of any series of Preferred Stock to be redeemed on a Redemption Date (except the right to receive their respective Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever. Subject to the last sentence of Section 4.4(A), if the funds of the Corporation legally available for redemption on any Redemption Date are insufficient to redeem the total number of shares requested to be redeemed on such date, those funds which are legally available will be used to redeem the maximum possible number of such shares ratably among the holders of such shares to be redeemed based upon the proceeds to be received by them pursuant to this Section 4.4. The shares not redeemed shall remain outstanding and be entitled to all the rights and preferences provided herein. At any time and from time to time thereafter when additional funds of the Corporation are legally available for the redemption of shares not redeemed, such funds will immediately be irrevocably (subject to such funds becoming legally unavailable for distribution) set aside for the redemption of the balance of the shares which the Corporation has become obligated to redeem on any Redemption Date but which it has not redeemed.
4.5 Voting.
(A) General. Each holder of each outstanding share of each series of Preferred Stock shall be entitled to the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such holder are then convertible (as adjusted from time to time pursuant to Section 4.3 hereof) at each meeting of stockholders of the Corporation (and pursuant to written consent of stockholders in lieu of meetings) with respect to any and all matters presented to the stockholders of the Corporation for their action or consideration. Except as provided by law or by the provisions of this Section 4.5 or by Section 4.6 below, holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall vote together with the holders of Common Stock as a single class on all actions to be taken by the stockholders of the Corporation, including, but not limited to actions amending this Restated Certificate to increase the number of authorized shares of Common Stock.
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Fractional votes shall not, however, be permitted and any fractional voting resulting from the above formula (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted) shall be rounded down to the nearest whole number.
(B) Adjustment in Authorized Common Stock. Without limiting the generality of Section 4.5(A), and in accordance with the provisions of Section 242(b)(2) of the DGCL, the number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares of Common Stock then outstanding) by the affirmative vote of the holders of a majority of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Common Stock, voting together as one class and not as separate classes or series, with each holder of Preferred Stock having that number of votes per share as is equal to the number of shares of Common Stock into which each such share of Preferred Stock held by such holder could be converted on the date for determination of stockholders entitled to vote on such increase or decrease.
(C) Election of Directors.
(1) The holders of Common Stock, voting as a single class, shall be entitled to elect two (2) members of the Corporations Board of Directors at each meeting or pursuant to each written consent of the Corporations holders of Common Stock for the election of directors (the Common Directors). The holders of Series A Preferred Stock shall be entitled to elect two (2) members of the Corporations Board of Directors at each meeting or pursuant to each written consent of the Corporations holders of Series A Preferred Stock for the election of directors (the Series A Directors). The holders of Series B Preferred Stock shall be entitled to elect one (1) member of the Corporations Board of Directors at each meeting or pursuant to each written consent of the Corporations holders of Series B Preferred Stock for the election of directors (the Series B Director,). The holders of Series E Preferred Stock shall be entitled to elect one (1) member of the Corporations Board of Directors at each meeting or pursuant to each written consent of the Corporations holders of Series E Preferred Stock for the election of directors (the Series E Director, and together with the Series A Directors and the Series B Director, the Preferred Directors). The holders of a majority of the then outstanding Preferred Stock and Common Stock, voting together as a single class and on an as-converted basis, shall be entitled to elect the remaining members of the Corporations Board of Directors at each meeting or pursuant to each written consent of the Corporations stockholders for the election of directors.
(2) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by Section 4.5(C)(1), vacancies and newly created directorships of such class or classes or series may be filled by at least a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected, or, if there is no sole remaining director then in office, by the affirmative vote of the holders of at least a majority of the shares of that class or classes or series.
(3) Any director who was elected by a specified class or classes of stock or series thereof may be removed during his or her term of office, either for or without cause, by, and only by, the affirmative vote of the holders of at least a majority of the shares of the class or classes of stock or series thereof that are entitled to elect such director. Such vote may be given at a special meeting of such stockholders duly called or by an action by written consent for that purpose.
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4.6 Protective Provisions.
(A) So long as any shares of Preferred Stock are outstanding, the Corporation shall not, without first obtaining the approval (by vote or written consent) of the holders of a majority of the Preferred Stock then outstanding, voting as a single class on an as-converted basis, either directly or by amendment, merger, consolidation or otherwise:
(1) Authorize, create or issue any new class or series of equity securities, or reclassify any existing capital stock into any new class or series of equity securities, having any preference or priority as to voting, dividends, or distribution of assets upon liquidation, merger or otherwise that is superior to or on a parity with any such preference or priority of any series of Preferred Stock then outstanding;
(2) Effect a liquidation, dissolution or winding up of the Corporation, including any Deemed Liquidation;
(3) Authorize, issue, or obligate the Corporation to issue any shares of any series of Preferred Stock after the first date on which any shares of such series were issued, or increase or decrease (other than by redemption or conversion) the number of authorized shares of any series of Preferred Stock;
(4) Declare or pay any cash dividends or other distribution (other than liquidation payments pursuant to Section 4.2 hereof or dividends to the holders of Preferred Stock pursuant to the first sentence of Section 4.1 hereof) on any equity securities prior to any series of Preferred Stock;
(5) Redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any shares of capital stock of the Corporation; provided, however, that this restriction shall not apply to (i) the repurchase of shares of Common Stock at the original cost from employees, officers, directors, consultants or other persons performing services for this Corporation pursuant to agreements under which this Corporation has the right to repurchase such shares upon the occurrence of certain events, such as the termination of services, (ii) the redemption of Preferred Stock by the Corporation pursuant to Section 4.4, (iii) the net exercise of any warrant of the Corporation, and (iv) the cashless exercise of stock options pursuant to the Corporations 2005 Stock Plan;
(6) Issue any new equity securities for consideration other than cash, other than pursuant to the Corporations 2005 Stock Plan, unless such issuance is approved by the Corporations Board of Directors (including the approval of at least two (2) of the Preferred Directors);
(7) Enter into any transaction with any employee, officer, director or stockholder of the Corporation or member of his or her immediate family, other than advances to employees for travel or other business expenses incurred in the ordinary course of business, unless such transaction is approved by the Corporations Board of Directors (including the approval of at least two (2) of the Preferred Directors);
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(8) Incur indebtedness in excess of $2,000,000 in the aggregate;
(9) Make any loans or advances to, or guarantee the indebtedness or obligations of, any person, other than advances to employees for travel or other business expenses incurred in the ordinary course of business, unless such loan, advance or guarantee is approved by the Corporations Board of Directors (including the approval of at least two (2) of the Preferred Directors);
(10) Change the Corporations primary line of business, unless such change is approved by the Corporations Board of Directors (including the approval of at least two (2) of the Preferred Directors);
(11) Hire any senior executive officer of the Company, unless such hiring is approved by the Corporations Board of Directors (including the approval of at least two (2) of the Preferred Directors);
(12) Own or control, directly or indirectly, any interest in any corporation, partnership, limited liability company, association or other business entity that is not a wholly-owned subsidiary of the Corporation, unless such ownership or control is approved by the Corporations Board of Directors (including the approval of at least two (2) of the Preferred Directors);
(13) Increase or decrease the number of authorized directors of the Corporations Board of Directors;
(14) Increase the number of shares of Common Stock reserved for issuance pursuant to the Corporations 2005 Stock Plan or create any new equity incentive plan;
(15) Amend, alter or repeal any provision of the Restated Certificate or Bylaws; or
(16) Enter into any agreement or commitment to do any of the things described in this Section 4.6(A), unless the effectiveness of such agreement or commitment or action described in this Section 4.6(A) is conditioned upon the Corporation obtaining the approval required by this Section 4.6(A).
The provisions of this Section 4.6(A) shall be in addition to any rights which any holder of Preferred Stock may have under the DGCL.
(B) So long as any shares of Series B Preferred Stock are outstanding, the Corporation shall not, without first obtaining the approval (by vote or written consent) of the holders of at least two-thirds (2/3) of the Series B Preferred Stock then outstanding, voting as a separate class, either directly or by amendment, merger, consolidation or otherwise:
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(1) Authorize, issue, or obligate the Corporation to issue any shares of Series B Preferred Stock after the initial date that shares of Series B Preferred Stock were initially issued (the Series B Original Issue Date) (other than pursuant to the terms of the Series B Preferred Stock Purchase Agreement dated as of the Series B Original Issue Date), or increase or decrease (other than by redemption or conversion) the number of authorized shares of Series B Preferred Stock;
(2) Take any action that would alter, change or amend the powers, preferences or rights of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock in such a manner that would affect the powers, preferences or rights of the Series B Preferred Stock in an adversely different manner from the Series A Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock; or
(3) Enter into any agreement or commitment to do any of the things described in this Section 4.6(B), unless the effectiveness of such agreement or commitment or action described in this Section 4.6(B) is conditioned upon the Corporation obtaining the approval required by this Section 4.6(B).
The provisions of this Section 4.6(B) shall be in addition to any rights which any holder of Series B Preferred Stock may have under the DGCL.
(C) So long as any shares of Series C Preferred Stock are outstanding, the Corporation shall not, without first obtaining the approval (by vote or written consent) of the holders of at least two-thirds (2/3) of the Series C Preferred Stock then outstanding, voting as a separate class, either directly or by amendment, merger, consolidation or otherwise:
(1) Authorize, issue, or obligate the Corporation to issue any shares of Series C Preferred Stock after the initial date that shares of Series C Preferred Stock were initially issued (the Series C Original Issue Date) (other than pursuant to the terms of the Series C Preferred Stock Purchase Agreement dated as of the Series C Original Issue Date, as amended after the date of the Series C Original Issue Date (including pursuant to any subsequent closing provisions contained therein), or pursuant to the terms of any stock purchase warrant issued by the Corporation and outstanding on the date of filing of this Restated Certificate) or increase or decrease (other than by redemption or conversion) the number of authorized shares of Series C Preferred Stock;
(2) Take any action that would alter, change or amend the powers, preferences or rights of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock in such a manner that would affect the powers, preferences or rights of the Series C Preferred Stock in an adversely different manner from the Series A Preferred Stock, Series B Preferred Stock, Series D Preferred Stock or Series E Preferred Stock; or
(3) Enter into any agreement or commitment to do any of the things described in this Section 4.6(C), unless the effectiveness of such agreement or commitment or action described in this Section 4.6(C) is conditioned upon the Corporation obtaining the approval required by this Section 4.6(C).
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The provisions of this Section 4.6(C) shall be in addition to any rights which any holder of Series C Preferred Stock may have under the DGCL.
(D) So long as any shares of Series D Preferred Stock are outstanding, the Corporation shall not, without first obtaining the approval (by vote or written consent) of the holders of at least two-thirds (2/3) of the Series D Preferred Stock then outstanding, voting as a separate class, either directly or by amendment, merger, consolidation or otherwise:
(1) Authorize, issue, or obligate the Corporation to issue any shares of Series D Preferred Stock after the initial date that shares of Series D Preferred Stock were initially issued (the Series D Original Issue Date) (other than pursuant to the terms of the Series D Preferred Stock Purchase Agreement dated as of the Series D Original Issue Date, as amended after the date of the Series D Original Issue Date (including pursuant to any subsequent closing provisions contained therein) or increase or decrease (other than by redemption or conversion) the number of authorized shares of Series D Preferred Stock;
(2) Take any action that would alter, change or amend the powers, preferences or rights of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock or Series E Preferred Stock in such a manner that would affect the powers, preferences or rights of the Series D Preferred Stock in an adversely different manner from the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series E Preferred Stock; or
(3) Enter into any agreement or commitment to do any of the things described in this Section 4.6(D), unless the effectiveness of such agreement or commitment or action described in this Section 4.6(D) is conditioned upon the Corporation obtaining the approval required by this Section 4.6(D).
The provisions of this Section 4.6(D) shall be in addition to any rights which any holder of Series D Preferred Stock may have under the DGCL.
(E) So long as any shares of Series E Preferred Stock are outstanding, the Corporation shall not, without first obtaining the approval (by vote or written consent) of the holders of a majority of the Series E Preferred Stock then outstanding, voting as a separate class, either directly or by amendment, merger, consolidation or otherwise:
(1) Authorize, issue, or obligate the Corporation to issue any shares of Series E Preferred Stock after the Series E Original Issue Date (other than pursuant to the terms of the Series E Preferred Stock Purchase Agreement dated as of the Series E Original Issue Date, as amended after the date of the Series E Original Issue Date (including pursuant to any subsequent closing provisions contained therein)) or increase or decrease (other than by redemption or conversion) the number of authorized shares of Series E Preferred Stock;
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(2) Take any action that would alter, change or amend the powers, preferences or rights of the Series E Preferred Stock;
(3) Reclassify any existing equity security into any new class or series of equity securities, having any preference or priority as to voting, dividends, or distribution of assets upon liquidation, merger or otherwise that is superior to or on a parity with any such preference or priority of the Series E Preferred Stock;
(4) Authorize, create or issue any new equity security having any preference or priority as to voting, dividends, or distribution of assets upon liquidation, merger or otherwise that is superior to any such preference or priority of the Series E Preferred Stock or having a per share preference or priority as to distribution of assets upon liquidation, merger or otherwise that is greater than the actual cost per share paid for such security, plus declared but unpaid dividends thereon;
(5) Declare or pay any cash dividends or other distribution on any equity securities (other than liquidation payments pursuant to Section 4.2 hereof);
(6) Redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any shares of capital stock of the Corporation; provided, however, that this restriction shall not apply to (i) the repurchase of shares of Common Stock at the original cost from employees, officers, directors, consultants or other persons performing services for this Corporation pursuant to agreements under which this Corporation has the right to repurchase such shares upon the occurrence of certain events, such as the termination of services, (ii) the redemption of Preferred Stock by the Corporation pursuant to Section 4.4, (iii) the net exercise of any warrant of the Corporation, and (iv) the cashless exercise of stock options pursuant to the Corporations 2005 Stock Plan;
(7) Take any action that would result in the Series E Preferred Stock automatically converting to Common Stock in any situation other than a Qualified IPO or pursuant Section 4.3(K) of this Restated Certificate; or
(8) Enter into any agreement or commitment to do any of the things described in this Section 4.6(E), unless the effectiveness of such agreement or commitment or action described in this Section 4.6(E) is conditioned upon the Corporation obtaining the approval required by this Section 4.6(E).
The provisions of this Section 4.6(E) shall be in addition to any rights which any holder of Series E Preferred Stock may have under the DGCL.
(F) So long as any shares of Preferred Stock are outstanding, the Company shall not, without the approval of the holders of at least two-thirds of the Preferred Stock, voting as a single class on an as-converted basis, either directly or by amendment, merger, consolidation or otherwise, consummate a public offering of its equity securities, unless the public offering price per share (before deducting underwriting commissions and expenses) is at least $3.7635 per share (as adjusted for any stock dividend, stock split or combination with respect to such share), in which case the separate vote of the Preferred Stock will not be required.
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4.7 Status of Redeemed or Converted Stock. In the event any shares of any series of Preferred Stock are converted pursuant to Section 4.3 or redeemed pursuant to Section (K), the Corporation shall never again issue the shares so converted or redeemed and all such shares so converted or redeemed shall, upon such conversion or redemption, cease to be a part of the Corporations authorized or outstanding stock. The Corporations Certificate of Incorporation shall be appropriately amended to effect the corresponding reduction in the Corporations authorized stock.
4.8 Notices. Any notice required by the provisions of Sections 4.2, 4.3 and 4.4 to be given to the holders of shares of any series of Preferred Stock shall be in writing and shall be delivered personally by hand or by courier, mailed by United States first-class mail, postage prepaid, sent by facsimile or sent by electronic mail directed to each holder of record at such holders address, facsimile number or electronic mail address appearing on the Corporations books, or, if to an overseas address, via a recognized overseas air courier service. Any such notice shall be effective or deemed given on the date of delivery, mailing, or confirmed facsimile transfer (or if overseas, two (2) business days after delivery to a recognized overseas air courier service).
4.9 Common Stock
(A) Dividend Rights. Subject to the prior rights of holders of all classes of stock at the time outstanding having prior rights as to dividends, the holders of the Common Stock shall be entitled to receive noncumulative dividends, when, as and if declared by the Board of Directors, out of any assets of the Corporation legally available therefor.
(B) Liquidation Rights. Upon the liquidation, dissolution or winding up of the Corporation, the assets of the Corporation shall be distributed as provided in Section 4.2 hereof.
(C) Voting Rights. The holder of each share of Common Stock shall have the right to one (1) vote, shall be entitled to notice of any stockholders meeting in accordance with the Bylaws of the Corporation, and shall be entitled to vote upon such matters and in such manner as may be provided by law and as provided in Section 4.5 hereof.
(D) Redemption. The holders of shares of Common Stock shall not have the right to require the redemption of such shares by the Corporation.
ARTICLE V
Except as may otherwise be provided in this Restated Certificate, in furtherance and not in limitation of the powers conferred by the laws of the state of Delaware, the Corporations Board of Directors is expressly authorized to make, alter, amend or repeal the Corporations Bylaws.
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ARTICLE VI
Elections of directors need not be by written ballot unless the Corporations Bylaws shall so provide.
ARTICLE VII
7.1 Limitation of Directors Liability. To the fullest extent permitted by the DGCL, as the same exists or may hereafter be amended, a director of this Corporation shall not be personally liable to this Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.
7.2 Indemnification of Directors and Officers. To the fullest extent permitted by applicable law, this Corporation shall provide indemnification of, and advancement of expenses to, directors and officers, and is authorized to provide indemnification of, and advancement of expenses to, directors, officers, employees and other agents of this Corporation and any other persons to which applicable law permits this Corporation to provide indemnification.
7.3 Repeal or Modification. Any repeal or modification of this Article VII, by amendment of this Article VII or by operation of law, shall not adversely affect any right or protection of a director, officer, employee or other agent of this Corporation existing at the time of, or increase the liability of any such person with respect to any acts or omissions in their capacity as a director, officer, employee, or other agent of the corporation occurring prior to, such repeal or modification.
ARTICLE VIII
Subject to Section 4.6 of Article IV of this Restated Certificate, the Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
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IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be signed by its President on May 24, 2011.
MAVENIR SYSTEMS, INC. |
/s/ Pardeep Kohli |
Pardeep Kohli, President |
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
SIGNATURE PAGE
Exhibit 3.2
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Mavenir Systems, Inc. (the Corporation), a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the DGCL), does hereby certify:
FIRST: That the Corporation was originally incorporated pursuant to the DGCL on March 30, 2006 under the name Mavenir Systems, Inc.
SECOND: The Amended and Restated Certificate of Incorporation of the Corporation in the form attached hereto as Exhibit A (the Certificate of Incorporation) has been duly adopted in accordance with the provisions of Sections 228, 245 and 242 of the DGCL by the directors and stockholders of the Corporation.
[THIRD: The Certificate of Incorporation shall be effective as of [ ] a.m. Eastern [Daylight] [Standard] Time, on [ ], 201 .]
THIRD [FOURTH]: The Certificate of Incorporation restates, integrates and amends the provisions of the Certificate of Incorporation of the Corporation, as previously amended.
FOURTH [FIFTH]: The Certificate of Incorporation so adopted reads in full as set forth in Exhibit A attached hereto and is incorporated herein by this reference.
IN WITNESS WHEREOF, Mavenir Systems, Inc. has caused this Amended and Restated Certificate to be signed by its President and Chief Executive Officer as of [ ].
MAVENIR SYSTEMS, INC. | ||
By: |
| |
Pardeep Kohli | ||
President and Chief Executive Officer |
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
MAVENIR SYSTEMS, INC.
ARTICLE I.
The name of this corporation is Mavenir Systems, Inc. (the Corporation).
ARTICLE II.
The name and address of the registered agent for service of process of the Corporation in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
ARTICLE III.
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law (the DGCL).
ARTICLE IV.
A. Authorized Capital Stock. The Corporation is authorized to issue two classes of stock to be designated Common Stock and Preferred Stock. The total number of shares which the Corporation is authorized to issue is [three hundred twenty] million ([320,000,000])1 shares. [Three hundred] million ([300,000,000]) shares shall be Common Stock, $0.001 par value per share. [Twenty] million ([20,000,000]) shares shall be Preferred Stock $0.001 par value per share.
B. Preferred Stock. The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby expressly authorized to provide for the issue of all or any of the shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting powers, if any, and such designation, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such shares and as may be permitted by the DGCL. The Board of Directors is also expressly authorized to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.
1 | NTD - the authorized share numbers assume a 4 to 1 reverse stock split prior to the IPO. |
C. Common Stock. The Common Stock shall have the rights, powers, qualifications and limitations, as set forth below:
1. Subject to the preferences applicable to any series of Preferred Stock outstanding at any time, the holders of shares of Common Stock shall be entitled to receive such dividends and other distributions in cash, property or shares of stock of the Corporation as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor.
2. Upon the dissolution, liquidation or winding up of the Corporation, subject to the rights, if any, of the holders of any outstanding series of Preferred Stock, the holders of shares of Common Stock shall be entitled to receive the assets of the Corporation available for distribution to its stockholders ratably in proportion to the number of shares held by them.
3. Except as required by law, each holder of Common Stock shall be entitled, with respect to each share of Common Stock held by such holder on the applicable record date, to one vote in person or by proxy on all matters submitted to a vote of the holders of Common Stock, including, without limitation, in connection with the election of directors to the Board of Directors (it being understood that in respect of the election of directors, no stockholder shall be entitled to cumulate votes on behalf of any candidate), whether voting separately as a class or otherwise. Notwithstanding the foregoing, and except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to the Certificate of Incorporation (including any Certificate of Designations relating to any series of Preferred Stock) that relates solely to the terms of one or more then-outstanding series of Preferred Stock if the holders of such affected series of Preferred Stock are entitled, either separately or together with the holders of one or more other such series of Preferred Stock, to vote thereon pursuant to the Certificate of Incorporation (including any Certificate of Designations relating to any series of Preferred Stock) or pursuant to the DGCL.
ARTICLE V.
For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of the Corporation, of its directors and of its stockholders or any class thereof, as the case may be, it is further provided that:
A. Board of Directors: Powers; Classification; Removal; Vacancies.
1. The management of the business and the conduct of the affairs of the Corporation shall be vested in the Board of Directors. In addition to the powers and authority expressly conferred upon them by law or by the Certificate of Incorporation or the Bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation. Subject to the rights of any series of Preferred Stock then outstanding to elect additional directors under specified circumstances, the number of directors which shall constitute the whole Board of Directors shall be fixed exclusively by one or more resolutions adopted from time to time by a majority of the authorized number of directors constituting the Board of Directors.
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2. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the directors shall be divided into three classes, designated as Class I, Class II and Class III, as nearly equal in number as possible. The Board of Directors is authorized to assign members of the Board of Directors already in office to such classes at the time the classification becomes effective. At the first annual meeting of stockholders following the initial classification of the Board of Directors, the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of stockholders following such initial classification, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following such initial classification, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this Article V.A.2, each director shall serve until his or her successor is duly elected and qualified or until his or her death, resignation or removal. If the number of directors is hereafter changed, any newly created directorships or decrease in directorships will be apportioned among the classes so as to make the classes as nearly equal in number as possible; provided, however, that no decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
3. Subject to the rights of any series of Preferred Stock to elect additional directors under specified circumstances, neither the Board of Directors nor any individual director may be removed without cause. Subject to any limitation imposed by law, any individual director or directors may be removed with cause by the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (the Voting Stock).
4. Subject to the rights of the holders of any series of Preferred Stock, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or any other causes and any newly created directorships resulting from any increase in the number of directors, shall, except as otherwise provided by law, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors, and not by the stockholders, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such directors successor shall have been elected and qualified.
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B. Certain Stockholder Actions.
1. In furtherance and not in limitation of the powers conferred by law, the Board of Directors is expressly authorized to make, alter or repeal the Bylaws of the Corporation by the affirmative vote of a majority of the directors present at any regular or special meeting of the Board of Directors at which a quorum is present. Notwithstanding the foregoing, but in addition to any affirmative vote of the holders of any particular class or series of the Voting Stock required by law, the Bylaws of the Corporation may be rescinded, altered, amended or repealed in any respect by the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all the then-outstanding shares of the Voting Stock.
2. The directors of the Corporation need not be elected by written ballot unless the Bylaws so provide.
3. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any action required or permitted to be taken by the stockholders of the Corporation must be at an annual or special meeting of the stockholders of the Corporation duly called in accordance with the Bylaws of the Corporation, and the taking of any action by written consent or electronic transmission of the stockholders is specifically denied.
4. Subject to the rights of the holders of any series of Preferred Stock then outstanding, advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation.
C. Exclusive Forum for Certain Actions. Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation; (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporations stockholders; (iii) any action asserting a claim arising pursuant to any provision of the DGCL; or (iv) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article V.C.
ARTICLE VI.
A. Limitation of Directors Liability. To the maximum extent permitted by the DGCL or any other law of the State of Delaware, as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the DGCL or any other law of the State of Delaware is amended after approval by the stockholders of this Article VI to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL or such other law of the State of Delaware as so amended.
B. Indemnification of Directors and Officers. To the maximum extent permitted by applicable law, the Corporation is authorized to provide indemnification of, and advancement of
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expenses to any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that the person, the persons testator or intestate, is or was a director, officer, employee or agent of the Corporation, or serves or served at any other enterprise as a director, officer, employee or agent at the request of the Corporation or any predecessor to the Corporation.
C. Repeal or Modification. Any repeal or modification of this Article VI, by amendment of such section or by operation of law, shall not adversely affect any right or protection of a director, officer, employee or other agent of the Corporation existing at the time of, or increase the liability of any such person with respect to any acts or omissions in their capacity as a director, officer, employee, or other agent of the Corporation occurring prior to, such repeal or modification.
ARTICLE VII.
The Corporation reserves the right to amend, alter, change, or repeal any provision contained in the Certificate of Incorporation or any Certificate of Designation in the manner prescribed herein and by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation; provided, however, that notwithstanding any other provisions of the Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the Corporation required by law, the Certificate of Incorporation or any Certificate of Designation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of Voting Stock, voting together as a single class, shall be required to alter, amend or repeal any or all of Section B of Article IV, Article V, Article VI or this Article VII.
* * * * *
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Exhibit 3.3
BYLAWS OF
MAVENIR SYSTEMS, INC.
(initially adopted on March 30, 2006)
TABLE OF CONTENTS
Article I - CORPORATE OFFICES |
1 | |||
1.1 Registered Office |
1 | |||
1.2 Other Offices |
1 | |||
Article II - MEETINGS OF STOCKHOLDERS |
1 | |||
2.1 Place of Meetings |
1 | |||
2.2 Annual Meeting |
1 | |||
2.3 Special Meeting |
1 | |||
2.4 Notice of Stockholders Meetings |
2 | |||
2.5 Manner of Giving Notice; Affidavit of Notice |
2 | |||
2.6 Quorum |
2 | |||
2.7 Adjourned Meeting; Notice |
3 | |||
2.8 Conduct of Business |
3 | |||
2.9 Voting |
3 | |||
2.10 Stockholder Action by Written Consent Without a Meeting |
3 | |||
2.11 Record Date for Stockholder Notice; Voting; Giving Consents |
4 | |||
2.12 Proxies |
4 | |||
2.13 List of Stockholders Entitled to Vote |
5 | |||
Article III - DIRECTORS |
5 | |||
3.1 Powers |
5 | |||
3.2 Number of Directors |
5 | |||
3.3 Election, Qualification and Term of Office of Directors |
5 | |||
3.4 Resignation and Vacancies |
6 | |||
3.5 Place of Meetings; Meetings by Telephone |
6 | |||
3.6 Regular Meetings |
7 | |||
3.7 Special Meetings; Notice |
7 | |||
3.8 Quorum |
7 | |||
3.9 Board Action by Written Consent Without a Meeting |
8 | |||
3.10 Fees and Compensation of Directors |
8 | |||
3.11 Approval of Loans to Officers |
8 | |||
3.12 Removal of Directors |
8 | |||
Article IV - COMMITTEES |
8 | |||
4.1 Committees of Directors |
8 | |||
4.2 Committee Minutes |
9 | |||
4.3 Meetings and Action of Committees |
9 | |||
Article V - OFFICERS |
9 | |||
5.1 Officers |
9 | |||
5.2 Appointment of Officers |
9 | |||
5.3 Subordinate Officers |
10 | |||
5.4 Removal and Resignation of Officers |
10 | |||
5.5 Vacancies In Offices |
10 | |||
5.6 Chairperson of the Board |
10 | |||
5.7 Chief Executive Officer |
10 | |||
5.8 President |
11 | |||
5.9 Vice Presidents |
11 | |||
5.10 Secretary |
11 |
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5.11 Chief Financial Officer |
11 | |||
5.12 Assistant Secretary |
12 | |||
5.13 Assistant Treasurer |
12 | |||
5.14 Representation of Shares of Other Corporations |
12 | |||
5.15 Authority and Duties of Officers |
12 | |||
Article VI - RECORDS AND REPORTS |
12 | |||
6.1 Maintenance and Inspection of Records |
12 | |||
6.2 Inspection by Directors |
13 | |||
Article VII - GENERAL MATTERS |
13 | |||
7.1 Checks |
13 | |||
7.2 Execution of Corporate Contracts and Instruments |
13 | |||
7.3 Stock Certificates; Partly Paid Shares |
14 | |||
7.4 Special Designation on Certificates |
14 | |||
7.5 Lost Certificates |
14 | |||
7.6 Construction; Definitions |
15 | |||
7.7 Dividends |
15 | |||
7.8 Fiscal Year |
15 | |||
7.9 Seal |
15 | |||
7.10 Transfer of Stock |
15 | |||
7.11 Stock Transfer Agreements |
15 | |||
7.12 Registered Stockholders |
16 | |||
7.13 Waiver of Notice of Meetings of Stockholders, Directors and Committees |
16 | |||
Article VIII - NOTICE BY ELECTRONIC TRANSMISSION |
16 | |||
8.1 Notice by Electronic Transmission |
16 | |||
8.2 Definition of Electronic Transmission |
17 | |||
8.3 Inapplicability |
17 | |||
Article IX - INDEMNIFICATION |
17 | |||
9.1 Indemnification of Directors and Officers |
17 | |||
9.2 Indemnification of Others |
17 | |||
9.3 Prepayment of Expenses |
18 | |||
9.4 Non-Exclusivity of Rights |
18 | |||
9.5 Insurance |
18 | |||
9.6 Other Indemnification |
18 | |||
9.7 Amendment Or Repeal |
18 | |||
Article X - AMENDMENTS |
19 |
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BYLAWS OF MAVENIR SYSTEMS, INC.
ARTICLE ICORPORATE OFFICES
1.1 Registered Office. The registered office of Mavenir Systems, Inc. (the Corporation) shall be fixed in the Corporations certificate of incorporation, as the same may be amended from time to time (the Certificate of Incorporation).
1.2 Other Offices. The Corporations Board of Directors (the Board) may at any time establish other offices at any place or places where the Corporation is qualified to do business.
ARTICLE IIMEETINGS OF STOCKHOLDERS
2.1 Place of Meetings. Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the Board. The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 21 l(a)(2) of the Delaware General Corporation Law (the DGCL). In the absence of any such designation or determination, stockholders meetings shall be held at the Corporations principal executive office.
2.2 Annual Meeting. The annual meeting of stockholders shall be held each year on a date and at a time designated by the Board. In the absence of such designation the annual meeting of stockholders shall be held on the second Tuesday of April of each year at 10:00 a.m. However, if such day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding business day. At the annual meeting, directors shall be elected and any other proper business maybe transacted.
2.3 Special Meeting. A special meeting of the stockholders may be called at any time by (i) the Board, (ii) the Corporations chairperson of the Board, chief executive officer or president (in the absence of a chief executive officer) or (iii) one or more stockholders holding shares in the aggregate entitled to cast not less than ten percent (10%) of the votes at that meeting.
If any person(s) other than the Board calls a special meeting, the request shall:
(a) be in writing;
(b) specify the time of such meeting and the general nature of the business proposed to be transacted; and
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(c) be delivered personally or sent by registered mail or by facsimile transmission to the Corporations chairperson of the Board, chief executive officer, president (in the absence of a chief executive officer) or secretary.
The officer(s) receiving the request shall cause notice to be promptly given to the stockholders entitled to vote at such meeting, in accordance with the provisions of Sections 2.4 and 2.5 of these Bylaws, that a meeting will be held at the time requested by the person or persons calling the meeting. No business may be transacted at such special meeting other than business specified in such notice to stockholders. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board may be held.
2.4 Notice of Stockholders Meetings. All notices of meetings of stockholders shall be sent or otherwise given in accordance with either Section 2.5 or Section 8.1 of these Bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.
2.5 Manner of Giving Notice; Affidavit of Notice. Notice of any meeting of stockholders shall be given:
(a) if mailed, when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholders address as it appears on the Corporations records; or
(b) if electronically transmitted as provided in Section 8.1 of these Bylaws.
An affidavit of the secretary or an assistant secretary of the Corporation or of the transfer agent or other agent of the Corporation that the notice has been given by mail or by a form of electronic transmission, as applicable, shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
2.6 Quorum. The holders of at least a majority of the stock issued and outstanding and entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of the meeting or (ii) the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.
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2.7 Adjourned Meeting; Notice. When a meeting is adjourned to another time or place, unless these Bylaws otherwise require, notice need not be given of the adjourned meeting if the time, place, if any, thereof and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the continuation of the adjourned meeting, the Corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
2.8 Conduct of Business. The chairperson of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business.
2.9 Voting. The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.11 of these Bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating to voting trusts and other voting agreements) of the DGCL.
Except as may be otherwise provided in the Certificate of Incorporation or these Bylaws, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder and stockholders shall not be entitled to cumulate their votes in the election of directors or with respect to any matter submitted to a vote of the stockholders.
2.10 Stockholder Action by Written Consent Without a Meeting. Unless otherwise provided in the Certificate of Incorporation, any action required by the DGCL to be taken at any annual or special meeting of stockholders of a corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Corporation as provided in Section 228 of the DGCL. In the event that the action which is consented to is such as would have required the filing of a certificate under any provision of the DGCL if such action had been voted on by stockholders at a meeting thereof, the certificate filed under such provision shall state, in lieu of any statement required by such provision concerning any vote of stockholders, that written consent has been given in accordance with Section 228 of the DGCL.
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2.11 Record Date for Stockholder Notice; Voting; Giving Consents. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other such action.
If the Board does not so fix a record date:
(a) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.
(b) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board is necessary, shall be the day on which the first written consent is expressed.
(c) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.
2.12 Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by the DGCL filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. The provisions of Section 212 of the DGCL shall govern the revocability of any proxy that states on its face that it is irrevocable.
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2.13 List of Stockholders Entitled to Vote. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting or (ii) during ordinary business hours, at the Corporations principal executive office. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.
ARTICLE IIIDIRECTORS
3.1 Powers. Subject to the provisions of the DGCL and any limitations in the Certificate of Incorporation or these Bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board.
3.2 Number of Directors. The authorized number of directors shall be determined from time to time by resolution of the Board, provided the Board shall consist of at least one (1) member. No reduction of the authorized number of directors shall have the effect of removing any director before that directors term of office expires.
3.3 Election, Qualification and Term of Office of Directors. Except as provided in Section 3.4 of these Bylaws, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Directors need not be stockholders unless so required by the Certificate of Incorporation or these Bylaws. The Certificate of Incorporation or these Bylaws may prescribe other qualifications for directors. Each director, including a director elected to fill a vacancy, shall hold office until such directors successor is elected and qualified or until such directors earlier resignation, removal or death.
Elections of directors need not be by written ballot.
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3.4 Resignation and Vacancies. Any director may resign at any time upon notice given in writing or by electronic transmission to the Corporation. When one or more directors so resigns and the resignation is effective at a future date, at least a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the Certificate of Incorporation or these Bylaws:
(a) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by at least a majority of the directors then in office, although less than a quorum, or by a sole remaining director.
(b) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled by at least a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected, or, if there is no sole remaining director then if office, by the affirmative vote of the holders of at least a majority of the shares of that class or classes or series.
If at any time, by reason of death or resignation or other cause, the Corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the Certificate of Incorporation or these Bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the DGCL.
If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the authorized Board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent (10%) of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the DGCL as far as applicable.
3.5 Place of Meetings; Meetings by Telephone. The Board may hold meetings, both regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
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3.6 Regular Meetings. Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board.
3.7 Special Meetings; Notice. Special meetings of the Board for any purpose or purposes may be called at any time by the chairperson of the Board, the chief executive officer, the president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be:
(a) | delivered personally by hand, by courier or by telephone; |
(b) | sent by United States first-class mail, postage prepaid; |
(c) | sent by facsimile; or |
(d) | sent by electronic mail, |
directed to each director at that directors address, telephone number, facsimile number or electronic mail address, as the case may be, as shown on the Corporations records.
If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or (iii) sent by electronic mail, it shall be delivered or sent at least twenty-four (24) hours before the time of the holding of the meeting. If the notice is sent by United States mail, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. Any oral notice may be communicated to the director. The notice need not specify the place of the meeting (if the meeting is to be held at the Corporations principal executive office) nor the purpose of the meeting.
3.8 Quorum. At all meetings of the Board, at least a majority of the directors then in office shall constitute a quorum for the transaction of business; provided, however, that in no case shall a quorum be less than one-third (1/3) of the authorized number of directors. The vote of at least a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically provided by statute, the Certificate of Incorporation or these Bylaws. If a quorum is not present at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.
A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.
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3.9 Board Action by Written Consent Without a Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
3.10 Fees and Compensation of Directors. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board shall have the authority to fix the compensation of directors.
3.11 Approval of Loans to Officers. The Corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the Corporation or of its subsidiary, including any officer or employee who is a director of the Corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the Corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board shall approve, including, without limitation, a pledge of shares of stock of the Corporation.
3.12 Removal of Directors. Unless otherwise restricted by the DGCL, the Certificate of Incorporation or these Bylaws, any director or the entire Board may be removed, with or without cause, by the holders of at least a majority of the shares then entitled to vote at an election of directors.
ARTICLE IVCOMMITTEES
4.1 Committees of Directors. The Board may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board or in these Bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval or (ii) adopt, amend or repeal any Bylaw of the Corporation.
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4.2 Committee Minutes. Each committee shall keep regular minutes of its meetings and report the same to the Board when required.
4.3 Meetings and Action of Committees. Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:
(a) | Section 3.5 (place of meetings and meetings by telephone); |
(b) | Section 3.6 (regular meetings); |
(c) | Section 3.7 (special meetings and notice); |
(d) | Section 3.8 (quorum); |
(e) | Section 3.9 (action without a meeting); and |
(f) | Section 7.13 (waiver of notice), |
with such changes in the context of those Bylaws as are necessary to substitute the committee and its members for the Board and its members; provided, however, that (i) the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee, (ii) special meetings of committees may also be called by resolution of the Board and (iii) notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board may adopt rules for the government of any committee not inconsistent with the provisions of these Bylaws.
ARTICLE VOFFICERS
5.1 Officers. The officers of the Corporation shall be a president and a secretary. The Corporation may also have, at the discretion of the Board, a chairperson of the Board, a vice chairperson of the Board, a chief executive officer, a chief financial officer or treasurer, one or more vice presidents, one or more assistant vice presidents, one or more assistant treasurers, one or more assistant secretaries, and any such other officers as may be appointed in accordance with the provisions of these Bylaws. The same person may hold any number of offices.
5.2 Appointment of Officers. The Board shall appoint the officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 and 5.5 of these Bylaws, subject to the rights, if any, of an officer under any contract of employment.
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5.3 Subordinate Officers. The Board may appoint, or empower the chief executive officer or, in the absence of a chief executive officer, the president to appoint, such other officers and agents as the business of the Corporation may require. Each of such officers and agents shall hold office for such period, have such authority and perform such duties as are provided in these Bylaws or as the Board may from time to time determine.
5.4 Removal and Resignation of Officers. Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.
Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party.
5.5 Vacancies In Offices. Any vacancy occurring in any office of the Corporation shall be filled by the Board, or as provided in Section 5.2.
5.6 Chairperson of the Board. The chairperson of the Board, if such an officer be elected, shall, if present, preside at meetings of the Board and shall have such other powers and perform such other duties as from time to time may be prescribed by the Board or these Bylaws. If there is no chief executive officer or president, then the chairperson of the Board shall also be the chief executive officer of the Corporation and shall have the powers and duties prescribed in Section 5.7 of these Bylaws.
5.7 Chief Executive Officer. Subject to such supervisory powers, if any, as the Board may give to the chairperson of the Board, the chief executive officer shall, subject to the control of the Board, have general supervision, direction, and control of the business and affairs of the Corporation and shall report directly to the Board. All other officers, officials, employees and agents shall report directly or indirectly to the chief executive officer. The chief executive officer shall see that all orders and resolutions of the Board are carried into effect. The chief executive officer shall serve as chairperson of and preside at all meetings of the stockholders. In the absence of a chairperson of the Board, the chief executive officer shall preside at all meetings of the Board.
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5.8 President. In the absence or disability of the chief executive officer, the president shall perform all the duties of the chief executive officer. When acting as the chief executive officer, the president shall have all the powers of, and be subject to all the restrictions upon, the chief executive officer, The president shall have such other powers and perform such other duties as from time to time may be prescribed by the Board, these Bylaws, the chief executive officer or the chairperson of the Board.
5.9 Vice Presidents. In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the Board or, if not ranked, a vice president designated by the Board, shall perform all the duties of the president. When acting as the president, the appropriate vice president shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed by the Board, these Bylaws, the chairperson of the Board, the chief executive officer or, in the absence of a chief executive officer, the president.
5.10 Secretary. The secretary shall keep or cause to be kept, at the principal executive office of the Corporation or such other place as the Board may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, whether regular or special, the names of those present at directors meetings or committee meetings, the number of shares present or represented at stockholders meetings, hand the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive office of the Corporation or at the office of the Corporations transfer agent or registrar, as determined by resolution of the Board, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the Board required to be given by law or by these Bylaws. The secretary shall keep the seal of the Corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the Board or by these Bylaws.
5.11 Chief Financial Officer. The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director.
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The chief financial officer shall deposit all moneys and other valuables in the name and to the credit of the Corporation with such depositories as the Board may designate. The chief financial officer shall disburse the funds of the Corporation as may be ordered by the Board, shall render to the chief executive officer or, in the absence of a chief executive officer, the president and directors, whenever they request it, an account of all his or her other transactions as chief financial officer and of the financial condition of the Corporation, and shall have other powers and perform such other duties as may be prescribed by the Board or these Bylaws.
The chief financial officer shall be the treasurer of the Corporation.
5.12 Assistant Secretary. The assistant secretary, or, if there is more than one, the assistant secretaries in the order determined by the stockholders or Board (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of the secretarys inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as may be prescribed by the Board or these Bylaws.
5.13 Assistant Treasurer. The assistant treasurer, or, if there is more than one, the assistant treasurers, in the order determined by the stockholders or Board (or if there be no such determination, then in the order of their election), shall, in the absence of the chief financial officer or in the event of the chief financial officers inability or refusal to act, perform the duties and exercise the powers of the chief financial officer and shall perform such other duties and have such other powers as may be prescribed by the Board or these Bylaws.
5.14 Representation of Shares of Other Corporations. The chairperson of the Board, the chief executive officer, the president or any other person authorized by the Board, the chairperson of the Board, the chief executive officer or the president, is authorized to vote, represent, and exercise on behalf of this Corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this Corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.
5.15 Authority and Duties of Officers. In addition to the foregoing authority and duties, all officers of the Corporation shall respectively have such authority and perform such duties in the management of the business of the Corporation as may be designated from time to time by the Board or the stockholders.
ARTICLE VIRECORDS AND REPORTS
6.1 Maintenance and Inspection of Records. The Corporation shall, either at its principal executive office or at such place or places as designated by the Board, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these Bylaws as amended to date, accounting books, and other records.
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Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the Corporations stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such persons interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent so to act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office in Delaware or at its principal executive office.
6.2 Inspection by Directors. Any director shall have the right to examine the Corporations stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his or her position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the Corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper.
ARTICLE VIIGENERAL MATTERS
7.1 Checks. From time to time, the Board shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the Corporation, and only the persons so authorized shall sign or endorse those instruments.
7.2 Execution of Corporate Contracts and Instruments. The Board, except as otherwise provided in these Bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
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7.3 Stock Certificates; Partly Paid Shares. The shares of the Corporation shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the Corporation by the chairperson or vice chairperson of the Board, or the president or vice president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the Corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be an officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.
The Corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the Corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the Corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.
7.4 Special Designation on Certificates. If the Corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
7.5 Lost Certificates. Except as provided in this Section 7.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Corporation and cancelled at the same time. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owners legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
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7.6 Construction; Definitions. Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the DGCL shall govern the construction of these Bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term person includes both a corporation and a natural person.
7.7 Dividends. The Board, subject to any restrictions contained in the DGCL or the Certificate of Incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the Corporations capital stock.
The Board may set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the Corporation, and meeting contingencies.
7.8 Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board and may be changed by the Board.
7.9 Seal. The Corporation may adopt a corporate seal, which shall be adopted and which may be altered by the Board. The Corporation may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
7.10 Transfer of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books.
7.11 Stock Transfer Agreements. The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.
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7.12 Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
7.13 Waiver of Notice of Meetings of Stockholders, Directors and Committees. Whenever notice is required to be given under any provision of the DGCL, the Certificate of Incorporation or these Bylaws, a written waiver thereof, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, the Board or a committee of the Board need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the Certificate of Incorporation or these Bylaws.
ARTICLE VIIINOTICE BY ELECTRONIC TRANSMISSION
8.1 Notice by Electronic Transmission. Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the Certificate of Incorporation or these Bylaws, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these Bylaws shall be effective if given by a form. of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (1) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (2) such inability becomes known to the secretary or an assistant secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.
Any notice given pursuant to the preceding paragraph shall be deemed given:
(a) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;
(b) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;
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(c) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (i) such posting and (ii) the giving of such separate notice; and
(d) if by any other form of electronic transmission, when directed to the stockholder.
An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the Corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
8.2 Definition of Electronic Transmission. An electronic transmission means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.
8.3 Inapplicability. Notice by a form of electronic transmission shall not apply to Sections 164, 296, 311, 312 or 324 of the DGCL.
ARTICLE IXINDEMNIFICATION
9.1 Indemnification of Directors and Officers. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a Proceeding) by reason of the fact that such person is or was a director or officer of the Corporation or is or was a director or officer of the Corporation who is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person in connection with any such Proceeding. The Corporation shall be required to indemnify a person in connection with a Proceeding (or part thereof) initiated by such person only if the Proceeding (or part thereof) was authorized by the Board.
9.2 Indemnification of Others. The Corporation shall have the power to indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any Proceeding by reason of the fact that such person is or was an employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person in connection with any such Proceeding.
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9.3 Prepayment of Expenses. The Corporation shall pay the expenses incurred by any officer or director of the Corporation, and may pay the expenses incurred by any employee or agent of the Corporation, in defending any Proceeding in advance of such. Proceedings final disposition; provided, however, that the payment of expenses incurred by a person in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the person to repay all amounts advanced if it should be ultimately determined that the person is not entitled to be indemnified under this Article 9 or otherwise.
9.4 Non-Exclusivity of Rights. The rights conferred on any person by this Article 9 shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, the Certificate of Incorporation, these Bylaws, agreement, vote of stockholders or disinterested directors or otherwise.
9.5 Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such persons status as such, whether or not the Corporation would have the power to indemnify such person against such liability under applicable law.
9.6 Other Indemnification. The Corporations obligation, if any, to indemnify any person who was or is serving at the Corporations request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust or other enterprise.
9.7 Amendment Or Repeal. Any repeal or modification of the foregoing provisions of this Article 9 shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.
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ARTICLE XAMENDMENTS
These Bylaws may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the Corporation may, in its Certificate of Incorporation, confer the power to adopt, amend or repeal Bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal Bylaws.
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MAVENIR SYSTEMS, INC.
CERTIFICATE OF ADOPTION OF BYLAWS
The undersigned hereby certifies that he is the duly elected, qualified, and acting Secretary or Assistant Secretary of Mavenir Systems, Inc., a Delaware corporation (the Corporation), and that the foregoing Bylaws, comprising 19 pages, were adopted as the Corporations Bylaws on March 30, 2006 by the Corporations Board of Directors,
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 30th day of March, 2006.
/s/ Mohammad R. Ali |
Mohammad R. Ali, Secretary |
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Exhibit 3.4
AMENDED AND RESTATED BYLAWS
OF
MAVENIR SYSTEMS, INC.,
a Delaware corporation
(initially adopted on September 17, 2013, to be effective upon
the closing of the Corporations initial public offering)
Table of Contents
Article I CORPORATE OFFICES |
1 | |||||||
1.1 |
Registered Office |
1 | ||||||
1.2 |
Other Offices |
1 | ||||||
Article II MEETINGS OF STOCKHOLDERS |
1 | |||||||
2.1 |
Place of Meetings |
1 | ||||||
2.2 |
Annual Meeting |
1 | ||||||
2.3 |
Special Meeting |
1 | ||||||
2.4 |
Advance Notice Procedures for Business Brought Before a Meeting |
1 | ||||||
2.5 |
Advance Notice Procedures for Nominations of Directors |
4 | ||||||
2.6 |
Notice of Stockholders Meetings |
6 | ||||||
2.7 |
Manner of Giving Notice; Affidavit of Notice |
6 | ||||||
2.8 |
Quorum |
7 | ||||||
2.9 |
Adjourned Meeting; Notice |
7 | ||||||
2.10 |
Conduct of Business |
7 | ||||||
2.11 |
Voting |
8 | ||||||
2.12 |
Stockholder Action By Written Consent Without a Meeting |
8 | ||||||
2.13 |
Record Date for Stockholder Notice; Voting |
9 | ||||||
2.14 |
Proxies |
9 | ||||||
2.15 |
List of Stockholders Entitled to Vote |
10 | ||||||
2.16 |
Inspectors of Election |
10 | ||||||
Article III DIRECTORS |
11 | |||||||
3.1 |
Powers |
11 | ||||||
3.2 |
Number of Directors |
11 | ||||||
3.3 |
Election, Qualification and Term of Office of Directors |
11 | ||||||
3.4 |
Resignation and Vacancies |
11 | ||||||
3.5 |
Place of Meetings; Meetings by Telephone |
11 | ||||||
3.6 |
Regular Meetings |
12 | ||||||
3.7 |
Special Meetings; Notice |
12 | ||||||
3.8 |
Quorum |
12 | ||||||
3.9 |
Board Action By Written Consent Without a Meeting |
13 | ||||||
3.10 |
Fees and Compensation of Directors |
13 | ||||||
3.11 |
Removal of Directors |
13 | ||||||
3.12 |
Emergency Bylaws |
13 | ||||||
Article IV COMMITTEES |
14 | |||||||
4.1 |
Committees of Directors |
14 | ||||||
4.2 |
Committee Minutes |
14 | ||||||
4.3 |
Meetings and Action of Committees |
14 | ||||||
Article V OFFICERS |
15 | |||||||
5.1 |
Officers |
15 | ||||||
5.2 |
Appointment of Officers |
15 | ||||||
5.3 |
Appointed Officers |
15 | ||||||
5.4 |
Removal and Resignation of Officers |
15 | ||||||
5.5 |
Vacancies in Offices |
15 | ||||||
5.6 |
Representation of Shares of Other Corporations |
15 | ||||||
5.7 |
Authority and Duties of Officers |
16 |
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Article VI GENERAL MATTERS |
16 | |||||||
6.1 |
Execution of Corporate Contracts and Instruments |
16 | ||||||
6.2 |
Issuance of Stock |
16 | ||||||
6.3 |
Stock Certificates |
16 | ||||||
6.4 |
Special Designation on Certificates |
16 | ||||||
6.5 |
Lost Certificates |
17 | ||||||
6.6 |
Construction; Definitions; Time Periods |
17 | ||||||
6.7 |
Dividends |
17 | ||||||
6.8 |
Fiscal Year |
17 | ||||||
6.9 |
Seal |
17 | ||||||
6.10 |
Transfer of Stock |
17 | ||||||
6.11 |
Stock Transfer Agreements |
18 | ||||||
6.12 |
Registered Stockholders |
18 | ||||||
6.13 |
Waiver of Notice |
18 | ||||||
6.14 |
Evidence of Authority |
18 | ||||||
6.15 |
Reliance Upon Books, Reports and Records |
18 | ||||||
6.16 |
Severability |
19 | ||||||
Article VII NOTICE BY ELECTRONIC TRANSMISSION |
19 | |||||||
7.1 |
Notice By Electronic Transmission |
19 | ||||||
7.2 |
Definition of Electronic Transmission |
20 | ||||||
Article VIII INDEMNIFICATION |
20 | |||||||
8.1 |
Indemnification of Directors and Officers |
20 | ||||||
8.2 |
Indemnification of Others |
20 | ||||||
8.3 |
Prepayment of Expenses |
20 | ||||||
8.4 |
Determination; Claim |
21 | ||||||
8.5 |
Indemnification of Contracts |
21 | ||||||
8.6 |
Non-Exclusivity Rights |
21 | ||||||
8.7 |
Insurance |
21 | ||||||
8.8 |
Other Indemnification |
21 | ||||||
8.9 |
Continuation of Indemnification |
21 | ||||||
8.10 |
Amendment or Repeal |
21 | ||||||
Article IX AMENDMENTS |
22 | |||||||
Article X Definitions |
22 |
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BYLAWS
OF
MAVENIR SYSTEMS, INC.
Capitalized terms used in these Bylaws are defined in Article X hereof.
ARTICLE I
CORPORATE OFFICES
1.1 Registered Office. The registered office of the Corporation shall be fixed in the Certificate of Incorporation.
1.2 Other Offices. The Corporation may also have offices at other such places, both within and without the State of Delaware, as the Board of Directors from time to time may determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 Place of Meetings. Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the Board. The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the DGCL. In the absence of any such designation or determination, stockholders meetings shall be held at the Corporations principal executive offices.
2.2 Annual Meeting. The Board shall designate the date and time of the annual meeting. At the annual meeting, directors shall be elected and other proper business properly brought before the meeting in accordance with Section 2.4 of this Article II may be transacted.
2.3 Special Meeting.
(a) Special meetings of the stockholders of the Corporation may be called, for any purpose or purposes, by the Board, chairperson of the Board, or chief executive officer, or, in the absence of a chief executive officer, the president, but special meetings of the stockholders may not be called by any other person or persons.
(b) No business may be transacted at such special meeting other than the business specified in the notice of such meeting given to stockholders. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board may be held.
2.4 Advance Notice Procedures for Business Brought Before a Meeting.
(a) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought
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before an annual meeting, business must be (i) brought before the meeting by the Corporation and specified in the notice of meeting given by or at the direction of the Board; (ii) brought before the meeting by or at the direction of the Board or any committee thereof; or (iii) otherwise properly brought before the meeting by a stockholder who (A) was a stockholder of record of the Corporation (and, with respect to any beneficial owner, if different, on whose behalf such business is proposed, only if such beneficial owner was the beneficial owner of shares of the Corporation) both at the time of giving the notice provided for in this Section 2.4 and at the time of the meeting; (B) is entitled to vote at the meeting; and (C) has complied with this Section 2.4 as to such business. Stockholders shall not be permitted to propose business to be brought before a special meeting of the stockholders, and the only matters that may be brought before a special meeting are the matters specified in the notice of meeting given by or at the direction of the person calling the meeting pursuant to Section 2.3 of these Bylaws. Stockholders seeking to nominate persons for election to the Board must comply with Section 2.5 of these Bylaws, and this Section 2.4 shall not be applicable to nominations except as expressly provided in Section 2.5 of these Bylaws.
(b) Without qualification, for business to be properly brought before an annual meeting by a stockholder, the stockholder must (i) provide Annual Meeting Timely Notice thereof in writing and in proper form to the secretary of the Corporation; and (ii) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.4, and any such proposed business must constitute a proper matter for stockholder action. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of Annual Meeting Timely Notice.
(c) To be in proper form for purposes of this Section 2.4, a stockholders notice to the secretary shall set forth:
(i) As to each item of business that the stockholder proposes to bring before the annual meeting, (A) a brief description of the business desired to be brought before the annual meeting, the reasons for conducting such business at the annual meeting and any material interest in such business of each Proposing Person; (B) the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws of the Corporation, the language of the proposed amendment); and (C) a reasonably detailed description of all agreements, arrangements and understandings between or among any of the Proposing Persons or between or among any Proposing Person and any other person or entity (including their names) relating to the Corporation and/or the proposal of such business by such stockholder.
(ii) All Stockholder Information as to each Proposing Person.
(iii) All Disclosable Interests as to each Proposing Person.
(d) A stockholder providing notice of business proposed to be brought before an annual meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.4 shall be true and correct as of the record date for notice of the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such
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update and supplement shall be delivered to, or mailed and received by, the secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for notice of the meeting (in the case of the update and supplement required to be made as of the record date for notice), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).
(e) Notwithstanding anything in these Bylaws to the contrary, no business (other than with respect to the election of directors) shall be conducted at an annual meeting except in accordance with this Section 2.4. The presiding officer of the meeting shall have the power and duty to, if the facts warrant, determine that the business was not properly brought before the meeting in accordance with this Section 2.4, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this Section 2.4, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual meeting of stockholders of the Corporation to present the proposed business, such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.4, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.
(f) This Section 2.4 is expressly intended to apply to any business proposed to be brought before an annual meeting of stockholders other than any proposal made pursuant to Rule 14a-8 under the Exchange Act. Nothing in this Section 2.4 shall be deemed to affect the rights of stockholders to request inclusion of proposals in the Corporations proxy statement pursuant to Rule 14a-8 under the Exchange Act.
(g) Notwithstanding the foregoing provisions of this Section 2.4, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 2.4; provided however, that any references in these Bylaws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit any requirements applicable to proposals as to any other business to be considered pursuant to this Section 2.4, and compliance with this Section 2.4 shall be the exclusive means for a stockholder to submit other business to be considered at an annual meeting, other than business brought properly under and in compliance with Rule 14a-8 of the Exchange Act, as the same may be amended from time to time.
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2.5 Advance Notice Procedures for Nominations of Directors.
(a) Nominations of any person for election to the Board at an annual meeting or at a special meeting (but only if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting) may be made at such meeting only (i) pursuant to the Corporations notice of meeting (or any supplement thereto); (ii) by or at the direction of the Board, including by any committee or persons appointed by the Board; or (iii) by a stockholder who (A) was a stockholder of record of the Corporation (and, with respect to any beneficial owner, if different, on whose behalf such nomination is proposed to be made, only if such beneficial owner was the beneficial owner of shares of the Corporation) both at the time of giving the notice provided for in this Section 2.5 and at the time of the meeting; (B) is entitled to vote at the meeting and upon such election; and (C) has timely complied with this Section 2.5 as to such nomination. The foregoing clause (iii) shall be the exclusive means for a stockholder to make any nomination of a person or persons for election to the Board to be considered by the stockholders at an annual meeting or special meeting.
(b) Without qualification, for a stockholder to make any nomination of a person or persons for election to the Board at an annual meeting, the stockholder must (i) provide Annual Meeting Timely Notice thereof in writing and in proper form to the secretary of the Corporation and (ii) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.5. Without qualification, if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling a special meeting, then for a stockholder to make any nomination of a person or persons for election to the Board at such special meeting, the stockholder must (A) provide Special Meeting Timely Notice thereof in writing and in proper form to the secretary of the Corporation at the principal executive offices of the Corporation and (B) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.5. In no event shall any adjournment or postponement of an annual meeting or special meeting or the announcement thereof commence a new time period for the giving of a stockholders notice as described above.
(c) To be in proper form for purposes of this Section 2.5, a stockholders notice to the secretary shall set forth:
(i) All Stockholder Information as to each Proposing Person.
(ii) All Disclosable Interests as to each Proposing Person.
(iii) As to each Nominee, (A) the Nominee Information; (B) a completed and signed questionnaire, representation and agreement and resignation as provided in Section 2.5(f); and (C) all Disclosable Interests.
(iv) The Corporation may require any Nominee to furnish such other information (A) as may reasonably be required by the Corporation to determine the eligibility of such Nominee to serve as a director of the Corporation in accordance with the Corporations corporate governance policies and guidelines adopted by the Board or a committee thereof; or (B) that could be material to a reasonable stockholders understanding of the independence or lack of independence of such Nominee.
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(d) A stockholder providing notice of any nomination proposed to be made at a meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.5 shall be true and correct as of the record date for notice of the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for notice of the meeting (in the case of the update and supplement required to be made as of the record date for notice), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).
(e) Notwithstanding anything in these Bylaws to the contrary, no person shall be eligible for election as a director of the Corporation unless nominated in accordance with this Section 2.5. The presiding officer at the meeting shall have the power and duty, if the facts warrant, determine that a nomination was not properly made in accordance with this Section 2.5, and if he or she should so determine, he or she shall so declare such determination to the meeting and the defective nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 2.5, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the meeting of stockholders of the Corporation to present the nomination, such nomination shall be disregarded, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.5, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.
(f) To be eligible to be a Nominee, the Nominee must deliver (in accordance with the time periods prescribed for delivery of notice under this Section 2.5) to the secretary at the principal executive offices of the Corporation (i) a written questionnaire, in the form provided by the secretary upon written request, with respect to the background and qualifications of such person and of any other person or entity on whose behalf the nomination is being made; (ii) a written representation and agreement, in the form provided by the secretary upon written request, that such person: (A) is not, if serving as a director of the Corporation, and will not become, while serving as a director of the Corporation, a party to any agreement, arrangement or understanding (whether written or oral) with, and has not given any commitment or assurance to, any person or entity (1) as to how such person will act or vote on any issue or question to be considered by the Board of Directors that has not been disclosed therein; or (2) that could limit or interfere with such persons ability to comply with such persons fiduciary duties as a director of the Corporation under applicable law while serving as such; (B) is not and will not become a party to any agreement, arrangement or understanding (whether written or oral) with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director of the
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Corporation that has not been disclosed to the Corporation; (C) is, if serving as a director of the Corporation, or would be if elected as a director of the Corporation, and will be, while serving as such, in compliance with all applicable corporate governance, conflict of interest, confidentiality, securities ownership and trading policies and guidelines of the Corporation and any other policies applicable to directors; and (D) irrevocably submits his or her resignation as a director, if serving, or if elected, as a director of the Corporation, effective upon a finding by a court of competent jurisdiction that such person has breached such written representation and agreement; and (iii) a written letter, in the form provided by the secretary upon written request, pursuant to which such person irrevocably submits his or her resignation as a director, if serving, or if elected, as a director of the Corporation, effective upon (A) such persons failure to be elected in an election of directors; and (B) acceptance by the Board of Directors of such persons resignation following such failure.
(g) Notwithstanding the foregoing provisions of this Section 2.5, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 2.5; provided however, that any references in these Bylaws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit any requirements applicable to nominations to be considered pursuant to this Section 2.5, and compliance with this Section 2.5 shall be the exclusive means for a stockholder to make nominations.
2.6 Notice of Stockholders Meetings. Unless otherwise provided by law, the Certificate of Incorporation or these Bylaws, the notice of any meeting of stockholders shall be sent or otherwise given in accordance with either Section 2.7 or 7.1 of these Bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at the meeting as of the record date for determining the stockholders entitled to notice of the meeting. The notice shall specify the place, if any, date and hour of the meeting, the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for stockholders entitled to notice of the meeting), the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.
2.7 Manner of Giving Notice; Affidavit of Notice. Notice of any meeting of stockholders shall be deemed given:
(a) if mailed, when deposited in the United States mail, postage prepaid, directed to the stockholder at his or her address as it appears on the Corporations records; or
(b) if electronically transmitted as provided in Section 7.1 of these Bylaws.
An affidavit of the secretary or an assistant secretary of the Corporation or of the transfer agent or any other agent of the Corporation that the notice has been given by mail or by a form of electronic transmission, as applicable, shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
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2.8 Quorum. Unless otherwise provided by law, the Certificate of Incorporation or these Bylaws, the holders of a majority in voting power of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of the meeting; or (ii) a majority in voting power of the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have power to adjourn the meeting from time to time in the manner provided in Section 2.9 of these Bylaws until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any subsidiary of the Corporation to vote stock, including, without limitation, its own stock, held by it in a fiduciary capacity.
2.9 Adjourned Meeting; Notice. Any meeting of stockholders may be adjourned to any other time and to any other place at which a meeting of stockholders may be held under these Bylaws by the chairperson of the meeting or, in the absence of such person, by any officer entitled to preside at or to act as secretary of such meeting, or by a majority in voting power of the stockholders entitled to vote at the meeting, present in person or represented by proxy, although less than a quorum. When a meeting is adjourned to another time or place, unless these Bylaws otherwise require, notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting in accordance with Section 2.13(c), the Corporation shall give notice of the adjourned meeting to each stockholder of record as of the record date so fixed for notice of such adjourned meeting.
2.10 Conduct of Business.
(a) Meetings of stockholders shall be presided over by such person as the Board may designate, or, in the absence of such a person, the chairperson of the Board, or, in the absence of such person, the chief executive officer, or, in the absence of such person, such person as may be chosen by the majority of the voting power of the shares of stock present or represented at the meeting and entitled to vote. The secretary of the Corporation shall act as secretary of the meeting, but in his or her absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.
(b) The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent
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inconsistent with such rules and regulations as adopted by the Board of Directors, the chairperson of any meeting of the stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Without limiting the foregoing, the chairperson may (i) establish an agenda or order of business for the meeting; (ii) determine when the polls shall open and close for any given matter to be voted on at the meeting; (iii) establish rules and procedures for maintaining order at the meeting and the safety of those present; (iv) restrict attendance at any time to bona fide stockholders and their proxies and other persons in attendance at the invitation of the chairperson of the meeting or the Board; (v) restrict use of audio or video recording devices at the meeting; and (vi) impose reasonable limits on the amount of time taken up at the meeting on discussion in general or on remarks by any one stockholder.
(c) Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at a meeting except in accordance with the procedures set forth in this Section 2.10 and Section 2.4 above. The chairperson of a meeting may determine and declare to the meeting that any proposed item of business was not brought before the meeting in accordance with the provisions of this Section 2.10 and Section 2.4, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.
2.11 Voting.
(a) The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.13 of these Bylaws, subject to Section 217 of the DGCL (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 of the DGCL (relating to voting trusts and other voting agreements).
(b) Except as may be otherwise provided in the Certificate of Incorporation or these Bylaws, each stockholder shall be entitled to one (1) vote for each share of capital stock held by such stockholder, which has voting power upon the matter in question.
(c) At all meetings of stockholders for the election of directors at which a quorum is present a plurality of the votes cast shall be sufficient to elect a director. All other elections and questions presented to the stockholders at a meeting at which a quorum is present shall, unless otherwise provided by the Certificate of Incorporation, these Bylaws, the rules or regulations of any stock exchange applicable to the Corporation, or applicable law or pursuant to any regulation applicable to the Corporation or its securities, be decided by the affirmative vote of a majority of the votes cast on the question.
2.12 Stockholder Action By Written Consent Without a Meeting. Subject to the rights of the holders of any series of preferred stock then outstanding, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of the stockholders of the Corporation, and the taking of any action by written consent of the stockholders is specifically denied.
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2.13 Record Date for Stockholder Notice; Voting.
(a) In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board may fix, in advance, a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which shall unless otherwise required by law not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board of Directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board of Directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination.
(b) If the Board does not so fix a record date:
(i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.
(ii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.
(c) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.
(d) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which shall not be more than sixty (60) days prior to such entitlement or such other action. If no such record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
2.14 Proxies. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL. A proxy may be in the form of a telegram, cablegram or other means of electronic transmission which sets forth or is submitted with information from which it can be determined that the telegram, cablegram or other means of electronic transmission was authorized by the stockholder.
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2.15 List of Stockholders Entitled to Vote. The secretary or other officer who has charge of the stock ledger of the Corporation shall prepare and make a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder, at least ten (10) days before every meeting of stockholders; provided, however, if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date. The Corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting; or (ii) during ordinary business hours, at the Corporations principal executive offices. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.
2.16 Inspectors of Election.
(a) Before any meeting of stockholders, the Corporation may, and shall if required by law, appoint an inspector or inspectors of election to act at the meeting or its adjournment and make a written report thereof. The number of inspectors shall be either one (1) or three (3). The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If any person appointed as inspector fails to appear or fails or refuses to act, then the chairperson of the meeting may, and upon the request of any stockholder or a stockholders proxy shall, appoint a person to fill that vacancy. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath to execute faithfully the duties of inspector with strict impartiality and according to the best of his or her ability. No person who is a candidate for an office at an election may serve as an inspector at such election.
(b) Such inspectors shall:
(i) ascertain the number of shares of capital stock of the Corporation outstanding and the voting power of each such share;
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(ii) determine the shares of capital stock of the Corporation present or represented at the meeting and the validity of proxies and ballots;
(iii) count all votes and ballots;
(iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and
(v) certify their determination of the number of shares of capital stock of the Corporation present or represented at the meeting and such inspectors count of all votes and ballots. Such certification shall specify such other information as may be required by law. In determining the validity and counting of proxies and ballots cast at any meeting of stockholders of the Corporation, the inspectors may consider such information as is permitted by applicable law.
(c) The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three (3) inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein.
ARTICLE III
DIRECTORS
3.1 Powers. Subject to the provisions of the DGCL and any limitations in the Certificate of Incorporation or these Bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board. In the event of a vacancy in the Board, the remaining directors, except as otherwise provided by law, may exercise the powers of the full Board until the vacancy is filled.
3.2 Number of Directors. The number of directors shall be determined from time to time as provided by the Certificate of Incorporation.
3.3 Election, Qualification and Term of Office of Directors. Except as provided in Section 3.4 of these Bylaws, each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until such directors successor is elected and qualified or until such directors earlier death, resignation or removal.
3.4 Resignation and Vacancies. Any director may resign at any time upon notice given in writing or by electronic transmission to the Corporation. Any vacancy on the Board, however resulting, may be filled only in the manner provided in, and only to the extent permitted under, the Certificate of Incorporation.
3.5 Place of Meetings; Meetings by Telephone.
(a) The Board may hold meetings, both regular and special, either within or outside the State of Delaware.
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(b) Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting pursuant to this bylaw shall constitute presence in person at the meeting.
3.6 Regular Meetings. Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board. A regular meeting of the Board may be held without notice immediately after and at the same place as the annual meeting of stockholders.
3.7 Special Meetings; Notice. Special meetings of the Board for any purpose or purposes may be called at any time by the chairperson of the Board, the chief executive officer, the president, the secretary or a majority of the authorized number of directors.
(a) Notice of the time and place of special meetings shall be:
(i) delivered personally by hand, by courier or by telephone;
(ii) sent by United States first-class mail, postage prepaid;
(iii) sent by facsimile; or
(iv) sent by electronic mail,
directed to each director at that directors address, telephone number, facsimile number or electronic mail address, as the case may be, as shown on the Corporations records.
(b) If the notice is (i) delivered personally by hand, by courier or by telephone; (ii) sent by facsimile; or (iii) sent by electronic mail, it shall be delivered or sent at least twenty-four (24) hours before the time of the holding of the meeting. If the notice is sent by United States mail, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. The notice need not specify the place of the meeting (if the meeting is to be held at the Corporations principal executive offices) nor the purpose of the meeting. Notice of any meeting may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat.
3.8 Quorum.
(a) At all meetings of the Board, a majority of the authorized number of directors shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically provided by law, the Certificate of Incorporation or these Bylaws. If a quorum is not present at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. Interested directors may be counted in determining the presence of a quorum at a meeting of the Board or at a meeting of a committee which authorizes a particular contract or transaction.
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(b) A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.
(c) If the Certificate of Incorporation provides that one or more directors shall have more or less than one vote per director on any matter, every reference in these Bylaws to a majority or other proportion of the directors shall refer to a majority or other proportion of the votes of the directors.
3.9 Board Action By Written Consent Without a Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
3.10 Fees and Compensation of Directors. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board shall have the authority to fix the compensation of directors. No such payment shall preclude any director from serving the Corporation or any of its parent or subsidiary corporations in any other capacity and receiving compensation for such service.
3.11 Removal of Directors.
(a) Any director may be removed only in the manner provided in, and only to the extent permitted under, the Certificate of Incorporation. Any director serving on a committee of the Board may be removed from such committee at any time by the Board.
(b) No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such directors term of office.
3.12 Emergency Bylaws. In the event of any emergency, disaster or catastrophe, as referred to in Section 110 of the DGCL, or other similar emergency condition, as a result of which a quorum of the Board or a standing committee of the Board cannot readily be convened for action, then the director or directors in attendance at a meeting shall constitute a quorum. Such director or directors in attendance may further take action to appoint one (1) or more of themselves or other directors to membership on any standing or temporary committees of the Board as they shall deem necessary and appropriate.
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ARTICLE IV
COMMITTEES
4.1 Committees of Directors. The Board may designate one (1) or more committees, each committee to consist of one (1) or more of the directors of the Corporation. Any such committee, to the extent provided in the resolution of the Board or in these Bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval; or (ii) adopt, amend or repeal any bylaw of the Corporation.
4.2 Committee Minutes. Each committee shall keep minutes of its meetings and report the same to the Board when required.
4.3 Meetings and Action of Committees.
(a) Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:
(i) Section 3.5 (place of meetings and meetings by telephone);
(ii) Section 3.6 (regular meetings);
(iii) Section 3.7 (special meetings and notice);
(iv) Section 3.8 (quorum);
(v) Section 6.13 (waiver of notice); and
(vi) Section 3.9 (action without a meeting), with such changes in the context of these Bylaws as are necessary to substitute the committee and its members for the Board and its members.
Notwithstanding the foregoing, (A) the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee; and (B) special meetings of committees may also be called by resolution of the Board or by resolution of the committee.
(b) The Board or the relevant committee may adopt rules for the governing of any committee not inconsistent with the provisions of these Bylaws.
(c) Any provision in the Certificate of Incorporation providing that one or more directors shall have more or less than one vote per director on any matter shall apply to voting in any committee or subcommittee, unless otherwise provided in the Certificate of Incorporation or these Bylaws.
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ARTICLE V
OFFICERS
5.1 Officers. The officers of the Corporation shall be a president and a secretary. The Corporation may also have, at the discretion of the Board, a chairperson of the Board, a vice chairperson of the Board, a chief executive officer, a chief financial officer or treasurer, one (1) or more vice presidents, one (1) or more assistant vice presidents, one (1) or more assistant treasurers, one (1) or more assistant secretaries, and any such other officers as may be appointed in accordance with the provisions of these Bylaws. Any number of offices may be held by the same person.
5.2 Appointment of Officers. The Board shall appoint the officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 of these Bylaws. No stockholder shall be entitled to appoint any officers.
5.3 Appointed Officers. The Board may appoint, or empower the chief executive officer or, in the absence of a chief executive officer, the president, to appoint, such other officers and agents as the business of the Corporation may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these Bylaws or as the Board may from time to time determine. No stockholder shall be entitled to appoint any officers.
5.4 Removal and Resignation of Officers.
(a) Any officer may be removed, either with or without cause, only by an affirmative vote of the majority of the Board at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board. No stockholder shall be entitled to remove any officer.
(b) Any officer may resign at any time by giving written notice to the Corporation. Subject to the last sentence of this subsection, any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party or otherwise.
5.5 Vacancies in Offices. Any vacancy occurring in any office of the Corporation shall be filled only by the Board or as provided in Section 5.2. No stockholder shall be entitled to appoint any officers.
5.6 Representation of Shares of Other Corporations. The chairperson of the Board, the president, the chief financial officer, the treasurer, the secretary or assistant secretary of this Corporation, or any other person authorized by the Board or such officers, is authorized to vote, represent and exercise on behalf of this Corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this Corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.
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5.7 Authority and Duties of Officers. All officers of the Corporation shall respectively have such authority and perform such duties in the management of the business of the Corporation as may be designated from time to time by the Board and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.
ARTICLE VI
GENERAL MATTERS
6.1 Execution of Corporate Contracts and Instruments. The Board, except as otherwise provided in these Bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
6.2 Issuance of Stock. Subject to the provisions of the Certificate of Incorporation, the whole or any part of any unissued balance of the authorized capital stock of the Corporation or the whole or any part of any unissued balance of the authorized capital stock of the Corporation held in its treasury may be issued, sold, transferred or otherwise disposed of by vote of the Board in such manner, for such consideration and on such terms as the Board may determine.
6.3 Stock Certificates. The shares of the Corporation shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board, every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the Corporation by the chairperson or vice-chairperson of the Board, or the president or vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the Corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.
6.4 Special Designation on Certificates. If the Corporation is authorized to issue more than one class of stock or more than one series of any class, then the voting powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such voting powers, designations, preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock a statement that the
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Corporation will furnish without charge to each stockholder who so requests the voting powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such voting powers, designations, preferences and/or rights.
6.5 Lost Certificates. Except as provided in this Section 6.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Corporation and cancelled at the same time. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owners legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
6.6 Construction; Definitions; Time Periods. Unless the context requires otherwise, the general provisions, rules of construction and definitions in the DGCL shall govern the construction of these Bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term person includes both a corporation and a natural person. In applying any provision of these Bylaws which requires that an act be done or not done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.
6.7 Dividends.
(a) The Board, subject to any restrictions contained in either (i) the DGCL; or (ii) the Certificate of Incorporation, may declare and pay dividends upon the shares of the Corporations capital stock. Dividends may be paid in cash, in property or in shares of the Corporations capital stock.
(b) The Board may set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the Corporation, and meeting contingencies.
6.8 Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board and may be changed by the Board.
6.9 Seal. The Corporation may adopt a corporate seal, which shall be adopted and which may be altered by the Board. Any corporate instrument or document requiring the corporate seal may be executed as provided in Article VI of these Bylaws, and the corporate seal shall be applied by the Secretary or any Assistant Secretary.
6.10 Transfer of Stock. Shares of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws. Shares of stock of the Corporation shall be transferred on the books of the Corporation only by the holder of record thereof or by such holders attorney
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duly authorized in writing, upon surrender to the Corporation of the certificate or certificates representing such shares endorsed by the appropriate person or persons (or by delivery of duly executed instructions with respect to uncertificated shares), with such evidence of the authenticity of such endorsement or execution, transfer, authorization and other matters as the Corporation may reasonably require, and accompanied by all necessary stock transfer stamps. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing the names of the persons from and to whom it was transferred.
6.11 Stock Transfer Agreements. The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.
6.12 Registered Stockholders. The Corporation:
(a) shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner;
(b) shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares; and
(c) shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.
6.13 Waiver of Notice. Whenever notice is required to be given under any provision of the DGCL, the Certificate of Incorporation or these Bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is or was to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the Certificate of Incorporation or these Bylaws.
6.14 Evidence of Authority. A certificate by the secretary, an assistant secretary, or a temporary secretary, as to any action taken by the stockholders, directors, a committee or any officer or representative of the Corporation shall as to all persons who rely on the certificate in good faith be conclusive evidence of such action.
6.15 Reliance Upon Books, Reports and Records. To the fullest extent permitted by law, each director, each member of any committee designated by the Board, and each officer of the Corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation as provided by law, including, without limitation, reports made to the Corporation by any of its officers, by an independent certified public accountant, or by an appraiser selected with reasonable care.
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6.16 Severability. If any provision of these Bylaws shall be held to be invalid, illegal, unenforceable or in conflict with the provisions of the Corporations Certificate of Incorporation, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of these Bylaws (including, without limitation, all portions of any section of these Bylaws containing any such provision held to be invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation) that are not themselves invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation shall remain in full force and effect.
ARTICLE VII
NOTICE BY ELECTRONIC TRANSMISSION
7.1 Notice By Electronic Transmission.
(a) Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the Certificate of Incorporation or these Bylaws, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these Bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if:
(i) the Corporation is unable to deliver by electronic transmission two (2) consecutive notices given by the Corporation in accordance with such consent; and
(ii) such inability becomes known to the secretary or an assistant secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice.
Notwithstanding the foregoing, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.
(b) Any notice given pursuant to the preceding paragraph shall be deemed given:
(i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;
(ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;
(iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting; and (B) the giving of such separate notice; and
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(iv) if by any other form of electronic transmission, when directed to the stockholder.
(c) An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the Corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
7.2 Definition of Electronic Transmission. An electronic transmission means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification of Directors and Officers. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by the DGCL as it presently exists or may hereafter be amended, any director or officer of the Corporation who was or is made or is threatened to be made a party or is otherwise involved in a Proceeding by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including, without limitation, service with respect to employee benefit plans, against all liability and loss suffered and expenses (including, without limitation, attorneys fees) reasonably incurred by such person in connection with any such Proceeding. Notwithstanding the preceding sentence, except as otherwise provided in Section 8.4, the Corporation shall be required to indemnify a person in connection with a Proceeding (or part thereof) initiated by such person only if the Proceeding (or part thereof) was authorized in the specific case by the Board.
8.2 Indemnification of Others. The Corporation shall have the power to indemnify and hold harmless, to the extent permitted by applicable law as it presently exists or may hereafter be amended, any employee or agent of the Corporation who was or is made or is threatened to be made a party or is otherwise involved in any Proceeding by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was an employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including, without limitation, service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person in connection with any such Proceeding.
8.3 Prepayment of Expenses. The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including, without limitation, attorneys fees) incurred by any officer or director of the Corporation, and may pay the expenses incurred by any employee or agent of the Corporation, in defending any Proceeding in advance of its final disposition; provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the person to repay all amounts advanced if it should be ultimately determined that the person is not entitled to be indemnified under this Article VIII or otherwise.
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8.4 Determination; Claim. If a claim for indemnification or advancement of expenses under this Article VIII is not paid in full within thirty (30) days after a written claim therefor has been received by the Corporation the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim to the fullest extent permitted by law. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law.
8.5 Indemnification of Contracts. The Board is authorized to enter into a contract with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise, including, without limitation, employee benefit plans, providing for indemnification rights equivalent to or, if the Board so determines, greater than, those provided for in this Article VIII.
8.6 Non-Exclusivity Rights. The rights conferred on any person by this Article VIII shall not be exclusive of any other rights which such person may have or hereafter acquire under any law, provision of the Certificate of Incorporation, these Bylaws, agreement, vote of stockholders or disinterested directors or otherwise.
8.7 Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or non-profit entity against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of the DGCL.
8.8 Other Indemnification. The Corporations obligation, if any, to indemnify or advance expenses to any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or non-profit entity shall be reduced by any amount such person has collected as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise.
8.9 Continuation of Indemnification. The rights to indemnification and to prepayment of expenses provided by, or granted pursuant to, this Article VIII shall continue notwithstanding that the person has ceased to be a director, officer, employee or agent of the Corporation and shall inure to the benefit of the estate, heirs, executors, administrators, legatees and distributees of such person.
8.10 Amendment or Repeal. The provisions of this Article VIII shall constitute a contract between the Corporation, on the one hand, and, on the other hand, each individual who serves or has served as a director, officer, employee or agent of the Corporation (whether before
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or after the adoption of these Bylaws), in consideration of such persons performance of such services, and pursuant to this Article VIII the Corporation intends to be legally bound to each such current or former director, officer, employee or agent of the Corporation. With respect to current and former directors, officers, employees or agents of the Corporation, the rights conferred under this Article VIII are present contractual rights and such rights are fully vested, and shall be deemed to have vested fully, immediately upon adoption of these Bylaws. With respect to any directors, officers, employees or agents of the Corporation who commence service following adoption of these Bylaws, the rights conferred under this provision shall be present contractual rights and such rights shall fully vest, and be deemed to have vested fully, immediately upon such director or officer commencing service as a director, officer, employee or agent of the Corporation. Any repeal or modification of the foregoing provisions of this Article VIII shall not adversely affect any right or protection (i) hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification; or (ii) under any agreement providing for indemnification or advancement of expenses to a director, officer, employee or agent of the Corporation in effect prior to the time of such repeal or modification.
ARTICLE IX
AMENDMENTS
In furtherance and not in limitation of the powers conferred by law, the Board is expressly authorized to make, alter or repeal these Bylaws of the Corporation by the affirmative vote of a majority of the directors present at any regular or special meeting of the Board at which a quorum is present. Notwithstanding the foregoing, but in addition to any affirmative vote of the holders of any particular class or series of the Voting Stock required by law, the Certificate of Incorporation or any certificate of designation, the Bylaws of the Corporation may be rescinded, altered, amended or repealed in any respect by the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all the then-outstanding shares of the Voting Stock.
ARTICLE X
DEFINITIONS
For the purposes of these Bylaws, the following terms will have the following meanings:
(a) A person shall be deemed to be Acting in Concert with another person if such person knowingly acts (whether or not pursuant to an express agreement, arrangement or understanding) in concert with, or towards a common goal relating to the management, governance or control of the Corporation in parallel with, such other person where (i) each person is conscious of the other persons conduct or intent and this awareness is an element in their decision-making processes; and (ii) at least one additional factor suggests that such persons intend to act in concert or in parallel, which such additional factors may include, without limitation, exchanging information (whether publicly or privately), attending meetings, conducting discussions, or making or soliciting invitations to act in concert or in parallel; provided, however, that a person shall not be deemed to be Acting in Concert with any other person solely as a result of the solicitation or receipt of revocable proxies or consents from such other person in response to a solicitation made pursuant to, and in accordance with, the Section 14(a) of the Exchange Act by way of a proxy or consent solicitation statement filed on Schedule 14A. A person Acting in Concert with another person shall be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other person.
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(b) Annual Meeting Timely Notice means a stockholders notice that is delivered to, or mailed and received at, the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the one-year anniversary of the preceding years annual meeting; provided, however, that in the event that no annual meeting was held the previous year or if the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after the one-year anniversary date, notice by the stockholder to be timely must be so delivered, or mailed and received, not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of (A) the ninetieth (90th) day prior to such annual meeting; or (B) the tenth (10th) day following the day on which Public Announcement of the date of such annual meeting was first made.
(c) Board means the Corporations board of directors.
(d) Bylaws means these Bylaws.
(e) Certificate of Incorporation means the Corporations certificate of incorporation, as the same may be amended from time to time.
(f) Corporation means Mavenir Systems, Inc.
(g) Derivative Interests means derivative securities (as defined under Rule 16a-1 under the Exchange Act or any successor provision thereto) and any derivative, swap or other transaction or series of transactions engaged in, directly or indirectly, by a Proposing Person or Nominee, the purpose or effect of which is to give such Proposing Person or Nominee economic risk and/or benefit similar to ownership of any security of the Corporation, including, without limitation, due to the fact that the value of such derivative, swap, option, warrant, hedge, profit interest or other transactions are determined by reference to the price, value or volatility of any security of the Corporation, or which derivative, swap or other transactions provide, directly or indirectly, the opportunity to profit from any increase in the price or value of any security of the Corporation.
(h) DGCL means the General Corporation Law of the State of Delaware.
(i) Disclosable Interests means the following disclosures as to each Proposing Person or Nominee, as applicable:
(A) a list of any Derivative Interests engaged in, entered into or held by, directly or indirectly, such Proposing Person or Nominee, which Derivative Interests shall be disclosed without regard to whether (x) the Derivative Interests convey any voting rights in the Corporation to such Proposing Person or Nominee; (y) the Derivative Interests are required to be, or are capable of being, settled through delivery of securities of the Corporation; or (z) such Proposing Person or Nominee may have entered into other transactions that hedge or mitigate the economic effect of such Derivative Interests;
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(B) a list of any Short Interests engaged in, entered into or held by, directly or indirectly, such Proposing Person or Nominee, which Short Interests shall be disclosed without regard to whether (x) the Short Interests convey any voting rights in the Corporation to such Proposing Person or Nominee; (y) the Short Interests are required to be, or are capable of being, settled through delivery of securities of the Corporation; or (z) such Proposing Person or Nominee may have entered into other transactions that hedge or mitigate the economic effect of such Short Interests;
(C) a list of any Other Interests engaged in, entered into or held by, directly or indirectly, such Proposing Person or Nominee;
(D) the name of each person with whom such Proposing Person or Nominee has a Voting Agreement;
(E) a description of all economic terms of all such Derivative Interests, Short Interests, Other Interests or Voting Agreements and copies of all agreements and other documents (including, without limitation, master agreements, confirmations and all ancillary documents and the names and details of counterparties to, and brokers involved in, all such transactions) relating to each such Derivative Interest, Short Interest, Other Interest or Voting Agreement;
(F) any rights to dividends on the shares of any class or series of capital stock of the Corporation owned beneficially by such Proposing Person or Nominee that are separated or separable from the underlying shares of the Corporation;
(G) a list of all transactions by such Proposing Person or Nominee involving any security of the Corporation or any Derivative Interests, Short Interests, Other Interests or Voting Agreements within the six-month period prior to the date of the notice;
(H) (x) if such Proposing Person is not a natural person, the identity of the Responsible Person, the manner in which such Responsible Person was selected, any fiduciary duties owed by such Responsible Person to the equity holders or other beneficiaries of such Proposing Person, the qualifications and background of such Responsible Person and any material interests or relationships of such Responsible Person that are not shared generally by any other record or beneficial holder of any security of the Corporation and that reasonably could have influenced the decision of such Proposing Person to propose such business to be brought before the meeting; and (y) if such Proposing Person is a natural person, the qualifications and background of such natural person and any material interests or relationships of such natural person that are not shared generally by any other record or beneficial holder of any security of the Corporation and that reasonably could have influenced the decision of such Proposing Person to propose such business or nomination to be brought before the meeting;
(I) any significant equity interests or any Derivative Interests, Short Interests or Other Interests in any principal competitor of the Corporation held by such Proposing Person or Nominee;
(J) any direct or indirect interest of such Proposing Person or Nominee in any contract with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, without limitation, in any such case, any employment agreement, collective bargaining agreement or consulting agreement);
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(K) any pending or threatened litigation in which such Proposing Person or Nominee is a party or material participant involving the Corporation or any of its officers or directors, or any affiliate of the Corporation;
(L) any material transaction occurring during the prior twelve (12) months between such Proposing Person or Nominee or any affiliate of the Proposing Person or Nominee, on the one hand, and the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation, on the other hand;
(M) a summary of any material discussions regarding the proposed business or nomination (x) between or among any of the Proposing Persons; (y) between or among any Proposing Person and any Nominee; or (z) between or among any Proposing Person or Nominee and any other record or beneficial holder of any security of the Corporation (including their names);
(N) a representation that the Proposing Person intends to appear in person or by proxy at the annual meeting to bring such business or nomination before the meeting; and
(O) any other information relating to such Proposing Person or the proposed business or nomination that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting or the nomination proposed to be made at a meeting pursuant to Section 14(a) of the Exchange Act.
Notwithstanding the foregoing, Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these Bylaws on behalf of a beneficial owner.
(a) electronic transmission has the meaning given such term in Section 7.2.
(b) Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (as so amended and inclusive of such rules and regulations).
(c) Nominee means a person and his/her affiliates whom a Proposing Person proposes to nominate for election as a director.
(d) Nominee Information means (i) all information with respect to a Nominee that would be required to be set forth in a stockholders notice pursuant to Section 2.5 if such Nominee were a Proposing Person; (ii) all information relating to such Nominee that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to
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Section 14(a) under the Exchange Act (including such Nominees written consent to being named in the proxy statement as a Nominee and to serving as a director if elected); (iii) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three (3) years, and any other material relationships, between or among any Proposing Person, on the one hand, and each Nominee, his or her respective affiliates and associates and any other persons with whom such proposed Nominee (or any of his or her respective affiliates and associates) is Acting in Concert, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K (or any amendments or successors thereto) if such Proposing Person were the registrant for purposes of such rule and the proposed Nominee were a director or executive officer of such registrant.
(e) Other Interests means all other material interests of each Proposing Person or Nominee in business or nomination proposed to be brought before a meeting, any security of the Corporation, Derivative Interests, Short Interests or Voting Agreements (including, without limitation, any rights to dividends or performance-related fees based on any increase or decrease in the value of such security, Derivative Interests or Short Interests).
(f) Proceeding means any action, suit, inquiry or proceeding, whether civil, criminal, administrative, regulatory or investigative.
(g) Proposing Person means (i) the stockholder providing the notice of business proposed to be brought before an annual meeting or the nomination proposed to be made at a meeting, as applicable; (ii) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the business proposed to be brought before the annual meeting or the notice of the nomination proposed to be made at a meeting, as applicable, is made; (C) any affiliate or associate (each within the meaning of Rule 12b-2 under the Exchange Act for the purposes of these Bylaws) of such stockholder or beneficial owner; and (D) any other person with whom such stockholder or beneficial owner (or any of their respective affiliates or associates) is Acting in Concert.
(h) Public Announcement means disclosure in a press release reported by the Dow Jones News Service, Associated Press or other national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act (or any successor provisions thereto).
(i) Responsible Person means the natural person or persons associated with a Proposing Person that is not a natural person and who is responsible (in whole or in material part) for the formulation of and decision to propose the business to be brought before the meeting.
(j) Short Interests means any agreement, arrangement, understanding or relationship, including, without limitation, any repurchase or similar so-called stock borrowing agreement or arrangement, engaged in, directly or indirectly, by a Proposing Person or Nominee, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of any security of the Corporation by, manage the risk of share price changes for, or increase or decrease the voting power of, such Proposing Person or Nominee with respect to any security of the Corporation, or which provides, directly or indirectly, the opportunity to profit from any decrease in the price or value of any security of the Corporation.
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(k) Special Meeting Timely Notice means a stockholders notice for nominations to be made at a special meeting delivered to, or mailed and received at, the principal executive offices of the Corporation not earlier than the close of business on the one hundred twentieth (120th) day prior to such special meeting and not later than the close of business on the later of (A) the ninetieth (90th) day prior to such special meeting; or (B) the tenth (10th) day following the day on which Public Announcement of the date of such special meeting was first made.
(l) Stockholder Information means, as to each Proposing Person, (i) the name and address of such Proposing Person (including, if applicable, the name and address that appear on the Corporations books and records); (ii) the class or series and number of shares of the Corporation that are, directly or indirectly, owned of record or beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by such Proposing Person, except that such Proposing Person shall in all events be deemed to beneficially own any shares of any class or series of the Corporation as to which such Proposing Person has a right to acquire beneficial ownership at any time in the future; (iii) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination; and (iv) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporations outstanding capital stock required to approve the business proposal or nomination; and/or (y) otherwise to solicit proxies or votes from stockholders in support of such business proposal or nomination.
(m) Voting Agreement means any agreement, arrangement or understanding (whether written or oral) (i) for the purposes of acquiring, holding, voting (except pursuant to a revocable proxy given to such person in response to a public proxy or consent solicitation made generally by such person to all holders of shares of the Corporation) or disposing of any shares of capital stock of the Corporation; (ii) to cooperate in obtaining, changing or influencing the control of the Corporation (except independent financial, legal and other advisors acting in the ordinary course of their respective businesses); (iii) with the effect or intent of increasing or decreasing the voting power of, or that contemplates any person voting together with, any such Proposing Person or Nominee with respect to any security of the Corporation or any business or nomination proposed by the Proposing Person; or (iv) otherwise in connection with any business or nomination proposed by a Proposing Person and a description of each such agreement, arrangement or understanding.
(n) Voting Stock means of all the then outstanding shares of voting stock of the Corporation entitled to vote at an election of directors.
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Exhibit 4.1
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
May 26, 2011
TABLE OF CONTENTS
Page | ||||
1. Registration Rights |
||||
1.1 Definitions |
1 | |||
1.2 Request for Registration |
3 | |||
1.3 Company Registration |
5 | |||
1.4 Obligations of the Company |
5 | |||
1.5 Furnish Information |
6 | |||
1.6 Expenses of Registrations |
6 | |||
1.7 Underwriting Requirements |
7 | |||
1.8 Delay of Registration |
8 | |||
1.9 Indemnification |
8 | |||
1.10 Reports Under Securities Exchange Act |
10 | |||
1.11 Form S-3 Registration |
10 | |||
1.12 Transfer or Assignment of Registration Rights |
12 | |||
1.13 Limitations on Subsequent Registration Rights |
12 | |||
1.14 Market Stand-Off Agreement |
12 | |||
1.15 Termination of Registration Rights |
13 | |||
2. Covenants of the Company to the Investors |
13 | |||
2.1 Information Rights |
13 | |||
2.2 Visitation and Inspection |
14 | |||
2.3 Right of First Offer |
14 | |||
2.4 Other Covenants |
17 | |||
2.5 Confidentiality, Assignment and Termination of Covenants |
19 | |||
3. Voting Agreement |
20 | |||
3.1 Common Directors |
20 | |||
3.2 Series A Directors |
20 | |||
3.3 Series B Director |
20 | |||
3.4 Series E Director |
20 | |||
3.5 Outside Director |
21 | |||
3.6 Agreement to Corporate Action |
21 | |||
3.7 Obligations of the Company |
21 | |||
3.8 Vacancies; Removal |
21 | |||
3.9 Grant of Proxy |
22 | |||
3.10 Termination |
22 | |||
4. Legend |
22 | |||
5. Miscellaneous |
23 | |||
5.1 Governing Law |
23 | |||
5.2 Waivers and Amendments |
23 | |||
5.3 Binding Effect |
24 | |||
5.4 Entire Agreement |
24 | |||
5.5 Notices |
24 | |||
5.6 Interpretation |
25 | |||
5.7 Severability |
25 |
i
TABLE OF CONTENTS
(continued)
Page | ||||
5.8 Aggregation of Stock |
25 | |||
5.9 Counterparts |
25 | |||
5.10 Telecopy Execution and Delivery |
25 | |||
5.11 Amendment and Restatement of Prior Agreement |
26 |
Schedules:
A Schedule of Investors
B Schedule of Common Holders
Exhibits
A Adoption Agreement
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MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT (this Agreement) is made as of May 26, 2011, by and among Mavenir Systems, Inc., a Delaware corporation (the Company), and the individuals and entities listed on Schedule A hereto (each, an Investor and collectively, the Investors) and certain holders of the Companys Common Stock listed on Schedule B hereto (each, a Common Holder and collectively, the Common Holders). This Agreement amends, supersedes and replaces the Companys Amended and Restated Investors Rights Agreement, dated June 3, 2010 (the Prior Agreement).
RECITALS
WHEREAS, certain of the Investors (the Existing Investors) hold shares of the Companys Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and/or shares of Common Stock issued upon conversion thereof and possess registration rights, information rights, rights of first offer and other rights pursuant to the Prior Agreement;
WHEREAS, the Company and certain Investors are parties to the Series E Preferred Stock Purchase Agreement dated as of even date herewith (the Series E Agreement); and
WHEREAS, such Investors obligations under the Series E Agreement are conditioned upon the execution and delivery of this Agreement by the Existing Investors holding at least a majority of the Registrable Securities (as defined in the Prior Agreement) and the Company; and
WHEREAS, the Existing Investors are holders of at least a majority of the Registrable Securities (as defined in the Prior Agreement), and desire to amend and restate the Prior Agreement and to accept the rights created pursuant to this Agreement in lieu of the rights granted to them under the Prior Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the Existing Investors hereby agree that the Prior Agreement shall be superseded and replaced in its entirety by this Agreement, and the parties hereto further agree as follows:
1. Registration Rights.
1.1 Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:
(a) Capital Stock means any and all shares of Common Stock and Preferred Stock and all other shares, interests, participation rights or other equivalents in the equity interests in the Company.
(b) Commission means the United States Securities and Exchange Commission.
(c) Common Stock means the Companys common stock, par value $0.001 per share.
(d) Conversion Stock means the shares of Common Stock issued or issuable upon conversion of the Shares, excluding any Special Mandatory Conversion Shares.
(e) Corporate Action shall mean any matter put to a vote of the stockholders of the Company.
(f) Deemed Liquidation shall have the meaning given such term in the Restated Certificate.
(g) Exchange Act means the Securities Exchange Act of 1934, as amended.
(h) Form S-3 means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the Commission that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the Commission.
(i) Holder means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 1.12.
(j) Preferred Stock means any class or series of the Companys preferred stock, par value $0.001 per share.
(k) Qualified IPO shall have the meaning given such term in the Restated Certificate.
(l) The terms register, registered and registration refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act or any other applicable law of any other jurisdiction, and the declaration or ordering of effectiveness of such registration statement or document.
(m) Registrable Securities means (i) the Conversion Stock and (ii) any of the Companys Common Stock issued as (or issuable upon the conversion or exercise of any warrant, note or other security that is issued as) a dividend or other distribution with respect to, or in exchange for, or in replacement of, the shares referenced in (i) above, excluding any Special Mandatory Conversion Shares; provided, however, that Registrable Securities shall not include any shares of Common Stock which have previously been registered, which have been sold to the public either pursuant to a registration statement or Rule 144, or which have been sold in a private transaction in which the transferors rights under this Section 1 are not assigned.
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(n) Restated Certificate means the Companys Amended and Restated Certificate of Incorporation, as in effect on the date of this Agreement and as amended from time to time after the date of this Agreement.
(o) Rule 144 means Rule 144 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.
(p) Rule 145 means Rule 145 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.
(q) Securities Act means the Securities Act of 1933, as amended.
(r) Series E Agreement means the Series E Preferred Stock Purchase Agreement dated as of the date hereof by and between the Company and certain of the Investors.
(s) Shares means the shares of the Companys Series A Preferred Stock, $0.001 par value per share, Series B Preferred Stock, $0.001 par value per share, Series C Preferred Stock, $0.001 par value per share, Series D Preferred Stock, $0.001 par value per share and Series E Preferred Stock, $0.001 par value per share.
(t) Special Mandatory Conversion Shares means shares of Common Stock that may from time to time be issued pursuant to Article IV, Section 4.3(K) of the Companys Restated Certificate.
1.2 Request for Registration.
(a) Subject to the conditions of this Section 1.2, if the Company shall receive at any time after the earlier of (i) one hundred eighty days after the closing of a firm commitment underwritten public offering pursuant to an effective registration statement on Form S-1 under the Securities Act covering the offer and sale of Common Stock to the public for the account of the Company and (ii) the third anniversary of the date of this Agreement, a written request from the Holders of a majority of the Registrable Securities then outstanding that the Company effect a registration under the Securities Act with respect to at least a majority of the Registrable Securities then outstanding (the Initiating Holders), then the Company shall (x) give written notice of such request to all Holders within ten (10) calendar days of the date such request is given and (y) use its best efforts to effect as soon as practicable (and in any event within ninety (90) calendar days of the date such request is given) the registration under the Securities Act of all Registrable Securities that the Holders request to be registered within twenty (20) calendar days of the date the Companys notice referred to in this subsection 1.2(a) is given.
(b) If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to subsection 1.2(a) and the Company shall include such information in the written notice referred to in subsection 1.2(a). The underwriter will be selected by the Company and shall be reasonably acceptable to a majority in interest of
3
the Initiating Holders. In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holders participation in such underwriting and the inclusion of such Holders Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in subsection 1.4(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 1.2, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders electing to include shares in the underwriting, including the Initiating Holders, in proportion (as nearly as practicable) to the amount of Registrable Securities requested by each such Holder to be included in such underwriting; provided, however, that the number of shares of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities (including those to be sold for the Companys account) are first entirely excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish to the Initiating Holders a certificate signed by the Companys Chief Executive Officer or President stating that in the good faith judgment of the Companys Board of Directors, such registration would be seriously detrimental to the Company and its stockholders and that it is, therefore, essential to defer taking action with respect to such registration, the Company shall have the right to defer taking action with respect to such filing for a period of not more than one hundred twenty (120) calendar days after the date the request of the Initiating Holders is given; provided, however, that the Company may not utilize this right more than once in any twelve (12) month period; provided, further, that the Company shall not register any securities for the account of itself or any other stockholder during such period other than (i) a registration statement relating either to the sale of securities to employees of the Company pursuant to a stock option, stock purchase, stock incentive or stock appreciation plan or arrangement, (ii) a transaction pursuant to Rule 145 promulgated under the Securities Act, (iii) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered, or (iv) a registration in connection the initial public offering of the Companys securities (provided that, in the case of (iv), the Company has complied with its obligations under Section 1.3).
(d) In addition, the Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 1.2:
(i) after the Company has effected three (3) registrations pursuant to this Section 1.2 and such registrations have been declared or ordered effective;
(ii) during the period starting with the date sixty (60) calendar days prior to the Companys good faith estimate of the date of filing of, and ending on a date one hundred eighty (180) calendar days after the effective date of, any registration statement pertaining to a public offering of securities for the Companys account; provided, that the Company is actively employing its best efforts to cause such registration statement to be effective;
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(iii) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act; or
(iv) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 1.11.
1.3 Company Registration. If the Company proposes to register any of its stock or other securities either for its own account or the account of a stockholder or stockholders exercising their respective demand registration rights (other than (i) a registration pursuant to Sections 1.2 or 1.11, (ii) a registration relating solely to employee benefit or similar plans, (iii) a registration relating to a Rule 145 transaction or (iv) a registration on any form which does not permit secondary sales or does not include substantially the same information as would be required to be included in a registration statement covering the Registrable Securities), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within twenty (20) calendar days of the date such notice is given, the Company shall, subject to the provisions of Section 1.7, include in the registration all of the Registrable Securities that each such Holder has requested to be registered.
1.4 Obligations of the Company. Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the Commission a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and to keep such registration statement effective for a period of up to forty-five (45) calendar days or any lesser period of time in the event the distribution described in the registration statement has been completed.
(b) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement;
(c) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them;
(d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;
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(e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering (each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement);
(f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;
(g) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange or nationally recognized quotation system on which similar securities issued by the Company are then listed; and
(h) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.
1.5 Furnish Information. It shall be a condition precedent to the Companys obligations to take any action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding such Holder, the Registrable Securities held by such Holder, and the intended method of disposition of such securities as shall be reasonably required by the Company or the managing underwriters, if any, to effect the registration of such Holders Registrable Securities.
1.6 Expenses of Registrations. All expenses (other than underwriting discounts and commissions) incurred in connection with registrations, filings or qualifications pursuant to Sections 1.2, 1.3 or 1.11, including (without limitation) all registration, filing and qualification fees, printers fees, accounting fees and fees and disbursements of counsel for the Company (including fees and disbursements of counsel for the Company in its capacity as counsel to the selling Holders hereunder; but if Company counsel does not make itself available for this purpose, the Company will pay the reasonable fees and disbursements of one counsel for the selling Holders) shall be borne by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Sections 1.2 or 1.11 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses on a pro rata basis based on the number of Registrable Securities proposed to be registered by each such Holder), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one demand registration pursuant to Section 1.2; provided further, however, that if at the
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time of such withdrawal, the Holders have learned of a material adverse change in the condition, business, or prospects of the Company and such material adverse change was not known to the Holders at the time of their request and have withdrawn the request with reasonable promptness following disclosure by the Company of such material adverse change, then the Holders shall not be required to pay any of such expenses and shall not forfeit their right to one (1) demand registration pursuant to Section 1.2; and provided further, that changes resulting solely from the condition of the stock market substantially equally affecting all similarly situated companies shall not be deemed to be a material adverse change in the condition, business or prospects of the Company. Registrations effected pursuant to Section 1.11 shall not be counted as demands for registration or registrations effected pursuant to Section 1.2 or 1.3, respectively.
1.7 Underwriting Requirements. If the registration statement under which the Company gives notice under Section 1.3 is for an underwritten offering, the Company shall so advise the Holders. In such event, all Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in subsection 1.4(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. If the total amount of securities, including Registrable Securities requested by stockholders to be included in such offering, exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling stockholders according to the total amount of securities requested to be included therein by each such selling stockholder or in such other proportions as shall mutually be agreed to by such selling stockholders), but in no event shall (i) the amount of securities of the selling Holders included in the offering be reduced unless the securities of all other selling stockholders included in the offering are entirely excluded and (ii) the amount of securities of the selling Holders included in the offering be reduced below thirty percent (30%) of the total amount of securities included in such offering, unless such offering is the Qualified IPO of the Companys securities, in which case such Holders may be excluded entirely if the underwriters make the determination described above and if the securities of all other selling stockholders are excluded entirely. For purposes of the preceding parenthetical concerning apportionment, for any selling stockholder which is a Holder of Registrable Securities and which is a partnership, limited liability company or corporation, the partners (or retired partners), members (or retired members) and stockholders of such selling stockholder, or the estates and family members of any such partners (or retired partners), members (or retired members) or stockholders and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single selling stockholder and any pro rata reduction with respect to such selling stockholder shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such selling stockholder as defined in this sentence.
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1.8 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1.
1.9 Indemnification.
(a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, its officers, directors, partners or former partners, and members or former members, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder, its officers, directors, partners or former partners, and members or former members, or underwriter within the meaning of the Securities Act or the Exchange Act (each an Indemnified Person), against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject under the Securities Act, the Exchange Act or other federal or state or other applicable securities law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively, a Violation): (i) any untrue statement or alleged untrue statement of a material fact contained in a registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto (collectively, the Filings); (ii) the omission or alleged omission to state in the Filings a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state or other applicable securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will pay, as incurred, any legal or other expenses reasonably incurred by any Indemnified Person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection 1.9(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld or delayed), nor shall the Company be liable to such Indemnified Person in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation that occurs in reliance upon and in conformity with written information furnished to the Company expressly for use in connection with such registration by an Indemnified Person.
(b) To the extent permitted by law, each selling Holder will severally and not jointly indemnify and hold harmless the Company, each of its directors, each of its officers, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject under the Securities Act, the Exchange Act or other federal or state securities law insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in the registration statement in connection with such Filings; and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person to be indemnified pursuant to this subsection 1.9(b) in connection with investigating or defending any such loss,
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claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection 1.9(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld or delayed); provided, however, in no event shall the obligations of any Holder under this subsection 1.9(b) exceed the net proceeds from the shares of Registrable Securities sold in the offering and received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section 1.9 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.9, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of liability to the indemnified party under this Section 1.9, but only to the extent such failure to deliver written notice is materially prejudicial to the indemnifying partys ability to defend such action.
(d) If the indemnification provided for in Section 1.9(a) and (b) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage or expense referred to therein, then the indemnifying party in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such loss, liability, claim or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. In no event shall any Holder be required to contribute an amount, when combined with any amounts paid pursuant to Section 1.9(b), that exceeds the net proceeds from the shares of Registrable Securities sold in the offering and received by such Holder.
(e) The obligations of the Company and Holders under this Section 1.9 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1, and the termination of this Agreement.
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1.10 Reports Under Securities Exchange Act. With a view to making available the benefits of certain rules and regulations of the Commission, including Rule 144, which may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) Make and keep public information available, as those terms are understood and defined in Rule 144 after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public;
(b) Take such action, including the registration of its Common Stock under Section 12 of the Exchange Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Company for the offering of its securities to the general public is declared effective;
(c) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and
(d) Furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the Commission that permits the selling of any such securities without registration or pursuant to such form.
1.11 Form S-3 Registration.
(a) Subject to the conditions of this Section 1.11, if the Company shall receive from the Holders of a majority of the Registrable Securities then outstanding a written request that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder(s), then the Company shall (a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders and (b) use its best efforts to effect, as soon as practicable, such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of the Registrable Securities specified in such request, together with all or such portion of the Registrable Securities of any other Holder joining in such request as are specified in a written request given within fifteen (15) calendar days of the date the Companys notice referred to in clause (a) of this sentence is given.
(b) If the Holders requesting registration pursuant to this Section 1.11 intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as part of their request made pursuant to this Section 1.11 and the Company shall include such information in the written notice referred to in
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clause (a) of Section 1.11(a). The underwriter will be selected by the Company and shall be reasonably acceptable to a majority in interest of the Holders requesting registration. In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holders participation in such underwriting and the inclusion of such Holders Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 1.4(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 1.11, if the underwriter advises the Holders requesting registration in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Holders requesting registration shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders thereof, including the Holders requesting registration, in proportion (as nearly as practicable) to the amount of Registrable Securities requested by each such Holder to be included in such underwriting; provided, however, that the number of shares of Registrable Securities to be included in such underwriting shall not be reduced unless all other Securities (including those to be sold for the Companys account) are first entirely excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish to the Holder(s) requesting a registration pursuant to this Section 1.11, a certificate signed by the Companys Chief Executive Officer or President stating that in the good faith judgment of the Companys Board of Directors, such registration would be seriously detrimental to the Company and its stockholders and that it is, therefore, essential to defer taking action with respect to such registration, the Company shall have the right to defer taking action with respect to such filing for a period of not more than one hundred twenty (120) calendar days after the date the request of the Holder(s) requesting a registration pursuant to this Section 1.11 is given; provided, however, that the Company shall not utilize this right more than once in any twelve (12) month period.
(d) In addition, the Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 1.11:
(i) if Form S-3 is not available for such offering by the Holders;
(ii) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (net of underwriting discounts and commissions) of less than $10,000,000;
(iii) during the period starting with the date sixty (60) calendar days prior to the Companys good faith estimate of the date of filing of, and ending on a date one hundred eighty (180) calendar days after the effective date of, any registration statement pertaining to an underwritten public offering of securities for the Companys account; provided that the Company is actively employing its best efforts to cause such registration statement to be effective; or
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(iv) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act.
1.12 Transfer or Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 1 may be transferred or assigned, but only with all related obligations, by a Holder to a transferee or assignee who acquires at least 100,000 shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends and combinations) from such transferring Holder; provided, that (a) the Company is furnished with written notice stating the name and address of such transferee or assignee and identifying the securities with respect to which such registration rights are being transferred or assigned, (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement, including without limitation the provisions of Section 1.14 and (c) such transfer or assignment shall be effective only if immediately following such transfer or assignment, the further disposition of such securities by the transferee or assignee is restricted under the Securities Act.
1.13 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company giving such holder or prospective holder any registration rights, the terms of which are senior to, or in any manner inconsistent with the registration rights granted to the Holders hereunder.
1.14 Market Stand-Off Agreement. Each Investor and Common Holder hereby agrees that, if requested by the managing underwriter, it will not, without the prior written consent of the Company, during the period commencing on the date of the final prospectus relating to the Companys initial public offering or any secondary public offering, as applicable, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) calendar days in the case of an initial public offering and, solely in the case of a Common Holder, ninety (90) calendar days in the case of any secondary public offering (or such other period as may be requested by the Company or managing underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto)) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any securities of the Company, including (without limitation)
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shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired), whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of securities, in cash or otherwise. The foregoing covenants shall not apply to the sale of any shares by an Investor or Common Holder to an underwriter pursuant to an underwriting agreement and shall only be applicable to the Investors and Common Holders if all the Companys executive officers, directors and greater than one percent (1%) stockholders enter into similar agreements. Each Investor and Common Holder agrees to execute an agreement(s) reflecting (i) and (ii) above as may be requested by the managing underwriters at the time of the initial public offering or any secondary public offering (in the case of a Common Holder), and further agrees that the Company may impose stop transfer instructions with its transfer agent in order to enforce the covenants in (i) and (ii) above. Any discretionary waiver or termination of the restrictions of any or all such agreements by the Company shall apply to all Investors and Common Holders subject to such agreements pro rata based on the number of shares of stock or options to purchase shares of stock held by such Investors and Common Holders that are subject to such agreements. The restrictions in this Section 1.14 shall not apply to transfers to affiliates of Investors or Common Holders or purchases made in the open market following the completion of any offering covered by this Section 1.14, or, as to each Investor and Common Holder, to any resale public offerings in which such Investor or Common Holder is not selling shares of Common Stock for its own account.
1.15 Termination of Registration Rights.
(a) No Holder shall be entitled to exercise any right provided for in this Section 1 after the earlier of (i) five (5) years following the consummation of a Qualified IPO or (ii) as to any Holder, on such date after the consummation of a Qualified IPO at which the Company is subject to the reporting requirements of the Exchange Act and all shares of Registrable Securities held or entitled to be held upon conversion by such Holder may be sold under Rule 144 of the Securities Act during any 90-day period free of the current public information, volume limitation, and manner of sale restrictions, and the Form 144 filing requirements.
2. Covenants of the Company to the Investors.
2.1 Information Rights. The Company shall deliver to each Investor who holds (and continues to hold) at least 1,000,000 shares of the Companys Conversion Stock (subject to appropriate adjustment for stock splits, stock dividends and combinations) (each, a Qualified Holder):
(a) As soon as practicable, but in any event within one hundred-eighty (180) calendar days after the end of each fiscal year of the Company, consolidated balance sheets of the Company and its subsidiaries, if any, as of the end of such fiscal year, and consolidated statements of income and consolidated statements of cash flows of the Company and its subsidiaries, if any, for such year, prepared in accordance with generally accepted accounting principles (GAAP), all in reasonable detail and audited by independent public accountants of national or regional standing selected by the Board of Directors of the Company; and
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(b) As soon as practicable, but in any event within forty-five (45) calendar days after the end of each of the first three (3) quarters of each fiscal year of the Company, consolidated balance sheets of the Company and its subsidiaries, if any, as of the end of such quarter, and consolidated statements of income and consolidated statements of cash flows of the Company and its subsidiaries, if any, for such quarter prepared in accordance with GAAP consistently applied with prior practice for earlier periods (with the exception that footnotes that may be required by GAAP may be omitted) and which fairly present the financial condition of the Company and its results of operation for the period specified, subject to year-end audit adjustment.
(c) Within thirty (30) days of the end of each month, an unaudited income statement and statement of cash flows for such month, and a balance sheet for and as of the end of such month, in reasonable detail, as well as a budget update and variances from projected financial results for such month prepared in accordance with GAAP consistently applied with prior practice for earlier periods (with the exception that footnotes that may be required by GAAP may be omitted) and which fairly present the financial condition of the Company and its results of operation for the period specified, subject to year-end audit adjustment; and
(d) As soon as practicable, but in any event at least forty-five (45) days prior to the end of each fiscal year, a budget and business plan for the next fiscal year as approved by the Companys Board of Directors, prepared on a monthly basis, including balance sheets and income statements for such months and, as soon as prepared, any other budgets or revised budgets prepared by the Company.
2.2 Visitation and Inspection. The Company shall permit each Qualified Holder, at such Qualified Holders expense, to visit and inspect the Companys properties, to examine its books of account and records and to discuss the Companys affairs, finances and accounts with its officers, all at such reasonable times during business hours as may be requested by the Qualified Holder; provided, however, that the Company shall not be obligated pursuant to this Section 2.2 to provide access to any information that it reasonably considers in good faith to be a trade secret or similar confidential information. The provisions of this Section 2.2 shall not be in limitation of any rights which any Investor may have with respect to the books and records of the Company and its subsidiaries, or to inspect their properties or discuss their affairs, finances and accounts, under the laws of the State of Delaware.
2.3 Right of First Offer. Subject to the terms and conditions specified in this Section 2.3, the Company hereby grants to each Qualified Holder (each, an Offeree), a right of first offer to subscribe for and purchase such Offerees Pro Rata Share (as hereinafter defined for the purpose of this Section 2.3), in whole or in part, of future issuances by the Company of Future Shares (as hereinafter defined). Notwithstanding Section 2.5(b), each Offeree shall be entitled to assign or apportion the right of first offer among its partners and affiliates (including, in the case of a venture capital fund, other venture capital funds affiliated with such fund) in such proportions as
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it deems appropriate. For purposes of this Section 2.3, an Offerees Pro Rata Share of Future Shares shall be a fraction, the numerator of which is the number of shares of Common Stock issued or issuable upon conversion of the Preferred Stock held by such Offeree immediately prior to the issuance of Future Shares (assuming the full conversion and exercise of all outstanding securities convertible into or exercisable for Preferred Stock held by such investor and excluding Special Mandatory Conversion Shares) and the denominator of which is the total number of shares of the Companys Common Stock issued or issuable to all Offerees upon conversion of all Preferred Stock held by all Offerees (assuming full conversion and exercise of all outstanding securities convertible into or exercisable for Preferred Stock held by all Offerees and excluding Special Mandatory Conversion Shares) immediately prior to the issuance of Future Shares. Each time the Company proposes to offer any shares of, or securities convertible into or exercisable for any shares of, any class of its capital stock (Future Shares), the Company shall first make an offering of such Future Shares to each Offeree in accordance with the following provisions:
(a) The Company shall deliver a notice (Notice) to each Offeree stating (i) the Companys bona fide intention to offer such Future Shares, (ii) the number of such Future Shares to be offered, and (iii) the price and a summary of the terms, if any, upon which it proposes to offer such Future Shares.
(b) Each Offeree may elect to subscribe for and purchase, at the price and on the terms specified in the Notice, (i) up to such Offerees Pro Rata Share of the Future Shares and (ii) such additional number of the Future Shares as such Offeree indicates it is willing to purchase should the other Offerees subscribe for less than their respective Pro Rata Shares (for each Offeree, the Additional Portion) by notifying the Company in writing within ten (10) calendar days from the date the Notice is given by the Company.
(c) If the aggregate number of Future Shares subscribed for pursuant to subsection (a) above is less than the aggregate Pro Rata Share for which all Offerees are entitled to subscribe, then each Offeree who has subscribed for an Additional Portion pursuant to subsection (a) above shall be entitled to purchase, in addition to such Offerees Pro Rata Share, the Additional Portion subscribed for by such Offeree; provided, however, that if the Additional Portions subscribed for by all Offerees exceed the difference obtained by subtracting (x) the aggregate Pro Rata Share for which all Offerees are entitled to subscribe from (y) the number of Future Shares subscribed for by all Offerees (the Available Additional Portion), then each Offeree who has subscribed for an Additional Portion shall be entitled to purchase only that portion of the Available Additional Portion as such Offerees Pro Rata Share bears to the aggregate Pro Rata Share for all Offerees who subscribed for an Additional Portion, subject to rounding by the Companys Board of Directors to the extent it reasonably deems necessary and equitable. To the extent that Future Shares are not purchased by the Offerees as provided in subsection (a) above and this subsection (c), the Company may, during the ninety (90) calendar days following the expiration of the period provided in subsection (a) above, offer the remaining unsubscribed portion of such Future Shares to any person or persons at a price not less than and upon terms no more favorable than those specified in the Notice. If the Company does not enter into an agreement for the sale of the Future Shares within such period, or if such agreement is not consummated within thirty (30) calendar days of the execution thereof, the right provided in this Section 2.3 shall be deemed to be revived and such Future Shares shall not be offered unless first reoffered to the Offerees in accordance herewith.
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(d) The right of first offer in this Section 2.3 shall not be applicable to the issuance of (i) the Shares issued pursuant to the Series E Agreement; (ii) the Conversion Stock or Special Mandatory Conversion Shares; (iii) securities issued as a dividend or distribution on the Shares; (iv) securities issued in connection with any stock split of or stock dividend on the Common Stock or the Preferred Stock; (v) securities issued to the Companys employees, officers, directors, consultants, advisors or services providers pursuant to the Companys 2005 Stock Plan (or other plan, agreement or similar arrangement approved by the Companys Board of Directors), provided, such issuance is approved by a majority of the Companys Board of Directors; (vi) securities issued to vendors, banks or equipment lessors, provided, such issuance is approved by the Companys Board of Directors with such approval including at least two (2) Preferred Directors (as defined in the Restated Certificate) and is primarily for non-equity financing purposes; (vii) securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships; provided, such issuance is approved by the Companys Board of Directors with such approval including at least two (2) Preferred Directors and is primarily for non-equity financing purposes; (viii) securities issued in a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act pursuant to which all outstanding shares of each series of Preferred Stock are converted to Common Stock; (ix) securities issued in connection with a bona fide business acquisition of or by the Company (whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise), provided, such acquisition is approved by the Companys Board of Directors with such approval including at least two (2) Preferred Directors; or (x) any right, option or warrant to acquire any security convertible into or exercisable for the securities listed in clauses (i) through (ix) above.
(e) Notwithstanding Section 5.2 hereof, in the event the Company proposes to offer Future Shares pursuant to which Qualified Holders are entitled to a right of first offer pursuant to this Section 2.3, and such right of first offer is waived on behalf of all Qualified Holders pursuant to Section 5.2 hereof, if any Qualified Holder is allowed to purchase any of such Future Shares, then each other Qualified Holder shall be entitled to purchase its Pro Rata Portion of all such Future Shares.
(f) Each Existing Investor hereby (i) consents to the Company issuing shares of its Series E Preferred Stock pursuant to the Series E Agreement, as the same may be amended from time to time, (ii) waives any and all rights of first offer such Existing Investor has under Section 2.3 of the Prior Agreement, including but not limited to the right to purchase any portion of the Companys Series E Preferred Stock, including any of the Companys Common Stock issued upon conversion thereof and (iii) waives any required notice under the Prior Agreement or otherwise of the Companys intention to issue shares of its Series E Preferred Stock. The waiver set forth in this subsection (f) shall become effective and binding on all Existing Investors upon the execution of this Agreement by the Company and by Existing Investors holding at least a majority of the Registrable Securities (as defined in the Prior Agreement).
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2.4 Other Covenants.
(a) Proprietary Information and Inventions Assignment Agreement. The Company will cause each person now or hereafter employed by it or any subsidiary to enter into a proprietary information and inventions assignment agreement in substantially the form approved by the Companys Board of Directors, which agreement shall contain a non-solicitation of employees and customers covenant during and for a two-year period following the termination of such employment for any reason.
(b) Board of Directors. The Board of Directors shall meet at least once a month, unless the Companys Board of Directors (including at least two (2) of the Preferred Directors (as hereinafter defined)) agrees to meet less frequently. The Company shall promptly reimburse in full each director of the Company who is not an employee of the Company (an Outside Director) for all of his or her reasonable out-of-pocket expenses incurred in attending each meeting of the Companys Board of Directors or any committee thereof.
(c) Employee and Other Stock Arrangements. Each acquisition of any shares of the Companys capital stock or any option or right to acquire any shares of the Companys capital stock by an employee, consultant, officer or director of the Company will be conditioned upon the execution and delivery by the Company and such employee, consultant, officer or director of an agreement substantially in the form approved by the Board of Directors. Unless otherwise determined by the Companys Board of Directors (including at least two (2) of the Preferred Directors), any such option or right to acquire shares of the Companys capital stock shall vest at the rate of one-fourth ( 1/4th) of the shares granted after one year from the date of employment (for any initial grant to an employee, consultant, officer or director) or one year from the date of grant (for all other grants to such employee, consultant, officer or director) and one forty-eighth (1/48th) of the total number of shares granted monthly thereafter. Unless otherwise determined by the Companys Board of Directors (including at least two (2) of the Preferred Directors), any restricted stock to which this Section 2.4(c) applies shall be subject to the Companys right to repurchase any shares of unvested stock at the purchase price paid by the holder, a right of first refusal in favor of the Company to purchase any vested stock at the price offered by a third party, a restriction on the transfer of unvested stock, and such stock shall vest on the same schedule as set forth in the preceding sentence.
(d) Indemnification Agreements. The Company shall have as of the date hereof entered into Indemnification Agreements (in a form reasonably acceptable to the Companys Board of Directors) with the directors and executive officers of the Company. In the event of a Deemed Liquidation, the Company shall use its commercially reasonable efforts to require each successor of the Company to assume the Companys obligations with respect to indemnification of directors for a reasonable period of time following the consummation of such Deemed Liquidation. The Company hereby acknowledges that one or more of the Preferred Directors may have certain rights to indemnification, advancement of expenses and/or insurance provided by one or more of the Investors and certain of their affiliates (collectively, the Fund Indemnitors). The Company hereby agrees (a) that it is the indemnitor of first resort (i.e., its obligations to any such Preferred Director are primary and any obligation of the Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or
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liabilities incurred by such Preferred Director are secondary), (b) that it shall be required to advance the full amount of expenses incurred by such Preferred Director and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement by or on behalf of any such Preferred Director to the extent legally permitted and as required by the Restated Certificate or Bylaws of the Company (or any agreement between the Company and such Preferred Director), without regard to any rights such Preferred Director may have against the Fund Indemnitors, and, (c) that it irrevocably waives, relinquishes and releases the Fund Indemnitors from any and all claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Fund Indemnitors on behalf of any such Preferred Director with respect to any claim for which such Preferred Director has sought indemnification from the Company shall affect the foregoing and the Fund Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Preferred Director against the Company.
(e) Directors and Officers Insurance. The Company shall have as of the date hereof obtained from financially sound and reputable insurers directors and officers insurance with coverage customary for companies similarly situated to the Company, except as otherwise determined by a majority of the Companys Board of Directors, with such majority including at least two of the Preferred Directors. The Company will cause to be maintained the directors and officers insurance required by this subsection 2.4(e), except as otherwise determined by a majority of the Companys Board of Directors, with such majority including at least two of the Preferred Directors. Such policy shall not be cancelable by the Company without prior approval of a majority of the Board of Directors, with such approval including at least two of the Preferred Directors.
(f) Casualty and Liability Insurance. The Company shall have as of the date hereof obtained from financially sound and reputable insurers casualty and general liability insurance in amounts customary for companies similarly situated, except as otherwise determined by a majority of the Companys Board of Directors, with such majority including at least two of the Preferred Directors. The Company will cause to be maintained the general liability insurance required by this subsection 2.4(f), except as otherwise determined by a majority of the Companys Board of Directors, with such majority including at least two of the Preferred Directors. Such policy shall name the Company, Alloy Ventures 2005, L.P. (Alloy Ventures), Austin Ventures VIII, L.P. (Austin Ventures), North Bridge Venture Partners VI, L.P. (North Bridge) and August Capital V Special Opportunities, L.P. (August Capital) as loss payees and shall not be cancelable by the Company without prior approval of a majority of the Board of Directors, with such approval including at least two of the Preferred Directors.
(g) Related Hires. The Company shall not hire as an employee or retain as a consultant a Related Party of any then current employee of the Company, unless such action is approved by a majority of the disinterested members of the Companys Board of Directors with such approval including at least two (2) Preferred Directors. For the purpose hereof, Related Party means any ancestor, descendant, sibling, spouse, in-law, niece, nephew, uncle or aunt.
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(h) Future Legal Expenses.
(i) In the event that the Company shall receive at any time a written request of Austin Ventures, Alloy Ventures, August Capital or Northbridge so long as such Investor continues to hold at least 2,500,000 shares of Conversion Stock, then the Company shall reimburse (i) up to $3,000 of the reasonable fees and expenses of one counsel mutually agreed upon by Austin Ventures, Alloy Ventures, August Capital and Northbridge, so long as such Investor continues to hold at least 2,500,000 shares of Conversion Stock, to review transaction documents on behalf of all Investors in connection with each future financing transaction of the Company in which the gross proceeds to the Company are at least $1,000,000 and (ii) up to $30,000 of the reasonable fees and expenses of one counsel mutually agreed upon by Austin Ventures, Alloy Ventures, August Capital and Northbridge, so long as such Investor continues to hold at least 2,500,000 shares of Conversion Stock, to review transaction documents on behalf of all Investors in connection with any Deemed Liquidation.
(ii) In the event that the Company shall receive at any time a written request of Starent Networks LLC (Starent), so long as such Investor continues to hold at least twenty five percent (25%) of the Conversion Stock initially issued to it, then the Company shall reimburse (i) up to $2,000 of the reasonable fees and expenses of one counsel selected by Starent, so long as such Investor continues to hold at least twenty five percent (25%) of the Conversion Stock initially issued to it, to review transaction documents on behalf of Starent in connection with each future financing transaction of the Company in which the gross proceeds to the Company are at least $1,000,000 and (ii) up to $20,000 of the reasonable fees and expenses of one counsel selected by Starent, so long as such Investor continues to hold at least twenty five percent (25%) of the Conversion Stock initially issued to it, to review transaction documents on behalf of Starent in connection with any Deemed Liquidation.
2.5 Confidentiality, Assignment and Termination of Covenants.
(a) Confidentiality. Except as required by law, each Investor receiving information under the covenants set forth in Sections 2.1 and 2.2 hereby agrees to hold in confidence and trust all information so provided, unless such information is known, or until such information becomes known, to the public other than as a result of an Investors violation of this Section 2.5 or other obligation of confidentiality to the Company; provided, however, that notwithstanding the foregoing, an Investor may (i) disclose such information (x) to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with its investment in the Company, provided that such parties are bound by similar obligations of confidentiality, or (y) to any prospective purchaser of any Preferred Stock from such Investor as long as such prospective purchaser agrees in writing to be bound by the provisions of this Section 2.5(a), and (ii) may include summary financial information concerning the Company and general statements concerning the nature and progress of the Companys business in an Investors reports to its limited partners.
(b) Assignment. The covenants set forth in Sections 2.1, 2.2 and 2.3 may be assigned or transferred, but only with all related obligations, by an Investor to an assignee or transferee that (i) is a subsidiary, parent, partner, limited partner, retired partner, member, former member, affiliated venture capital fund or stockholder of an Investor or (ii) acquires at least 3,000,000 shares of Conversion Stock (subject to appropriate adjustment for stock splits, stock dividends and combinations) from such transferring Investor.
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(c) Termination. The covenants set forth in Sections 2.1, 2.2, 2.3 and 2.4 shall terminate as to all Investors and be of no further force or effect upon the earlier to occur of (i) the closing of a Qualified IPO or (ii) the consummation of a Deemed Liquidation.
3. Voting Agreement.
3.1 Common Directors. With respect to the two (2) members of the Companys Board of Directors that the Companys Restated Certificate provides are to be elected by the holders of Common Stock, each Investor and each Common Holder hereby agrees to vote all of such Investors or Common Holders shares of Capital Stock, now owned or hereafter acquired, in favor of (a) the designee nominated by a majority of the CEO Director, the Series A Directors, the Series B Director, the Series E Director and the Outside Director (the Common Director), who shall initially be K.P. Wilska and (b) the person then serving as the Companys Chief Executive Officer (the CEO Director), who shall initially be Pardeep Kohli. If for any reason the CEO Director ceases to be an employee of the Company, each Investor and each Common Holder shall promptly vote their shares of Capital Stock (a) to remove the CEO Director from the Board of Directors if such person has not resigned as a member of the Board of Directors and (b) to elect such persons replacement as Chief Executive Officer of the Company as the new CEO Director.
3.2 Series A Directors. With respect to those two (2) members of the Companys Board of Directors that the Restated Certificate provides are to be elected by the holders of the Series A Preferred Stock (the Series A Directors), each Investor hereby agrees to vote all of such Investors shares of Capital Stock, now owned or hereafter acquired, in favor of (a) one (1) designee of Austin Ventures, for so long as it is a Qualified Holder, who shall initially be Venu Shamapant, and (b) one (1) designee of North Bridge, for so long as it is a Qualified Holder, who shall initially be Jeffrey McCarthy.
3.3 Series B Director. With respect to the one (1) member of the Companys Board of Directors that the Restated Certificate provides is to be elected by the holders of the Series B Preferred Stock (the Series B Director), each Investor hereby agrees to vote all of such Investors shares of Capital Stock, now owned or hereafter acquired, in favor of one (1) designee of Alloy Ventures, for so long as it is a Qualified Holder, who shall initially be Ammar Hanafi.
3.4 Series E Director. With respect to the one (1) member of the Companys Board of Directors that the Restated Certificate provides is to be elected by the holders of the Series E Preferred Stock (the Series E Director), each Investor hereby agrees to vote all of such Investors shares of Capital Stock, now owned or hereafter acquired, in favor of one (1) designee of August Capital, for so long as it is a Qualified Holder, who shall initially be Vivek Mehra.
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3.5 Outside Director. With respect to the one (1) remaining member of the Companys Board of Directors that the Restated Certificate provides is to be elected by the holders of Common Stock and Preferred Stock, voting together as a single class and on an as-converted basis, each Investor and each Common Holder hereby agrees to vote all of such Investors or Common Holders shares of Capital Stock, now owned or hereafter acquired, in favor of the designee nominated by a majority of the Common Director, the CEO Director, the Series A Directors, the Series B Director and the Series E Director, who shall initially be Ben Scott (the Outside Director).
3.6 Agreement to Corporate Action. In the event that a Corporate Action is approved by the Companys Board of Directors, each Common Holder hereby agrees to consent to and vote all Capital Stock held by such Common Holder in favor of such Corporation Action.
3.7 Obligations of the Company. The Company shall use its best efforts and shall exercise all authority under applicable law to cause to be nominated for election and cause to be elected or appointed, as the case may be, as directors of the Company, a slate of directors consisting of individuals meeting the requirements of this Section 3. The Company will not, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all of the provisions of this Agreement and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the Investors hereunder against impairment. Each Investor and Common Holder hereby agrees to vote, cause to be voted or sign a written consent with respect to all of its shares of Capital Stock in favor of a slate of directors consisting of individuals meeting the requirements of this Section 3.
3.8 Vacancies; Removal. In the event of any vacancy in the Board of Directors, each Investor and Common Holder agrees to vote all outstanding shares of Capital Stock owned or controlled by such Investor or Common Holder and to use such Investors or Common Holders best efforts to fill such vacancy so that the Board of Directors will be comprised of directors designated as provided in this Section 3. Each Investor and Common Holder agrees to vote all outstanding shares of Capital Stock owned or controlled by such Investor or Common Holder for the removal of a director whenever (but only whenever) there shall be presented to the Board of Directors the written direction that such director be removed, signed by: (i) a majority of the CEO Director, the Series A Directors, the Series B Director, the Series E Director and the Outside Directors, in the case of the Common Director; (ii) Austin Ventures, for so long as it is a Qualified Holder, in the case of the Series A Director designated by Austin Ventures; (iii) North Bridge, for so long as it is a Qualified Holder, in the case of the Series A Director designated by North Bridge; (iv) Alloy Ventures, for so long as it is a Qualified Holder, in the case of the Series B Director; (v) August Capital, for so long as it is a Qualified Holder, in the case of the Series E Director; and (vi) a majority of the Common Director, the CEO Director, the Series A Directors, the Series B Director and the Series E Director, in the case of the Outside Directors. In such event, the Board of Directors shall solicit the vote of the Investors and Common Holders entitled to remove such director in order to effect such removal.
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3.9 Grant of Proxy. To ensure the performance of each Investor and Common Holder with respect to the agreements set forth herein, each Investor and Common Holder hereby appoints the Chairman of the Board of Directors and the Chief Executive Officer of the Company, or either of them from time to time, or their designees, as his, her or its true and lawful proxy and attorney-in-fact, with full power of substitution and resubstitution, to vote all Capital Stock owned or held by such Investor and Common Holder and to execute all appropriate instruments consistent with this Agreement, subject to the provisions of this Agreement, upon any matter presented to the stockholders of the Company, if and only if such Investor or Common Holder fails to vote all of such Investors or Common Holders Capital Stock or execute such other instruments in accordance with the provisions of this Agreement within five (5) days of the Companys or any other partys written request for such Investors or Common Holders written consent or signature. The proxies and powers granted by each Investor and Common Holder pursuant to this Section 3.9 are coupled with an interest and are given to secure the performance of such Investors and Common Holders commitments under this Agreement. Such proxies shall be irrevocable for the term of this Agreement and shall survive the death, incompetence, disability, merger, reorganization, dissolution or winding up of such Investor or Common Holder. Except as provided above, no Investor or Common Holder shall grant a proxy with respect to, transfer any voting control over, or create any right to vote any shares of Capital Stock of the Company without the prior written consent of the Company.
3.10 Termination. This Section 3 shall terminate in its entirety and be of no further force or effect upon the earlier to occur of (i) the closing of a Qualified IPO or (ii) the consummation of a Deemed Liquidation.
4. Legend. Each certificate representing the shares of Common Stock and/or Preferred Stock held by the Investors and by the Common Holders shall be endorsed with the following legend (the Legend):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A VOTING AGREEMENT AND LOCK-UP PERIOD FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AS SET FORTH IN THAT CERTAIN AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE COMPANYS PRINCIPAL OFFICE. SUCH VOTING AGREEMENT AND LOCK-UP PERIOD ARE BINDING ON TRANSFEREES OF THESE SHARES.
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5. Miscellaneous.
5.1 Governing Law. This Agreement shall be governed in all respects by the laws of the State of Delaware as such laws are applied to agreements between Delaware residents entered into and to be performed entirely within Delaware, without regard to conflict of laws rules.
5.2 Waivers and Amendments. This Agreement may be terminated and any term of this Agreement may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) with the written consent of the Company and Investors holding a majority of the Registrable Securities then outstanding (the Major Investors); provided, however, that (a) Sections 2.3(e) and 3.2 may not be amended or waived without the consent of both Austin Ventures and North Bridge, (b) Sections 2.3(e) and 3.3 may not be amended or waived without the consent of Alloy Ventures, (c) Sections 2.3(e) and 3.4 may not be amended or waived without the consent of August Capital, (d) Section 2.4(h)(ii) may not be amended or waived without the consent of Starent and (e) Section 3.6 may not be amended or waived without the consent of the holders of a majority of the shares of Common Stock held by the Common Holders. Notwithstanding the foregoing, additional parties may be added as Holders or Investors under this Agreement with the written consent of the Company and the Major Investors and without requiring the consent of the Common Holders. Any termination, amendment or waiver effected in accordance with this Section 5.2 shall be binding upon each holder of Registrable Securities then outstanding, each future holder of all such Registrable Securities, the Common Holders and the Company. Notwithstanding anything in this Section 5.2 to the contrary, to the extent that any amendment, modification or waiver of this Agreement would affect the preferences, privileges or rights of the holders of (i) the Series A Preferred Stock in an adversely different manner from the holders of the Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, such amendment, modification or waiver shall require the prior written consent of the holders of at least two-thirds (2/3) of the Series A Preferred Stock then outstanding, (ii) the Series B Preferred Stock in an adversely different manner from the holders of the Series A Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, such amendment, modification or waiver shall require the prior written consent of the holders of at least two-thirds (2/3) of the Series B Preferred Stock then outstanding, (iii) the Series C Preferred Stock in an adversely different manner from the holders of the Series A Preferred Stock, Series B Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, such amendment, modification or waiver shall require the prior written consent of the holders of at least two-thirds (2/3) of the Series C Preferred Stock then outstanding, (iv) the Series D Preferred Stock in an adversely different manner from the holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series E Preferred Stock, such amendment, modification or waiver shall require the prior written consent of the holders of at least two-thirds (2/3) of the Series D Preferred Stock then outstanding, or (v) the Series E Preferred Stock in an adversely different
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manner from the holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, such amendment, modification or waiver shall require the prior written consent of the holders of a majority of the Series E Preferred Stock then outstanding.
5.3 Binding Effect. In addition to any restriction on transfer that may be imposed by any other agreement by which any party hereto may be bound, this Agreement shall be binding upon the Investors and Common Holders and their respective permitted transferees, heirs, executors, administrators, successors and assigns; provided, however, that the Company shall not effect any transfer of Capital Stock subject to this Agreement on its books or issue a new certificate for such Capital Stock unless the transferee of such Capital Stock shall have executed and delivered an Adoption Agreement substantially in the form attached hereto as Exhibit A. Upon the execution and delivery of an Adoption Agreement by any transferee, such transferee shall be deemed to be a party hereto as if such transferees signature appeared on the signature pages hereto. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties to this Agreement or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
5.4 Entire Agreement. This Agreement constitutes the full and entire understanding and agreement among the parties with regard to the subject matter hereof, and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein.
5.5 Notices. All notices and other communications required or permitted under this Agreement shall be in writing and shall be delivered personally by hand or by courier, mailed by United States first-class mail, postage prepaid, or sent by facsimile directed (a) if to an Investor, at such Investors address or facsimile number set forth in the Companys records, or at such other address or facsimile number as such Investor may designate by ten (10) days advance written notice to the other parties hereto, (b) if to a Common Holder, at such Common Holders address or facsimile number set forth in the Companys records, or at such other address or facsimile number as such Common Holder may designate by ten (10) days advance written notice to the other parties hereto or (c) if to the Company, to its address or facsimile number set forth on its signature page to this Agreement and directed to the attention of the President, or at such other address or facsimile number as the Company may designate by ten (10) days advance written notice to the other parties hereto. All such notices and other communications shall be effective or deemed given upon personal delivery, on the date of mailing, or upon confirmation of facsimile transfer (or if to an overseas address, two (2) business days after delivery to a recognized overseas air courier service).
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5.6 Interpretation. The words include, includes and including when used herein shall be deemed in each case to be followed by the words without limitation. The titles and subtitles used in this Agreement are used for convenience only and are not considered in construing or interpreting this Agreement.
5.7 Severability. If any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Agreement, and such court will replace such illegal, void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision. The balance of this Agreement shall be enforceable in accordance with its terms.
5.8 Aggregation of Stock. All shares of Registrable Securities held or acquired by a Holder and its affiliated entities shall be aggregated together for the purpose of determining the availability of any rights under this Agreement. For purposes of the foregoing, any shares of Registrable Securities held by a Holder that (X) is a partnership, limited liability company or corporation shall be deemed to include shares held by (i) entities affiliated with such partnership, limited liability company or corporation, (ii) any partner (or retired partner), member (or retired member) or stockholder of such partnership, limited liability company or corporation, (iii) the spouse, siblings, lineal descendants or ancestors of any such partner (or retired partner), member (or retired member) or stockholder, (iv) the estate of any such partner (or retired partner), member (or retired member) or stockholder and (v) any custodian or trustee for the benefit of any such partner (or retired partner), member (or retired member) or stockholder or the spouse, siblings, lineal descendants or ancestors of any such partner (or retired partner), member (or retired member) or stockholder or (Y) is an individual shall be deemed to include shares held by (i) the estate of such individual or (ii) the spouse, siblings, lineal descendants or ancestors of such individual and any custodian or trustee for the benefit of any of the foregoing persons.
5.9 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.
5.10 Telecopy Execution and Delivery. A facsimile, telecopy or other reproduction of this Agreement may be executed by one or more parties hereto, and an executed copy of this Agreement may be delivered by one or more parties hereto by facsimile or similar electronic transmission device pursuant to which the signature of or on behalf of such party can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes. At the request of any party hereto, all parties hereto agree to execute an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof.
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5.11 Amendment and Restatement of Prior Agreement. Pursuant to Section 5.2 of the Prior Agreement, the Major Investors (as that term is defined in the Prior Agreement) hereby amend and restate the Prior Agreement on behalf of all Investors (as that term is defined in the Prior Agreement) with this Agreement, and any Investor (as that term is defined in the Prior Agreement) who does not sign this Agreement shall be bound by the terms and conditions of this Agreement pursuant to Section 5.2 of the Prior Agreement as if that Investor (as that term is defined in the Prior Agreement) had signed this Agreement.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties have executed this Agreement on the day, month and year first set forth above.
Company | ||
Mavenir Systems, Inc. | ||
By: |
/s/ Pardeep Kohli | |
| ||
Pardeep Kohli, President | ||
Address: | ||
1651 N. Glenville Road, Suite 216 | ||
Richardson, TX 75081 | ||
Facsimile: (469) 916-4397 |
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement on the day, month and year first set forth above.
Investor | ||
Alloy Ventures 2005, L.P. | ||
By: | Alloy Ventures 2005, LLC, | |
its General Partner | ||
By: |
/s/ Ammar Hanafi | |
| ||
Print Name: Ammar Hanafi | ||
Title: |
Managing Member |
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement on the day, month and year first set forth above.
Investor | ||
Austin Ventures VIII, L.P. | ||
By: |
AV Partners VIII, L.P., | |
its General Partner | ||
By: |
/s/ Chris Pacitti | |
| ||
Print Name: | ||
Title: |
||
| ||
AV VIII Holdings, Inc. | ||
By: |
/s/ Ken DeAngelas | |
| ||
Print Name: | ||
Title: |
||
|
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement on the day, month and year first set forth above.
Investor | ||
North Bridge Venture Partners V-A, L.P. | ||
By: |
North Bridge Venture Management V, L.P. | |
Its General Partner | ||
By: |
NBVM GP, LLC | |
Its General Partner | ||
By: |
/s/ Jeffrey P. McCarthy | |
| ||
Jeffrey P. McCarthy | ||
Manager | ||
North Bridge Venture Partners V-B, L.P. | ||
By: |
North Bridge Venture Management V, L.P. | |
Its General Partner | ||
By: |
NBVM GP, LLC | |
Its General Partner | ||
By: |
/s/ Jeffrey P. McCarthy | |
| ||
Jeffrey P. McCarthy | ||
Manager | ||
North Bridge Venture Partners VI, L.P. | ||
By: |
North Bridge Venture Management VI, L.P. | |
Its General Partner | ||
By: |
NBVM GP, LLC | |
Its General Partner | ||
By: |
/s/ Jeffrey P. McCarthy | |
| ||
Jeffrey P. McCarthy | ||
Manager |
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement on the day, month and year first set forth above.
Investor | ||
August Capital V Special Opportunities, L.P. | ||
By: | August Capital Management V, L.L.C. | |
Its general partner | ||
By: | /s/ Steven Simonian | |
| ||
Name: | Steven Simonian | |
Title: | Attorney-in-fact |
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement on the day, month and year first set forth above.
Investor | ||
Cross Creek Capital, L.P. | ||
By: |
Cross Creek Capital GP, L.P., | |
its Sole General Partner | ||
By: |
Cross Creek Capital, LLC, | |
its Sole General Partner | ||
By: |
Wasatch Advisors, Inc., | |
its Sole Member | ||
By: |
/s/ Daniel Thurber | |
| ||
Print Name: Daniel Thurber | ||
Title: |
Vice President |
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement on the day, month and year first set forth above.
Investor | ||
Cross Creek Capital Employees Fund, L.P. | ||
By: |
Cross Creek Capital GP, L.P., | |
its Sole General Partner | ||
By: |
Cross Creek Capital, LLC, | |
its Sole General Partner | ||
By: |
Wasatch Advisors, Inc., | |
its Sole Member | ||
By: |
/s/ Daniel Thurber | |
| ||
Print Name: Daniel Thurber | ||
Title: | Vice President |
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement on the day, month and year first set forth above.
Investor | ||
Greenspring Crossover Ventures I, L.P. | ||
By: |
Greenspring Crossover I GP, L.P. | |
By: |
Greenspring Crossover I GP, LLC | |
By: |
/s/ Ashton Newhall | |
| ||
Name: |
Ashton Newhall | |
Title: |
General Partner |
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement on the day, month and year first set forth above.
Investor |
/s/ Satish Kohli |
Satish Kohli |
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement on the day, month and year first set forth above.
Investor |
/s/ Pardeep Kohli |
Pardeep Kohli |
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement on the day, month and year first set forth above.
Investor |
/s/ KiHyun Joo |
KiHyun Joo |
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement on the day, month and year first set forth above.
Investor |
/s/ K.P. Wilska |
K.P. Wilska |
Facsimile: |
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement on the day, month and year first set forth above.
Investor |
/s/ Ashok Khuntia |
Ashok Khuntia |
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement on the day, month and year first set forth above.
Investor |
/s/ Satyendra Arya |
Satyendra Arya |
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement on the day, month and year first set forth above.
Investor | ||
Koteswar Krishna Revocable Trust, | ||
Koteswar Krishna and Vijaya Krishna co-trustees | ||
By: |
/s/ Koteswar Krishna | |
| ||
Print Name: Koteswar Krishna | ||
Title: |
Co-Trustee | |
By: |
/s/ Vijaya Krishna | |
| ||
Print Name: Vijaya Krishna | ||
Title: |
Co-Trustee |
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement on the day, month and year first set forth above.
Investor |
/s/ S. Paul Handa |
S. Paul Handa |
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
SIGNATURE PAGE
SCHEDULE A
SCHEDULE OF INVESTORS
August Capital V Special Opportunities, L.P.
Alloy Ventures 2005, L.P.
Satyendra Arya
Austin Ventures VIII, L.P.
AV VIII Holdings, Inc.
Alex Garbuz
Greenspring Crossover Ventures I, L.P.
S. Paul Handa
North Bridge Venture Partners V-A, L.P.
North Bridge Venture Partners V-B, L.P.
North Bridge Venture Partners VI, L.P.
KAM Patel LLC
Ashok Khuntia
KiHyun Joo
Pardeep Kohli
Satish Kohli
Starent Networks LLC
K-P Wilska
Cross Creek Capital, L.P.
Cross Creek Capital Employees Fund, L.P.
Koteswar Krishna Revocable Trust
S-1
SCHEDULE B
SCHEDULE OF COMMON HOLDERS
Pulin Patel
Rashad Ali
Achal Patel
Jake Han
S-2
EXHIBIT A
ADOPTION AGREEMENT
This Adoption Agreement (Adoption Agreement) is executed by the undersigned (the Transferee) pursuant to the terms of that certain Amended and Restated Investors Rights Agreement dated as of May 26, 2011 (the Agreement) by and among Mavenir Systems, Inc. (the Company) and certain of its Capital Stock. Capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Agreement. By the execution of this Adoption Agreement, the Transferee agrees as follows:
1. Acknowledgement. Transferee acknowledges that Transferee is acquiring certain shares of the Capital Stock of the Company, which shares are subject to the terms and conditions of the Agreement.
2. Agreement. As partial consideration for such transfer, Transferee (i) agrees that the Capital Stock acquired by Transferee shall be bound by and subject to the terms of the Agreement, to the same extent and with the same rights and obligations as the person(s) from which such Capital Stock is received and (ii) hereby agrees to become a party to the Agreement with the same force and effect as if Transferee were originally a party thereto.
3. Notice. Any notice required or permitted by the Agreement shall be given to Transferee at the address listed below Transferees signature below.
4. Joinder. The spouse of the undersigned Transferee, if applicable, executes this Adoption to acknowledge its fairness and that it is in such spouses best interests and to bind to the terms of the Agreement such spouses community interest, if any, in the Capital Stock.
EXECUTED AND DATED this day of , .
TRANSFEREE: | ||
Title: | ||
Address: | ||
Fax: | ||
Spouse: (if applicable): | ||
Name: |
Acknowledged and accepted on , .
MAVENIR SYSTEMS, INC. | ||
By: | ||
Name: | ||
Title: |
Exhibit B
Exhibit 4.2
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO RULE 144 OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, SUBSTANTIALLY AS SET FORTH IN A WARRANT TO PURCHASE STOCK BETWEEN THE COMPANY AND THE HOLDER, A COPY OF WHICH MAY BE OBTAINED AT THE COMPANYS PRINCIPAL OFFICE. SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES OF THESE SECURITIES.
WARRANT TO PURCHASE STOCK
Corporation: | MAVENIR SYSTEMS, INC., a Delaware corporation | |||||
Number of Shares: | 97,784 (Subject to Section 2.1) | |||||
Class of Stock: | Series B Preferred Stock (Subject to Section 2.1) | |||||
Initial Exercise Price: | $0.767 per share (Subject to Section 2.1) | |||||
Issue Date: | October 3, 2008 | |||||
Expiration Date: | October 3, 2015 (Subject to Section 4.1) |
THIS WARRANT TO PURCHASE STOCK (WARRANT) CERTIFIES THAT, for good and valuable consideration, the receipt of which is hereby acknowledged, COMERICA BANK, or its assignee (Holder), is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the Shares) of MAVENIR SYSTEMS, INC. (the Company) at the initial exercise price per Share (the Warrant Price) all as set forth above and as adjusted pursuant to this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. The definition of Shares, the Warrant Price and the number of Shares issuable upon exercise of this Warrant are subject to adjustment in accordance with Section 2.1 in the event of a Qualified Financing (as defined below).
ARTICLE 1
EXERCISE
1.1 Method of Exercise. Holder may exercise this Warrant by delivering this Warrant and a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Holder shall also deliver to the Company a check or wire for the aggregate Warrant Price for the Shares being purchased.
1.2 Delivery of Certificate and New Warrant. Within 45 days after Holder exercises this Warrant, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised and has not expired, a new warrant representing the Shares not so acquired.
1.3 Replacement of Warrants . In the case of loss, theft or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.
1.4 Acquisition of the Company.
1.4.1 Acquisition. For the purpose of this Warrant, Acquisition means (a) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any merger, consolidation or other form of reorganization in which outstanding shares of the Company are exchanged for securities or other consideration issued, or caused to be issued, by the acquiring entity or its subsidiary, but excluding any transaction effected primarily for the purpose of changing the Companys jurisdiction of incorporation) that results in the transfer or acquisition of at least a majority of the Companys voting power to such entity, or (b) a sale of all or substantially all of the assets of the Company or the exclusive license of all or substantially all of the Companys intellectual property by means of any transaction or series of related transactions.
1.4.2 Treatment of Warrant in the Event of an Acquisition. The Company shall give Holder written notice at least 20 days prior to the closing of any proposed Acquisition. The Company will use its commercially reasonable efforts to cause the acquirer of the Company under the Acquisition (the Acquirer) to assume this Warrant as a part of the Acquisition.
(A) If the Acquirer assumes this Warrant, then this Warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Warrant Price shall be adjusted accordingly, and the Warrant Price and number and class of Shares shall continue to be subject to adjustment from time to time in accordance with the provisions hereof.
(B) If the Acquirer refuses to assume this Warrant in connection with the Acquisition, the Company shall give Holder an additional written notice at least 5 days prior to the closing of the Acquisition of such fact. In such event, notwithstanding any other provision of this Warrant to the contrary, Holder may immediately exercise this Warrant in the manner specified in this Warrant with such exercise effective immediately prior to closing of the Acquisition. If Holder elects not to exercise this Warrant, then this Warrant will terminate immediately prior to the closing of the Acquisition.
ARTICLE 2
ADJUSTMENTS TO THE SHARES
2.1 Qualified Financing.
2.1.1 Qualified Financing. For the purpose of this Warrant, Qualified Financing means the next transaction (or series of related transactions) after the date of this Warrant in which the Company issues and sells shares of its capital stock in exchange for aggregate gross cash proceeds of at least $8.0 million (excluding any amounts received upon conversion of indebtedness).
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2.1.2 Adjustment in the Event of a Qualified Financing. Notwithstanding anything in this Warrant to the contrary, in the event that the Company issues equity securities in a Qualified Financing prior to January 15, 2009, this Warrant shall be exercisable for the number of equity securities issued in such Qualified Financing equal to the quotient obtained by dividing (x) by (y), where (x) is an amount equal to $75,000 and (y) is equal to the price per share at which the Company sells the equity securities issued in a Qualified Financing. In the event of such adjustment, the Warrant Price shall be equal to the price per share paid for the equity securities issued in such Qualified Financing.
2.2 Stock Dividends, Splits, Etc. If the Company subdivides the outstanding Shares, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend or subdivision occurred.
2.3 Reclassification, Exchange or Substitution. Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. Such an event shall include any automatic conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Companys Certificate of Incorporation upon the closing of a registered public offering of the Companys common stock. The Company or its successor shall promptly issue to Holder a new warrant for such new securities or other property. The new warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new warrant. The provisions of this Section 2.3 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events.
2.4 Adjustments for Combinations, Etc. If the outstanding Shares are combined or consolidated, by reclassification, reverse split or otherwise, into a lesser Number of Shares, the Warrant Price shall be proportionately increased. If the outstanding Shares are split or multiplied, by reclassification or otherwise, into a greater Number of Shares, the Warrant Price shall be proportionately decreased.
2.5 Adjustments for Diluting Issuances. The Shares issuable upon exercise of this Warrant are subject to the anti-dilution protection set forth in the Companys Amended and Restated Certificate of Incorporation as in effect on the Issue Date and as amended from time to time thereafter; provided, however, that under no circumstances shall the aggregate Warrant Price payable by the Holder upon exercise of this Warrant increase as a result of any adjustment arising from the issuance, after the Issue Date, of securities at a price per share less than the Warrant Price.
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2.6 No Impairment. The Company shall not, by amendment of its Certificate of Incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holders rights under this Article 2 against impairment.
2.7 Certificate as to Adjustments. Upon each adjustment of the Warrant Price, the Company at its expense shall promptly compute such adjustment, and furnish Holder with a certificate signed by its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price in effect upon the date thereof and the series of adjustments leading to such Warrant Price.
2.8 Fractional Shares. No fractional Shares shall be issuable upon exercise of this Warrant and the Number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise of the Warrant, the Company shall eliminate such fractional share interest by paying Holder an amount computed by multiplying the fractional interest by the fair market value, as determined by the Companys Board of Directors, of a full Share.
ARTICLE 3
REPRESENTATIONS AND COVENANTS OF THE COMPANY
3.1 Representations and Warranties. The Company hereby represents and warrants to, and agrees with, the Holder as follows:
3.1.1 The initial Warrant Price referenced on the first page of this Warrant is not greater than the price per share last paid by holders of Series B Preferred Stock.
3.1.2 All Shares which may be issued upon the exercise of the purchase right represented by this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.
3.1.3 The Companys capitalization table attached to this Warrant is true and complete as of the Issue Date.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to declare any dividend or distribution upon its stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (c) to effect any reclassification or recapitalization of stock; or (d) to merge or consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, or to liquidate, dissolve or wind up, then, in connection with each such event, the Company shall give Holder (1) at least 15 days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of stock will be entitled thereto) or for determining rights to
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vote, if any, in respect of the matters referred to in (a) and (b) above; and (2) in the case of the matters referred to in (c) and (d) above at least 15 days prior written notice of the date when the same will take place (and specifying the date on which the holders of stock will be entitled to exchange their stock for securities or other property deliverable upon the occurrence of such event).
3.3 Information Rights. So long as the Holder holds this Warrant and/or any of the Shares, the Company shall deliver to the Holder (a) promptly after mailing, copies of all communiqués to the shareholders of the Company, (b) within one hundred fifty (150) days after the end of each fiscal year of the Company, the annual audited financial statements of the Company certified by independent public accountants of recognized standing and (c) within thirty (30) days after the end of each of each month, the Companys monthly, unaudited financial statements.
3.4 Registration Under Securities Act of 1933, as amended. The Company agrees that the Shares or, if the Shares are convertible into common stock of the Company, such common stock, shall be subject to the registration rights set forth on Exhibit A.
3.5 Investment Representations of the Holder. With respect to the acquisition of any of the Shares, the Holder hereby represents and warrants to the Company as follows:
3.5.1 Purchase Entirely for Own Account. This Warrant is made with the Holder in reliance upon the Holders representation to the Company, which by the Holders execution of this Warrant the Holder hereby confirms, that the Shares will be acquired for investment for the Holders own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Holder has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Warrant, the Holder further represents that the Holder does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person with respect to any of the Shares.
3.5.2 Reliance upon Holders Representations. The Holder understands that the Shares have not been, and will not be, registered under the Securities Act of 1933, as amended (the Securities Act) by reason of a specific exemption from the registration provisions of the Securities Act, and that the Companys reliance on such exemption is predicated on the Holders representations set forth herein.
3.5.3 Investment Experience; Economic Risk. The Holder understands that the Company has a limited financial and operating history and that an investment in the Company involves substantial risks. The Holder is experienced in evaluating and investing in private placement transactions of securities of companies in a similar stage of development to that of the Company and acknowledges that the Holder is able to fend for itself. The Holder has such knowledge and experience in financial and business matters that the Holder is capable of evaluating the merits and risks of the investment in the Shares. The Holder can bear the economic risk of the Holders investment and is able, without impairing the Holders financial condition, to hold the Shares for an indefinite period of time and to suffer a complete loss of the Holders investment.
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3.5.4 Accredited Investor Status. The Holder is an accredited investor within the meaning of Regulation D, Rule 501(a), promulgated under the Securities Act. The Holder also represents that it has not been organized for the purpose of acquiring the Shares.
3.5.5 Restricted Securities. The Holder understands that the Shares are characterized as restricted securities under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such federal securities laws and applicable regulations such Shares may be resold without registration under the Securities Act only in certain limited circumstances. In this connection, Holder represents that it is aware of the provisions of Rule 144 promulgated under the Securities Act which permit limited resale of securities purchased in a private placement subject to the satisfaction of certain conditions, including, among other things, the existence of a public market for the securities and the availability of certain current public information about the Company.
3.5.6 Market Standoff. The Holder hereby agrees that, if requested by the managing underwriter, it will not, without the prior written consent of the Company, during the period commencing on the date of the final prospectus relating to the Companys initial public offering or any secondary public offering, as applicable, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) calendar days in the case of an initial public offering and ninety (90) calendar days in the case of any secondary public offering (or such other period as may be requested by the Company or managing underwriter to accommodate regulatory restrictions on (a) the publication or other distribution of research reports and (b) analyst recommendations and opinions, including, but not limited to, the restrictions contained in NASD Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto)) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired), whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of securities, in cash or otherwise. The foregoing covenants shall not apply to the sale of any shares by the Holder to an underwriter pursuant to an underwriting agreement and shall only be applicable to the Holder if all the Companys executive officers, directors and greater than one percent (1%) stockholders enter into similar agreements. The Holder agrees to execute an agreement(s) reflecting (i) and (ii) above as may be requested by the managing underwriters at the time of the initial public offering or any secondary public offering, and further agrees that the Company may impose stop transfer instructions with its transfer agent in order to enforce the covenants in (i) and (ii) above. The restrictions in this Section 3.5.6 shall not apply to transfers to affiliates of the Holder or purchases made in the open market following the completion of any offering covered by this Section 3.5.6 or to any resale public offerings in which the Holder is not selling shares of Common Stock for its own account.
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ARTICLE 4
MISCELLANEOUS
4.1 Term; Exercise Upon Expiration. This Warrant is exercisable in whole or in part, at any time and from time to time on or before the Expiration Date set forth above; provided, however, that if the Company completes its initial public offering within the one-year period immediately prior to the Expiration Date, the Expiration Date shall automatically be extended until the first anniversary of the effective date of the Companys initial public offering.
4.2 Legends. This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO RULE 144 OR OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT THERE EXISTS A VALID AND APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, SUBSTANTIALLY AS SET FORTH IN A WARRANT TO PURCHASE STOCK BETWEEN THE COMPANY AND THE HOLDER, A COPY OF WHICH MAY BE OBTAINED AT THE COMPANYS PRINCIPAL OFFICE. SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES OF THESE SECURITIES.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee.
4.4 Transfer Procedure. Subject to the provisions of Section 4.3, Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the securities issuable, directly or indirectly, upon conversion of the Shares, if any) by giving the Company written notice of the portion of this Warrant being transferred setting forth the name, address and taxpayer identification number of the transferee and surrendering this Warrant to the Company for reissuance to the transferee(s) (and Holder, if applicable); provided, however, that Holder may transfer all or part of this Warrant to its affiliates, including, without limitation, Comerica Incorporated, at any time without notice or the delivery of any other instrument to the Company, and such affiliate shall then be entitled to all the rights of Holder under this Warrant and any related agreements, and the Company shall cooperate fully in ensuring that any stock issued upon exercise of this Warrant is issued in the name of the affiliate that exercises this Warrant. The terms and conditions of this Warrant shall inure to the benefit of, and be binding upon, the Company and the holders
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hereof and their respective permitted successors and assigns. Unless the Company is filing financial information with the SEC pursuant to the Securities Exchange Act of 1934, the Company shall have the right to refuse to transfer any portion of this Warrant to any person who directly competes with the Company.
4.5 Notices. All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or the Holder, as the case may be, in writing by the Company or such Holder from time to time. All notices to the Holder shall be addressed as follows:
Comerica Bank c/o Comerica Incorporated
Attn: Warrant Administrator
500 Woodward Avenue, 32nd Floor, MC 3379
Detroit, MI 48226
All notices to the Company shall be addressed as follows:
Mavenir Systems, Inc.
Attn: Chief Financial Officer
1651 North Glenville Drive, Suite 201
Richardson, TX 75081
4.6 Amendments. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
4.7 Attorneys Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys fees.
4.8 Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its principles regarding conflicts of law.
4.9 Confidentiality. The Company hereby agrees to keep the terms and conditions of this Warrant confidential. Notwithstanding the foregoing confidentiality obligation, the Company may disclose information relating to this Warrant as required by law, rule, regulation, court order or other legal authority, provided that (i) the Company has given Holder at least ten (10) days notice of such required disclosure, and (ii) the Company only discloses information that is required, upon the advice of counsel, to be disclosed.
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MAVENIR SYSTEMS, INC. | ||
By: | /s/ Terry Hungle | |
Name: | Terry Hungle | |
Title: | Chief Financial Officer |
COMERICA BANK | ||
By: | /s/ Stu Bell | |
Name: | Stu Bell | |
Title: |
Vice President |
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APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase shares of the stock of Mavenir Systems, Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below:
Comerica Bank
Attn: Warrant Administrator
500 Woodward Avenue, 32nd Floor, MC 3379
Detroit, MI 48226
3. The undersigned represents it is acquiring the shares solely for its own account and not as a nominee for any other party and not with a view toward the resale or distribution thereof except in compliance with applicable securities laws and hereby makes the representations and warranties set forth in Section 3.5 of the attached Warrant.
COMERICA BANK or Assignee
(Signature) |
(Name and Title) |
(Date) |
EXHIBIT A
Registration Rights
The Shares (if common stock), or the common stock issuable upon conversion of the Shares, shall be deemed registrable securities for the purpose of being entitled to piggy back registration rights in accordance with the terms of the following agreement (the Agreement) between the Company and its investor(s):
Amended and Restated Investors Rights Agreement dated January 29, 2008, by and among the Company, the Investors listed on Schedule A attached thereto and the Common Holders listed on Schedule B attached thereto, as amended from time to time hereafter.
The Company agrees that no amendments will be made to the Agreement which would have an adverse impact on Holders registration rights thereunder without the consent of Holder unless such amendment affects all other holders of equivalent registration rights in the same manner. By acceptance of the Warrant to which this Exhibit A is attached, Holder shall be deemed to be a party to the Agreement solely for the purpose of the above-mentioned registration rights and shall be subject to all restrictions as set forth therein.
Exhibit 4.3
Issue Date: October 29, 2008
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES OF THIS INSTRUMENT.
MAVENIR SYSTEMS, INC.
STOCK PURCHASE WARRANT
THIS CERTIFIES that Starent Networks, Corp. (the Holder) is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe for and purchase, from Mavenir Systems, Inc., a Delaware corporation (the Company), up to 6,287,989 Shares (as defined below), at an exercise price of $0.9542 per share (the Exercise Price). The Exercise Price and the Shares purchasable hereunder are subject to adjustment as set forth in Section 9. This Warrant may be exercised for Vested Shares at any time on or prior to the close of business on October 29, 2015 (the Expiration Date).
1. Definitions.
(a) Bookings shall mean purchase orders accepted by the Company in accordance with its published policy for acceptable order support and documentation, consistently applied, that results from the sale of Mavenir Products by the Holder directly to Tier One Accounts, which Mavenir Products were acquired from the Company pursuant to the OEM Agreement.
(b) Change of Control shall mean (x) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any merger, consolidation or other form of reorganization in which outstanding shares of the Company are exchanged for securities or other consideration issued, or caused to be issued, by the acquiring entity or its subsidiary, but excluding any transaction effected primarily for the purpose of changing the Companys jurisdiction of incorporation) that results in the transfer or acquisition of at least a majority of the Companys voting power to such entity or (y) a sale of all or substantially all of the assets of the Company or the exclusive license of all or substantially all of the Companys intellectual property by means of any transaction or series of related transactions.
(c) Common Stock shall mean the Companys common stock, $0.001 par value per share.
(d) Effective Date shall mean October 29, 2008.
(e) IPO shall mean the Companys first firm commitment underwritten public offering of its Common Stock or other securities pursuant to an effective registration statement under the Securities Act.
(f) Mavenir Products shall have the meaning given such term in the OEM Agreement.
(g) OEM Agreement shall mean that certain Reseller OEM Agreement dated as of October 29, 2008 between the Company and the Holder, as amended from time to time.
(h) Preferred Stock shall mean the Series C Convertible Preferred Stock, par value $0.001 per share, of the Company and any other stock into or for which the Series C Convertible Preferred Stock may be converted or exchanged, and upon and after the occurrence of an event which results in the automatic or voluntary conversion, redemption or retirement of all (but not less than all) of the outstanding shares of such Preferred Stock, including without limitation, the consummation of an IPO in which such conversion occurs, then from and after the date upon which such outstanding shares are so converted, redeemed or retired, Preferred Stock shall mean such Common Stock.
(i) Securities shall mean this Warrant and the Shares issuable upon exercise of this Warrant.
(j) Securities Act shall mean the Securities Act of 1933, as amended.
(k) Shares shall mean shares of Preferred Stock.
(l) Tier One Accounts shall mean NTT DOCOMO, INC., Vodafone Group Plc, France Telecom, Bouygues Telecom, Telefonica S.A., Hutchison Telephone Company, Softbank Mobile Corp., AT&T Inc., Deutsche Telekom ADR, SK Telecom Co., Ltd., KT Freetel Co., Ltd., BT Group, plc, Verizon, Verizon Business, Verizon Wireless, Reliance Communications Limited, KDDI Corporation, Tata Teleservices Limited, Vivo, Alltel Communications, LLC, Telecomunicaciones Movilnet C.A., America Moviles, Bell Canada, Bell Mobility, China Unicom Ltd., China Telecom, China Mobile, Cox Wireless LLC (Cox/TMI Wireless), United States Cellular Corporation, Sprint Nextel Corporation, Clearwire / XHOM / Sprint Wireless Broadband Company LLC, Telus Communications Company, Mobilkom Austria Group, Joint Stock Financial Corporation Sistema, Willcom, Inc., Emobile Ltd., or any subsidiaries or affiliates of the foregoing.
(m) Vested Shares shall mean the number of Shares that have vested pursuant to Section 2(a) hereof.
(n) Warrant Period shall mean the period of time commencing on the Effective Date and expiring on the third anniversary of the Effective Date.
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2. Exercise of Warrant.
(a) The right to subscribe for and purchase the Shares shall vest according to the amount of Bookings during the Warrant Period in accordance with the milestones (the Milestones) set forth in the table below:
Milestones |
Incremental Number of Vested Shares |
Aggregate Number of Vested Shares |
||||||
$1 million in Bookings during the Warrant Period |
314,399 | 314,399 | ||||||
$2 million in Bookings during the Warrant Period |
314,400 | 628,799 | ||||||
$3 million in Bookings during the Warrant Period |
314,399 | 943,198 | ||||||
$4 million in Bookings during the Warrant Period |
314,400 | 1,257,598 | ||||||
$5 million in Bookings during the Warrant Period |
314,399 | 1,571,997 | ||||||
$6 million in Bookings during the Warrant Period |
314,400 | 1,886,397 | ||||||
$7 million in Bookings during the Warrant Period |
314,399 | 2,200,796 | ||||||
$8 million in Bookings during the Warrant Period |
314,400 | 2,515,196 | ||||||
$9 million in Bookings during the Warrant Period |
314,399 | 2,829,595 | ||||||
$10 million in Bookings during the Warrant Period |
314,400 | 3,143,995 | ||||||
$11 million in Bookings during the Warrant Period |
314,399 | 3,458,394 | ||||||
$12 million in Bookings during the Warrant Period |
314,400 | 3,772,794 |
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$13 million in Bookings during the Warrant Period |
314,399 | 4,087,193 | ||||||
$14 million in Bookings during the Warrant Period |
314,400 | 4,401,593 | ||||||
$15 million in Bookings during the Warrant Period |
314,399 | 4,715,992 | ||||||
$16 million in Bookings during the Warrant Period |
314,400 | 5,030,392 | ||||||
$17 million in Bookings during the Warrant Period |
314,399 | 5,344,791 | ||||||
$18 million in Bookings during the Warrant Period |
314,400 | 5,659,191 | ||||||
$19 million in Bookings during the Warrant Period |
314,399 | 5,973,590 | ||||||
$20 million in Bookings during the Warrant Period |
314,399 | 6,287,989 |
For the avoidance of doubt, (i) no additional Shares shall vest after the Warrant Period irrespective of the amount of Bookings generated thereafter, and (ii) there shall be no pro rata vesting between Milestones and the amount of Bookings must equal or exceed the specified Milestone in order for the Holder to be vested in the aggregate number of Shares corresponding to such Milestone.
(b) The purchase rights represented by this Warrant are exercisable by the Holder, in whole or in part, by the surrender of this Warrant and the Notice of Exercise annexed hereto duly executed at the principal executive office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company), and upon payment of the Exercise Price of the Shares thereby purchased (by cash or by check or bank draft payable to the order of the Company); whereupon the Holder shall be entitled to receive a certificate for the number of Shares so purchased. The Company agrees that if at the time of the surrender of this Warrant and purchase of the Shares, the Holder shall be entitled to exercise this Warrant, the Shares so purchased shall be and be deemed to be issued to the Holder as the record owner of such Shares as of the close of business on the date on which this Warrant shall have been exercised as aforesaid.
(c) In lieu of exercising this Warrant by payment of cash or check pursuant to subsection (b) above, the Holder may elect to receive Vested Shares equal to the value of the Warrant (based upon the value of the Vested Shares or the portion thereof being exercised), at any
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time after the date hereof and before the close of business on the Expiration Date, by surrender of this Warrant at the principal executive office of the Company, together with the Notice of Conversion annexed hereto, in which event the Company will issue to the Holder Vested Shares in accordance with the following formula:
X |
= | Y(A-B) | ||||||
A |
Where, |
X | = | the number of Vested Shares to be issued to the Holder; | |||||||||
Y | = | the number of Vested Shares for which the Warrant is being exercised; | ||||||||||
A | = | the fair market value of one Share; and | ||||||||||
B | = | the Exercise Price. |
For purposes of this subsection 2(c), the fair market value of a Share is defined as follows:
(1) if the exercise is in connection with an IPO, and if the Companys registration statement relating to such IPO has been declared effective by the Securities and Exchange Commission, then the fair market value shall be the initial Price to Public specified in the final prospectus with respect to the offering;
(2) if the exercise is in connection with a Change of Control, then the fair market value shall be the value received in such Change of Control by the holders of the securities as to which purchase rights under this Warrant exist;
(3) if the exercise occurs after, and not in connection with an IPO, and:
a) if traded on a securities exchange or the Nasdaq Stock Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange or market over the thirty (30) day period ending three (3) days prior to the date of the Notice of Conversion; or
b) if actively traded over-the-counter, the value shall be deemed to be the average of the closing bid prices over the thirty (30) day period ending three (3) days prior to the date of the Notice of Conversion;
(4) if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Companys Board of Directors.
3. Nonassessable. The Company covenants that all Shares which may be issued upon the exercise of rights represented by this Warrant will, upon exercise of the rights represented by this Warrant, be validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). Certificates for Shares purchased hereunder shall be delivered to the Holder within a reasonable time after the date on which this Warrant shall have been exercised as aforesaid.
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4. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon the exercise of this Warrant, an amount equal to such fraction multiplied by the then current price at which each Share may be purchased hereunder shall be paid in cash to the Holder.
5. Charges, Taxes and Expenses. Issuance of certificates for Shares upon the exercise of this Warrant shall be made without charge to the Holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder.
6. No Rights as Stockholder. This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Company prior to the exercise hereof.
7. Loss, Theft, Destruction or Mutilation of Warrant. On receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount.
8. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, a Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.
9. Adjustments. The Exercise Price and the number of Shares purchasable hereunder are subject to adjustment from time to time as set forth in this Section 9.
(a) Reclassification, etc. If the Company, at any time while this Warrant, or any portion hereof, remains outstanding and unexpired by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities or any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under this Warrant immediately prior to such reclassification or other change and the Exercise Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section 9.
(b) Subdivision or Combination of Shares. In the event that the Company shall at any time subdivide the outstanding securities as to which purchase rights under this Warrant exist, or shall issue a stock dividend on the securities as to which purchase rights under this Warrant exist, the number of securities as to which purchase rights under this Warrant exist immediately prior to such subdivision or to the issuance of such stock dividend shall be proportionately increased, and the Exercise Price shall be proportionately decreased, and in the event that the Company shall at any
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time combine the outstanding securities as to which purchase rights under this Warrant exist, the number of securities as to which purchase rights under this Warrant exist immediately prior to such combination shall be proportionately decreased, and the Exercise Price shall be proportionately increased, effective at the close of business on the date of such subdivision, stock dividend or combination, as the case may be.
(c) Cash Distributions. No adjustment on account of cash dividends or interest on the securities as to which purchase rights under this Warrant exist will be made to the Exercise Price under this Warrant.
(d) Antidilution Rights. Antidilution rights applicable to the Preferred Stock issuable upon the exercise of this Warrant are set forth in the Companys Amended and Restated Certificate of Incorporation (as it may be further amended or restated from time to time, the Charter), and shall be applicable with respect to the Preferred Stock issuable upon exercise of this Warrant. The Company shall promptly provide the Holder with any restatement, amendment, modification or waiver of the Charter. For avoidance of any doubt, there shall be no duplicate antidilution adjustment pursuant to this Section 9(d) and the Charter.
(e) Notice of Adjustments. If: (i) the Company shall declare any dividend or distribution upon its stock, whether in stock, cash, property or other securities; (ii) the Company shall offer for subscription prorata to the holders of any class of its Preferred Stock any additional shares of stock of any class or other rights; (iii) there shall be any Change of Control; (iv) there shall be an IPO; (v) the Company shall sell, lease, license or otherwise transfer all or substantially all of its assets; or (vi) there shall be voluntary dissolution, liquidation or winding up of the Company; then, in connection with each such event, the Company shall send to the Holder: (A) at least fifteen (15) days 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, subscription rights (specifying the date on which the holders of the Preferred Stock shall be entitled thereto) or for determining rights to vote in respect of such Change of Control, dissolution, liquidation or winding up; (B) in the case of any such Change of Control, sale, lease, license or other transfer of all or substantially all of the Companys assts, dissolution, liquidation or winding up, at least fifteen (15) days prior written notice of the date when the same shall take place (and specifying the approximate date on which the holders of Preferred Stock shall be entitled to exchange their Preferred Stock for securities of or other property deliverable upon such Change of Control, dissolution, liquidation or winding up); and (C) in the case of an IPO, the Company shall give the Holder at least fifteen (15) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the event requiring the notice, and (ii) if any adjustment is required to be made, (A) the amount of such adjustment, (B) the method by which such adjustment was calculated, (C) the adjusted Exercise Price (if the Exercise Price has been adjusted), and (D) the number of shares subject to purchase hereunder after giving effect to such adjustment, and shall be given in the manner set forth in Section 15(e).
(f) Timely Notice. Failure to timely provide such notice required by Section 9(e) above shall entitle Holder to retain the benefit of the applicable notice period notwithstanding anything to the contrary contained in any insufficient notice received by Holder.
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10. Restrictions on Transferability of Securities.
(a) Restrictions on Transferability. The Securities shall not be sold, assigned, transferred or pledged except upon the conditions specified in this Section 10.
(b) Restrictive Legend. Each certificate representing the Securities and any other securities issued in respect of the Securities upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall (unless otherwise permitted by the provisions of Section 10(c)) be stamped or otherwise imprinted with a legend in the following form (in addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AS SET FORTH IN THAT CERTAIN STOCK PURCHASE WARRANT BETWEEN THE CORPORATION AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH MAY BE OBTAINED AT THE CORPORATIONS PRINCIPAL OFFICE. SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES OF THESE SECURITIES.
Each holder of Securities and each subsequent transferee consents to the Company making a notation on its records and giving instructions to any transfer agent of the Securities in order to implement the restrictions on transfer established in this Section 10.
(c) Notice of Proposed Transfers. Each holder of a warrant or stock certificate, as the case may be, representing the Securities, by acceptance thereof, agrees to comply in all respects with the provisions of this Section 10(c). Such holder agrees not to make any disposition of all or any portion of the Securities unless and until there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement or such holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Company, such holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company that such disposition will not require registration of such shares under the Securities Act.
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11. Investment Representations of the Holder. With respect to the acquisition of any of the Securities, the Holder hereby represents and warrants to the Company as follows:
(a) Purchase Entirely for Own Account. This Warrant is made with the Holder in reliance upon the Holders representation to the Company, which by the Holders execution of this Warrant the Holder hereby confirms, that the Securities will be acquired for investment for the Holders own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Holder has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Warrant, the Holder further represents that the Holder does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person with respect to any of the Securities.
(b) Reliance upon Holders Representations. The Holder understands that the Securities have not been, and will not be, registered under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act, and that the Companys reliance on such exemption is predicated on the Holders representations set forth herein.
(c) Investment Experience; Economic Risk. The Holder understands that the Company has a limited financial and operating history and that an investment in the Company involves substantial risks. The Holder has made such inquiry concerning the Company and its business and personnel as it has deemed appropriate. The Holder has such knowledge and experience in financial and business matters that the Holder is capable of evaluating the merits and risks of the investment in the Securities. The Holder can bear the economic risk of the Holders investment and is able, without impairing the Holders financial condition, to hold the Securities for an indefinite period of time and to suffer a complete loss of the Holders investment.
(d) Accredited Investor Status. The Holder is an accredited investor within the meaning of Regulation D, Rule 501(a), promulgated under the Securities Act. The Holder also represents that it has not been organized for the purpose of acquiring the Securities.
(e) Restricted Securities. The Holder understands that the Securities are characterized as restricted securities under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such federal securities laws and applicable regulations such Securities may be resold without registration under the Securities Act only in certain limited circumstances. In this connection, Holder represents that it is aware of the provisions of Rule 144 promulgated under the Securities Act which permit limited resale of securities purchased in a private placement subject to the satisfaction of certain conditions, including, among other things, the existence of a public market for the securities and the availability of certain current public information about the Company.
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12. Market Standoff. The Holder hereby agrees that, if requested by the managing underwriter, it will not, without the prior written consent of the Company, during the period commencing on the date of the final prospectus relating to the Companys IPO or any secondary public offering, as applicable, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) calendar days in the case of an initial public offering and ninety (90) calendar days in the case of any secondary public offering (or such other period as may be requested by the Company or managing underwriter to accommodate regulatory restrictions on (a) the publication or other distribution of research reports and (b) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto)) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired), whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of securities, in cash or otherwise. The foregoing covenants shall not apply to the sale of any shares by the Holder to an underwriter pursuant to an underwriting agreement and shall only be applicable to the Holder if all the Companys executive officers, directors and greater than one percent (1%) stockholders enter into similar agreements. The Holder agrees to execute an agreement(s) reflecting (i) and (ii) above as may be requested by the managing underwriters at the time of the IPO or any secondary public offering, and further agrees that the Company may impose stop transfer instructions with its transfer agent in order to enforce the covenants in (i) and (ii) above. The restrictions in this Section 12 shall not apply to transfers to affiliates of the Holder or purchases made in the open market following the completion of any offering covered by this Section 12 or to any resale public offerings in which the Holder is not selling shares of Common Stock for its own account.
13. Change of Control. If at any time there shall be Change of Control, then, as a part of such Change of Control, lawful provision shall be made so that the Holder shall thereafter be entitled to receive, upon exercise of this Warrant, the kind and amount of shares of preferred stock or other securities or property of the successor, surviving or purchasing corporation resulting from or participating in such Change of Control that would have been issuable if Holder had exercised this Warrant immediately prior to the Change of Control. In any such case, appropriate adjustment (as determined in good faith by the Companys Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the Change of Control to the end that the provisions of this Warrant (including adjustments of the Exercise Price and number of shares of Preferred Stock purchasable upon exercise) shall be applicable in their entirety, and to the greatest extent possible. Without limiting the foregoing, in connection with any Change of Control, upon the closing thereof, the successor or surviving entity shall assume the obligations of this Warrant. In connection with a Change of Control and upon Holders written election to the Company, the Company shall cause this Warrant to be exchanged for the consideration that Holder would have received if Holder chose to exercise its right to have shares issued pursuant to Section 2(c) of this Warrant without actually exercising such right, acquiring such shares and exchanging such shares for such consideration.
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14. Reservation of Stock. The Company will at all times reserve and keep available, solely for issuance and delivery upon the exercise of this Warrant, such number of Shares and other securities, cash and/or property, as from time to time shall be issuable upon the exercise of this Warrant.
15. Miscellaneous.
(a) Governing Law. THIS WARRANT WILL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE (WITHOUT REFERENCE TO THE CONFLICTS OF LAW PROVISIONS THEREOF).
(b) Restrictions. By acceptance hereof, the Holder acknowledges that the Shares acquired upon the exercise of this Warrant may have restrictions upon its resale imposed by state and federal securities laws.
(c) Waivers and Amendments. This Warrant and any provisions 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.
(d) Assignment. This Warrant may be assigned or transferred by the Holder only with the prior written approval of the Company. This Warrant shall be binding upon any successors or assigns of the Company.
(e) Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be delivered personally by hand or by courier, mailed by United States first-class mail, postage prepaid, sent by facsimile or sent by electronic mail directed to the party to be notified at the address, facsimile number or electronic mail address indicated for such person on the signature page hereof, or at such other address, facsimile number or electronic mail address as such party may designate by ten (10) days advance written notice to the other parties hereto. All such notices and other communications shall be deemed given upon personal delivery, on the date of mailing, upon confirmation of facsimile transfer or when directed to the electronic mail address set forth on signature page hereof. With respect to any notice given by the Company under any provision of the Delaware General Corporation Law or the Companys charter or bylaws, the Holder agrees that such notice may given by facsimile or by electronic mail.
(f) Counterparts. This Warrant may be executed in any number of counterparts, each of which shall be enforceable, and all of which together shall constitute one instrument.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.
MAVENIR SYSTEMS, INC. | ||
By: | /s/ Pardeep Kohli | |
Name: | Pardeep Kohli | |
Title: | President and CEO | |
Address: | ||
1651 North Glenville Drive, Suite 201 | ||
Richardson, Texas 75081 | ||
Attn: Chief Executive Officer | ||
Attn: Chief Financial Officer | ||
Facsimile: (972) 437-6232 |
AGREED AND ACKNOWLEDGED: | ||
STARENT NETWORKS, CORP. | ||
By: | /s/ Paul Milbury | |
Name: | Paul Milbury | |
Title: | Vice President Operations and Chief Financial Officer | |
Address*: | ||
30 International Place | ||
Tewksbury, MA 01876 | ||
Facsimile #: (978) 863-3971 |
* | Please indicate address for notice purposes. |
MAVENIR SYSTEMS, INC.
SIGNATURE PAGE TO WARRANT
NOTICE OF EXERCISE
TO: | Mavenir Systems, Inc. |
1651 North Glenville Drive, Suite 201
Richardson, Texas 75081
ATTN: Chief Financial Officer
1. The undersigned hereby elects to purchase shares of the Stock (the Shares) of Mavenir Systems, Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full.
2. Please issue a certificate or certificates representing the Shares in the name of the undersigned or in such other name as is specified below:
(Print Name) |
||||
Address: | ||||
|
3. The undersigned confirms that the Shares are being acquired for the account of the undersigned for investment only and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or selling the Shares.
(Date) |
(Signature) | |
(Print Name) |
Exhibit 4.4
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN SECTIONS 5.3 AND 5.4 BELOW, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
WARRANT TO PURCHASE STOCK
Company: Mavenir Systems, Inc., a Delaware corporation
Number of Shares: 450,000, subject to adjustment in accordance with the provisions hereof
Type/Series of Stock: Common Stock, $0.001 par value per share
Warrant Price: $0.73 per Share, subject to adjustment in accordance with the provisions hereof
Issue Date: October 18, 2012
Expiration Date: As set forth in Section 5.1 below
Credit Facility: This Warrant to Purchase Stock (Warrant) is issued in connection with that certain Subordinated Loan and Security Agreement of even date herewith among Silicon Valley Bank, the Company and Mavenir Holdings, Inc. (as amended and/or modified and in effect from time to time, the Loan Agreement).
THIS WARRANT CERTIFIES THAT, for good and valuable consideration, SILICON VALLEY BANK (together with any successor or permitted assignee or transferee of this Warrant or of any shares issued upon exercise hereof, Holder) is entitled to purchase the number of fully paid and non-assessable shares (the Shares) of the above-stated Type/Series of Stock (the Class) of the above-named company (the Company) at the above-stated Warrant Price, all as set forth above and as adjusted pursuant to Section 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. Reference is made to Section 5.4 of this Warrant whereby Silicon Valley Bank shall transfer this Warrant to its parent company, SVB Financial Group.
SECTION 1. EXERCISE.
1.1 Method of Exercise. Holder may at any time and from time to time through the Expiration Date exercise this Warrant, in whole or in part, by delivering to the Company the original of this Warrant together with a duly executed Notice of Exercise in substantially the form attached hereto as Appendix 1 and, unless Holder is exercising this Warrant pursuant to a cashless exercise set forth in Section 1.2, a check, wire transfer of same-day funds (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.
1.2 Cashless Exercise. On any exercise of this Warrant, in lieu of payment of the aggregate Warrant Price in the manner as specified in Section 1.1 above, but otherwise in accordance with the requirements of Section 1.1, Holder may elect to receive, and the Company shall issue to the Holder, such number of fully paid and non-assessable Shares as are computed using the following formula:
X = | Y(A-B)/A |
where:
X = | the number of Shares to be issued to the Holder; |
Y = | the number of Shares with respect to which this Warrant is being exercised (inclusive of the Shares surrendered to the Company in payment of the aggregate Warrant Price); |
A = | the Fair Market Value (as determined pursuant to Section 1.3 below) of one Share; and |
B = | the Warrant Price. |
1.3 Fair Market Value. If shares of the Class are then traded or quoted on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a Trading Market), the fair market value of a Share shall be the closing price or last sale price of a share of the Class reported for the Business Day immediately before the date on which Holder delivers this Warrant together with its Notice of Exercise to the Company. If shares of the Class are not then traded in a Trading Market, the Board of Directors of the Company shall determine the fair market value of a Share in its reasonable good faith judgment.
1.4 Delivery of Certificate and New Warrant. Within a reasonable time after Holder exercises this Warrant in the manner set forth in Section 1.1 or 1.2 above, the Company shall deliver to Holder a certificate representing the Shares issued to Holder upon such exercise and, if this Warrant has not been fully exercised and has not expired, a new warrant of like tenor representing the Shares not so acquired.
1.5 Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of mutilation, on surrender of this Warrant to the Company for cancellation, the Company shall, within a reasonable time, execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.
1.6 Treatment of Warrant Upon Acquisition of Company.
(a) Acquisition. For the purpose of this Warrant, Acquisition means any transaction or series of related transactions involving: (i) the sale, lease, exclusive license, or other disposition of all or substantially all of the assets of the Company (ii) any merger or consolidation of the Company into or with another person or entity (other than a merger or consolidation effected exclusively to change the Companys domicile), or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Companys (or the surviving or successor entitys) outstanding voting power immediately after such merger, consolidation or reorganization (or, if such Company stockholders beneficially own a majority of the outstanding voting power of the surviving or successor entity as of immediately after such merger, consolidation or reorganization, such surviving or successor entity is not the Company); or (iii) any sale or other transfer by the stockholders of the Company, in a single transaction or series of related transactions, of shares representing at least a majority of the Companys then-total outstanding combined voting power.
2
(b) Treatment of Warrant on Cash/Public Acquisition. In the event of an Acquisition in which the consideration to be received by the Companys stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a Cash/Public Acquisition), either (i) Holder shall exercise this Warrant pursuant to Section 1.1 and/or 1.2 and such exercise will be deemed effective immediately prior to and contingent upon the consummation of such Acquisition or (ii) if Holder elects not to exercise the Warrant, this Warrant will expire immediately prior to the consummation of such Acquisition.
(c) The Company shall provide Holder with written notice of its intention to consummate a the Cash/Public Acquisition (together with such reasonable information as Holder may reasonably require regarding the treatment of this Warrant in connection with such contemplated Cash/Public Acquisition giving rise to such notice), which is to be delivered to Holder not less than seven (7) Business Days prior to the closing of the proposed Cash/Public Acquisition. In the event the Company does not provide such notice, then if, immediately prior to the Cash/Public Acquisition, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above would be greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall promptly notify the Holder of the number of Shares (or such other securities) issued upon such exercise to the Holder and Holder shall be deemed to have restated each of the representations and warranties in Section 4 of the Warrant as the date thereof.
(d) Upon the closing of any Acquisition other than a Cash/Public Acquisition, the acquiring, surviving or successor entity shall assume the obligations of this Warrant, and this Warrant shall thereafter be exercisable for the same securities and/or other property as would have been paid for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on and as of the closing of such Acquisition, subject to further adjustment from time to time in accordance with the provisions of this Warrant.
(e) As used in this Warrant, Marketable Securities means securities meeting all of the following requirements (determined as of immediately prior to the closing of the Acquisition): (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (ii) the class and series of shares or other security of the issuer that would be received by Holder in connection with the Acquisition were Holder to exercise this Warrant on or prior to the closing thereof is then traded in Trading Market, and (iii) Holder would be able to publicly re-sell, within six (6) months and one day following the closing of such Acquisition, all of the issuers shares and/or other securities that would be received by Holder in such Acquisition were Holder to exercise this Warrant in full on or prior to the closing of such Acquisition.
SECTION 2. ADJUSTMENTS TO THE SHARES AND WARRANT PRICE.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a dividend or distribution on the outstanding shares of the Class payable in additional shares of the Class or other securities or property (other than cash), then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without additional cost to Holder, the total number and kind of securities and property which Holder would have received had Holder owned the Shares of record as of the date the
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dividend or distribution occurred. If the Company subdivides the outstanding shares of the Class by reclassification or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of the Class are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.
2.2 Reclassification, Exchange, Combinations or Substitution. Upon any event whereby all of the outstanding shares of the Class are reclassified, exchanged, combined, substituted, or replaced for, into, with or by Company securities of a different class and/or series, then from and after the consummation of such event, this Warrant will be exercisable for the number, class and series of Company securities that Holder would have received had the Shares been outstanding on and as of the consummation of such event, and subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations substitutions, replacements or other similar events.
2.3 No Fractional Share. No fractional Share shall be issuable upon exercise of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional Share interest arises upon any exercise of the Warrant, the Company shall eliminate such fractional Share interest by paying Holder in cash the amount computed by multiplying the fractional interest by (i) the fair market value (as determined in accordance with Section 1.3 above) of a full Share, less (ii) the then-effective Warrant Price.
2.4 Notice/Certificate as to Adjustments. Upon each adjustment of the Warrant Price, Class and/or number of Shares, the Company, at the Companys expense, shall notify Holder in writing within a reasonable time setting forth the adjustments to the Warrant Price, Class and/or number of Shares and facts upon which such adjustment is based. The Company shall, upon written request from Holder, furnish Holder with a certificate of its Chief Financial Officer, including computations of such adjustment and the Warrant Price, Class and number of Shares in effect upon the date of such adjustment.
SECTION 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company represents and warrants to, and agrees with, the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this Warrant is not greater than the fair market value of a share of the Class as determined by the most recently completed valuation of the Companys stock for purposes of its compliance with Section 409A of the Internal Revenue Code of 1986, as amended.
(b) All Shares which may be issued upon the exercise of this Warrant shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws. The Company covenants that it shall at all times cause to be reserved and kept available out of its authorized and unissued capital stock such number of shares of the Class and other securities as will be sufficient to permit the exercise in full of this Warrant.
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(c) The Companys capitalization table attached hereto as Schedule 1 is true and complete, in all material respects, as of the Issue Date.
3.2 Notice of Certain Events. If the Company proposes at any time to:
(a) declare any dividend or distribution upon the outstanding shares of the Class, whether in cash, property, stock, or other securities and whether or not a regular cash dividend;
(b) offer for subscription or sale pro rata to the holders of the outstanding shares of the Class any additional shares of any class or series of the Companys stock (other than pursuant to contractual pre-emptive rights);
(c) effect any reclassification, exchange, combination, substitution, reorganization or recapitalization of the outstanding shares of the Class;
(d) effect an Acquisition or to liquidate, dissolve or wind up; or
(e) effect its initial, underwritten offering and sale of its securities to the public pursuant to an effective registration statement under the Act (the IPO);
then, in connection with each such event, the Company shall give Holder:
(1) in the case of the matters referred to in (a) and (b) above, at least seven (7) Business Days prior written notice of the earlier to occur of the effective date thereof or the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of outstanding shares of the Class will be entitled thereto) or for determining rights to vote, if any;
(2) in the case of the matters referred to in (c) and (d) above at least seven (7) Business Days prior written notice of the date when the same will take place (and specifying the date on which the holders of outstanding shares of the Class will be entitled to exchange their shares for the securities or other property deliverable upon the occurrence of such event); and
(3) with respect to the IPO, at least seven (7) Business Days prior written notice of the date on which the Company proposes to file its initial registration statement in connection therewith.
Reference is made to Section 1.6(c) whereby this Warrant will be deemed to be exercised pursuant to Section 1.2 hereof if the Company does not give written notice to Holder of a Cash/Public Acquisition as required by the terms hereof. Company will also provide information requested by Holder that is reasonably necessary to enable Holder to comply with Holders accounting or reporting requirements.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE HOLDER.
The Holder represents and warrants to the Company as follows:
4.1 Purchase for Own Account. This Warrant and the Shares to be acquired upon exercise of this Warrant by Holder are being acquired for investment for Holders account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act.
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Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares. Holder further represents that Holder does not currently have any contract, undertaking, agreement or arrangement with any unaffiliated person to sell or transfer to such person or any unaffiliated third person any of this Warrant or the Shares issuable hereunder, except for the transfer to SVB Financial Group as contemplated by Section 5.4.
4.2 Disclosure of Information. Holder is aware of the Companys business affairs and financial condition and has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information necessary to verify any information furnished to Holder or to which Holder has access.
4.3 Investment Experience. Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holders investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities (including a complete loss of Holders investment) and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.
4.4 Accredited Investor Status. Holder is an accredited investor within the meaning of Regulation D promulgated under the Act.
4.5 The Act. Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holders investment intent and the accuracy of Holders representations and warranties as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available. Holder is aware of the provisions of Rule 144 promulgated under the Act. Holder acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period, and requirements relating to the Company which are outside of the Holders control, and which the Company is under no obligation and may not reasonably be able to satisfy.
4.6 Market Stand-off Agreement. The Holder agrees that the Shares shall be subject to the Market Standoff provisions in Section 1.14 of the Companys Amended and Restated Investors Rights Agreement dated as of May 26, 2011, as such agreement may be amended or restated from time to time.
4.7 No Voting Rights. Holder, as a Holder of this Warrant, will not have any voting rights until the exercise of this Warrant.
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SECTION 5. MISCELLANEOUS.
5.1 Term; Automatic Cashless Exercise Upon Expiration.
(a) Term. Subject to the provisions of Section 1.6 above, this Warrant is exercisable in whole or in part at any time and from time to time on or before 6:00 PM, Pacific time, on the earliest to occur of (i) the tenth (10th) anniversary of the Issue Date hereof, and (ii) the date that is three (3) years following the effective date of the registration statement filed in connection with the IPO, and shall be void thereafter.
(b) Automatic Cashless Exercise upon Expiration. In the event that, upon the Expiration Date, the fair market value of one Share as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares for which it shall not previously have been exercised, and the Company shall, within a reasonable time, deliver a certificate representing the Shares issued upon such exercise to Holder.
5.2 Legends. Each certificate evidencing Shares shall be imprinted with a legend in substantially the following form:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE ISSUER TO SILICON VALLEY BANK DATED SEPTEMBER , 2012, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
5.3 Compliance with Securities Laws on Transfer. This Warrant and the Shares issued upon exercise of this Warrant may not be transferred or assigned in whole or in part except in compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to SVB Financial Group (Silicon Valley Banks parent company) or any other affiliate of Holder, provided that any such transferee is an accredited investor as defined in Regulation D promulgated under the Act.
5.4 Transfer Procedure. After receipt by Silicon Valley Bank of the executed Warrant, Silicon Valley Bank will transfer all of this Warrant to its parent company, SVB Financial Group. By its acceptance of this Warrant, SVB Financial Group hereby makes to the Company each of the representations, warranties and covenants set forth in Section 4 hereof and agrees to be bound by all of the terms and conditions of this Warrant as if the original Holder hereof. Subject to the provisions of Section 5.3 and upon providing the Company with written notice, SVB Financial Group and any subsequent Holder may transfer all or part of this Warrant or the Shares issued upon exercise of this Warrant to any transferee, provided, however, in connection with any such transfer, SVB Financial Group or any subsequent Holder will give the Company notice of the portion of the Warrant and/or
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Shares being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable); and provided further, that any subsequent transferee other than SVB Financial Group shall agree in writing with the Company to be bound by all of the terms and conditions of this Warrant. Notwithstanding any contrary provision herein, at all times prior to the IPO, Holder may not, without the Companys prior written consent, transfer this Warrant or any portion hereof, or any Shares issued upon any exercise hereof, to any person or entity who directly competes with the Company, except in connection with an Acquisition of the Company by such a direct competitor.
5.5 Notices. All notices and other communications hereunder from the Company to the Holder, or vice versa, shall be deemed delivered and effective (i) when given personally, (ii) on the third (3rd) Business Day after being mailed by first-class registered or certified mail, postage prepaid, (iii) upon actual receipt if given by facsimile or electronic mail and such receipt is confirmed in writing by the recipient, or (iv) on the first Business Day following delivery to a reliable overnight courier service, courier fee prepaid, in any case at such address as may have been furnished to the Company or Holder, as the case may be, in writing by the Company or such Holder from time to time in accordance with the provisions of this Section 5.5. All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:
SVB Financial Group
Attn: Treasury Department
3003 Tasman Drive, HC 215
Santa Clara, CA 95054
Telephone: (408) 654-7400
Facsimile: (408) 988-8317
Email address: derivatives@svb.com
Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:
Mavenir Systems, Inc.
1651 North Glenville Drive, Suite 216
Richardson, Texas 75081
Attn: Sam Garrett, General Counsel
Fax: (469) 916-4397
Email: sam@mavenir.com
With a copy (which shall not constitute notice) to:
Andrews Kurth LLP
111 Congress Avenue, Suite 1700
Austin, Texas 78701
Attn: Alan D. Bickerstaff
Fax: (512) 542-5219
Email: abickerstaff@andrewskurth.com
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5.6 Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated (either generally or in a particular instance and either retroactively or prospectively) only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
5.7 Attorneys Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys fees.
5.8 Counterparts; Facsimile/Electronic Signatures. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement. Any signature page delivered electronically or by facsimile shall be binding to the same extent as an original signature page with regards to any agreement subject to the terms hereof or any amendment thereto.
5.9 Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its principles regarding conflicts of law.
5.10 Headings. The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.
5.11 Business Days. Business Day is any day that is not a Saturday, Sunday or a day on which Silicon Valley Bank is closed.
[Remainder of page left blank intentionally]
[Signature page follows]
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IN WITNESS WHEREOF, the parties have caused this Warrant to Purchase Stock to be executed by their duly authorized representatives effective as of the Issue Date written above.
COMPANY | ||
MAVENIR SYSTEMS, INC. | ||
By: | /s/ Terry Hungle | |
Name: | Terry Hungle | |
(Print) | ||
Title: | Chief Financial Officer | |
HOLDER | ||
SILICON VALLEY BANK | ||
By: | /s/ Brendan P. Quinn | |
Name: | Brendan P. Quinn | |
(Print) | ||
Title: | Vice President | |
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APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned Holder hereby exercises its right to purchase shares of the Common/Series Preferred [circle one] Stock of (the Company) in accordance with the attached Warrant To Purchase Stock, and tenders payment of the aggregate Warrant Price for such shares as follows:
¨ | check in the amount of $ payable to order of the Company enclosed herewith |
¨ | Wire transfer of immediately available funds to the Companys account |
¨ | Cashless Exercise pursuant to Section 1.2 of the Warrant |
¨ | Other [Describe] |
2. Please issue a certificate or certificates representing the Shares in the name specified below:
Holders Name | ||||||
(Address) |
3. By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Section 4 of the Warrant to Purchase Stock as of the date hereof.
HOLDER: | ||
| ||
By: | ||
Name: | ||
Title: | ||
(Date): |
Appendix 1
Exhibit 4.5
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN SECTIONS 5.3 AND 5.4 BELOW, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
WARRANT TO PURCHASE STOCK
Company: Mavenir Systems, Inc., a Delaware corporation
Number of Shares: 450,000, subject to adjustment in accordance with the provisions hereof
Type/Series of Stock: Common Stock, $0.001 par value per share
Warrant Price: $0.73 per Share, subject to adjustment in accordance with the provisions hereof
Issue Date: October 18, 2012
Expiration Date: As set forth in Section 5.1 below
Credit Facility: This Warrant to Purchase Stock (Warrant) is issued in connection with that certain Subordinated Loan and Security Agreement of even date herewith among Silicon Valley Bank, the Company and Mavenir Holdings, Inc. (as amended and/or modified and in effect from time to time, the Loan Agreement) and the participation therein of WestRiver Mezzanine Loans, LLC pursuant to an arrangement among Silicon Valley Bank, WestRiver Management, LLC and WestRiver Mezzanine Loans, LLC.
THIS WARRANT CERTIFIES THAT, for good and valuable consideration, WESTRIVER MEZZANINE LOANS, LLC (together with any successor or permitted assignee or transferee of this Warrant or of any shares issued upon exercise hereof, Holder) is entitled to purchase the number of fully paid and non-assessable shares (the Shares) of the above-stated Type/Series of Stock (the Class) of the above-named company (the Company) at the above-stated Warrant Price, all as set forth above and as adjusted pursuant to Section 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant.
SECTION 1. EXERCISE.
1.1 Method of Exercise. Holder may at any time and from time to time through the Expiration Date exercise this Warrant, in whole or in part, by delivering to the Company the original of this Warrant together with a duly executed Notice of Exercise in substantially the form attached hereto as Appendix 1 and, unless Holder is exercising this Warrant pursuant to a cashless exercise set forth in Section 1.2, a check, wire transfer of same-day funds (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.
1.2 Cashless Exercise. On any exercise of this Warrant, in lieu of payment of the aggregate Warrant Price in the manner as specified in Section 1.1 above, but otherwise in accordance with the requirements of Section 1.1, Holder may elect to receive, and the Company shall issue to the Holder, such number of fully paid and non-assessable Shares as are computed using the following formula:
X = Y(A-B)/A
where:
X = | the number of Shares to be issued to the Holder; |
Y = | the number of Shares with respect to which this Warrant is being exercised (inclusive of the Shares surrendered to the Company in payment of the aggregate Warrant Price); |
A = | the Fair Market Value (as determined pursuant to Section 1.3 below) of one Share; and |
B = | the Warrant Price. |
1.3 Fair Market Value. If shares of the Class are then traded or quoted on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a Trading Market), the fair market value of a Share shall be the closing price or last sale price of a share of the Class reported for the Business Day immediately before the date on which Holder delivers this Warrant together with its Notice of Exercise to the Company. If shares of the Class are not then traded in a Trading Market, the Board of Directors of the Company shall determine the fair market value of a Share in its reasonable good faith judgment.
1.4 Delivery of Certificate and New Warrant. Within a reasonable time after Holder exercises this Warrant in the manner set forth in Section 1.1 or 1.2 above, the Company shall deliver to Holder a certificate representing the Shares issued to Holder upon such exercise and, if this Warrant has not been fully exercised and has not expired, a new warrant of like tenor representing the Shares not so acquired.
1.5 Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of mutilation, on surrender of this Warrant to the Company for cancellation, the Company shall, within a reasonable time, execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.
1.6 Treatment of Warrant Upon Acquisition of Company.
(a) Acquisition. For the purpose of this Warrant, Acquisition means any transaction or series of related transactions involving: (i) the sale, lease, exclusive license, or other disposition of all or substantially all of the assets of the Company (ii) any merger or consolidation of the Company into or with another person or entity (other than a merger or consolidation effected exclusively to change the Companys domicile), or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Companys (or the surviving or successor entitys) outstanding voting power immediately after such merger, consolidation or reorganization (or, if such Company stockholders beneficially own a majority of the outstanding voting power of the surviving or successor entity as of immediately after such merger, consolidation or reorganization, such surviving or successor entity is not the Company); or (iii) any sale or other transfer by the stockholders of the Company, in a single transaction or series of related transactions, of shares representing at least a majority of the Companys then-total outstanding combined voting power.
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(b) Treatment of Warrant on Cash/Public Acquisition. In the event of an Acquisition in which the consideration to be received by the Companys stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a Cash/Public Acquisition), either (i) Holder shall exercise this Warrant pursuant to Section 1.1 and/or 1.2 and such exercise will be deemed effective immediately prior to and contingent upon the consummation of such Acquisition or (ii) if Holder elects not to exercise the Warrant, this Warrant will expire immediately prior to the consummation of such Acquisition.
(c) The Company shall provide Holder with written notice of its intention to consummate a the Cash/Public Acquisition (together with such reasonable information as Holder may reasonably require regarding the treatment of this Warrant in connection with such contemplated Cash/Public Acquisition giving rise to such notice), which is to be delivered to Holder not less than seven (7) Business Days prior to the closing of the proposed Cash/Public Acquisition. In the event the Company does not provide such notice, then if, immediately prior to the Cash/Public Acquisition, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above would be greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall promptly notify the Holder of the number of Shares (or such other securities) issued upon such exercise to the Holder and Holder shall be deemed to have restated each of the representations and warranties in Section 4 of the Warrant as the date thereof.
(d) Upon the closing of any Acquisition other than a Cash/Public Acquisition, the acquiring, surviving or successor entity shall assume the obligations of this Warrant, and this Warrant shall thereafter be exercisable for the same securities and/or other property as would have been paid for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on and as of the closing of such Acquisition, subject to further adjustment from time to time in accordance with the provisions of this Warrant.
(e) As used in this Warrant, Marketable Securities means securities meeting all of the following requirements (determined as of immediately prior to the closing of the Acquisition): (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (ii) the class and series of shares or other security of the issuer that would be received by Holder in connection with the Acquisition were Holder to exercise this Warrant on or prior to the closing thereof is then traded in Trading Market, and (iii) Holder would be able to publicly re-sell, within six (6) months and one day following the closing of such Acquisition, all of the issuers shares and/or other securities that would be received by Holder in such Acquisition were Holder to exercise this Warrant in full on or prior to the closing of such Acquisition.
SECTION 2. ADJUSTMENTS TO THE SHARES AND WARRANT PRICE.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a dividend or distribution on the outstanding shares of the Class payable in additional shares of the Class or other securities or property (other than cash), then upon exercise of this Warrant, for each Share acquired,
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Holder shall receive, without additional cost to Holder, the total number and kind of securities and property which Holder would have received had Holder owned the Shares of record as of the date the dividend or distribution occurred. If the Company subdivides the outstanding shares of the Class by reclassification or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of the Class are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.
2.2 Reclassification, Exchange, Combinations or Substitution. Upon any event whereby all of the outstanding shares of the Class are reclassified, exchanged, combined, substituted, or replaced for, into, with or by Company securities of a different class and/or series, then from and after the consummation of such event, this Warrant will be exercisable for the number, class and series of Company securities that Holder would have received had the Shares been outstanding on and as of the consummation of such event, and subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations substitutions, replacements or other similar events.
2.3 No Fractional Share. No fractional Share shall be issuable upon exercise of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional Share interest arises upon any exercise of the Warrant, the Company shall eliminate such fractional Share interest by paying Holder in cash the amount computed by multiplying the fractional interest by (i) the fair market value (as determined in accordance with Section 1.3 above) of a full Share, less (ii) the then-effective Warrant Price.
2.4 Notice/Certificate as to Adjustments. Upon each adjustment of the Warrant Price, Class and/or number of Shares, the Company, at the Companys expense, shall notify Holder in writing within a reasonable time setting forth the adjustments to the Warrant Price, Class and/or number of Shares and facts upon which such adjustment is based. The Company shall, upon written request from Holder, furnish Holder with a certificate of its Chief Financial Officer, including computations of such adjustment and the Warrant Price, Class and number of Shares in effect upon the date of such adjustment.
SECTION 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company represents and warrants to, and agrees with, the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this Warrant is not greater than the fair market value of a share of the Class as determined by the most recently completed valuation of the Companys stock for purposes of its compliance with Section 409A of the Internal Revenue Code of 1986, as amended.
(b) All Shares which may be issued upon the exercise of this Warrant shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws. The Company covenants that it shall at all times cause to be reserved and kept available out of its authorized and unissued capital stock such number of shares of the Class and other securities as will be sufficient to permit the exercise in full of this Warrant.
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(c) The Companys capitalization table attached hereto as Schedule 1 is true and complete, in all material respects, as of the Issue Date.
3.2 Notice of Certain Events. If the Company proposes at any time to:
(a) declare any dividend or distribution upon the outstanding shares of the Class, whether in cash, property, stock, or other securities and whether or not a regular cash dividend;
(b) offer for subscription or sale pro rata to the holders of the outstanding shares of the Class any additional shares of any class or series of the Companys stock (other than pursuant to contractual pre-emptive rights);
(c) effect any reclassification, exchange, combination, substitution, reorganization or recapitalization of the outstanding shares of the Class;
(d) effect an Acquisition or to liquidate, dissolve or wind up; or
(e) effect its initial, underwritten offering and sale of its securities to the public pursuant to an effective registration statement under the Act (the IPO);
then, in connection with each such event, the Company shall give Holder:
(1) in the case of the matters referred to in (a) and (b) above, at least seven (7) Business Days prior written notice of the earlier to occur of the effective date thereof or the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of outstanding shares of the Class will be entitled thereto) or for determining rights to vote, if any;
(2) in the case of the matters referred to in (c) and (d) above at least seven (7) Business Days prior written notice of the date when the same will take place (and specifying the date on which the holders of outstanding shares of the Class will be entitled to exchange their shares for the securities or other property deliverable upon the occurrence of such event); and
(3) with respect to the IPO, at least seven (7) Business Days prior written notice of the date on which the Company proposes to file its initial registration statement in connection therewith.
Reference is made to Section 1.6(c) whereby this Warrant will be deemed to be exercised pursuant to Section 1.2 hereof if the Company does not give written notice to Holder of a Cash/Public Acquisition as required by the terms hereof. Company will also provide information requested by Holder that is reasonably necessary to enable Holder to comply with Holders accounting or reporting requirements.
5
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE HOLDER.
The Holder represents and warrants to the Company as follows:
4.1 Purchase for Own Account. This Warrant and the Shares to be acquired upon exercise of this Warrant by Holder are being acquired for investment for Holders account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act. Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares. Holder further represents that Holder does not currently have any contract, undertaking, agreement or arrangement with any unaffiliated person to sell or transfer to such person or any unaffiliated third person any of this Warrant or the Shares issuable hereunder.
4.2 Disclosure of Information. Holder is aware of the Companys business affairs and financial condition and has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information necessary to verify any information furnished to Holder or to which Holder has access.
4.3 Investment Experience. Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holders investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities (including a complete loss of Holders investment) and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.
4.4 Accredited Investor Status. Holder is an accredited investor within the meaning of Regulation D promulgated under the Act.
4.5 The Act. Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holders investment intent and the accuracy of Holders representations and warranties as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available. Holder is aware of the provisions of Rule 144 promulgated under the Act. Holder acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period, and requirements relating to the Company which are outside of the Holders control, and which the Company is under no obligation and may not reasonably be able to satisfy.
4.6 Market Stand-off Agreement. The Holder agrees that the Shares shall be subject to the Market Standoff provisions in Section 1.14 of the Companys Amended and Restated Investors Rights Agreement dated as of May 26, 2011, as such agreement may be amended or restated from time to time.
4.7 No Voting Rights. Holder, as a Holder of this Warrant, will not have any voting rights until the exercise of this Warrant.
6
SECTION 5. MISCELLANEOUS.
5.1 Term; Automatic Cashless Exercise Upon Expiration.
(a) Term. Subject to the provisions of Section 1.6 above, this Warrant is exercisable in whole or in part at any time and from time to time on or before 6:00 PM, Pacific time, on the earliest to occur of (i) the tenth (10th) anniversary of the Issue Date hereof, and (ii) the date that is three (3) years following the effective date of the registration statement filed in connection with the IPO, and shall be void thereafter.
(b) Automatic Cashless Exercise upon Expiration. In the event that, upon the Expiration Date, the fair market value of one Share as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares for which it shall not previously have been exercised, and the Company shall, within a reasonable time, deliver a certificate representing the Shares issued upon such exercise to Holder.
5.2 Legends. Each certificate evidencing Shares shall be imprinted with a legend in substantially the following form:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE ISSUER TO WESTRIVER MEZZANINE LOANS, LLC DATED SEPTEMBER , 2012, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
5.3 Compliance with Securities Laws on Transfer. This Warrant and the Shares issued upon exercise of this Warrant may not be transferred or assigned in whole or in part except in compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder, provided that such affiliate is an accredited investor as defined in Regulation D promulgated under the Act.
5.4 Transfer Procedure. Subject to the provisions of Section 5.3 and upon providing the Company with written notice, Holder may transfer all or part of this Warrant or the Shares issued upon exercise of this Warrant to any transferee, provided, however, in connection with any such transfer, Holder will give the Company notice of the portion of the Warrant and/or Shares being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable); and provided further, that any transferee shall agree in writing with the Company to be bound by all of the terms and conditions of this Warrant. Notwithstanding any contrary provision herein, at all times prior to the IPO,
7
Holder may not, without the Companys prior written consent, transfer this Warrant or any portion hereof, or any Shares issued upon any exercise hereof, to any person or entity who directly competes with the Company, except in connection with an Acquisition of the Company by such a direct competitor.
5.5 Notices. All notices and other communications hereunder from the Company to the Holder, or vice versa, shall be deemed delivered and effective (i) when given personally, (ii) on the third (3rd) Business Day after being mailed by first-class registered or certified mail, postage prepaid, (iii) upon actual receipt if given by facsimile or electronic mail and such receipt is confirmed in writing by the recipient, or (iv) on the first Business Day following delivery to a reliable overnight courier service, courier fee prepaid, in any case at such address as may have been furnished to the Company or Holder, as the case may be, in writing by the Company or such Holder from time to time in accordance with the provisions of this Section 5.5. All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:
WestRiver Mezzanine Loans, LLC
c/o WestRiver Management, LLC
3720 Carillon Point
Kirkland, Washington 98033-7455
Attention: Erik J. Anderson
Telephone: (425) 576-9850
Email: eanderson@westrivercap.com
With a copy (which shall not constitute notice) to:
Perkins Coie LLP
1201 Third Avenue, Suite 4800
Seattle, Washington 98101-3099
Attention: David C. Clarke
Telephone: (206) 359-8612
Email: dclarke@perkinscoie.com
Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:
Mavenir Systems, Inc.
1651 North Glenville Drive, Suite 216
Richardson, Texas 75081
Attn: Sam Garrett, General Counsel
Fax: (469) 916-4397
Email: sam@mavenir.com
With a copy (which shall not constitute notice) to:
Andrews Kurth LLP
111 Congress Avenue, Suite 1700
Austin, Texas 78701
Attn: Alan D. Bickerstaff
Fax: (512) 542-5219
Email: abickerstaff@andrewskurth.com
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5.6 Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated (either generally or in a particular instance and either retroactively or prospectively) only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
5.7 Attorneys Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys fees.
5.8 Counterparts; Facsimile/Electronic Signatures. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement. Any signature page delivered electronically or by facsimile shall be binding to the same extent as an original signature page with regards to any agreement subject to the terms hereof or any amendment thereto.
5.9 Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its principles regarding conflicts of law.
5.10 Headings. The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.
5.11 Business Days. Business Day is any day that is not a Saturday, Sunday or a day on which WestRiver Mezzanine Loans, LLC is closed.
[Remainder of page left blank intentionally]
[Signature page follows]
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IN WITNESS WHEREOF, the parties have caused this Warrant to Purchase Stock to be executed by their duly authorized representatives effective as of the Issue Date written above.
COMPANY | ||
MAVENIR SYSTEMS, INC. | ||
By: |
/s/ Terry Hungle | |
Name: |
Terry Hungle | |
(Print) | ||
Title: |
Chief Financial Officer |
HOLDER | ||
WESTRIVER MEZZANINE LOANS, LLC | ||
By: |
WestRiver Management, LLC, its | |
Managing Member | ||
By: |
/s/ Erik J. Anderson | |
Erik J. Anderson, Manager |
10
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned Holder hereby exercises its right to purchase shares of the Common/Series Preferred [circle one] Stock of (the Company) in accordance with the attached Warrant To Purchase Stock, and tenders payment of the aggregate Warrant Price for such shares as follows:
¨ | check in the amount of $ payable to order of the Company enclosed herewith | |
¨ | Wire transfer of immediately available funds to the Companys account | |
¨ | Cashless Exercise pursuant to Section 1.2 of the Warrant | |
¨ | Other [Describe] |
2. Please issue a certificate or certificates representing the Shares in the name specified below:
Holders Name | ||||||
(Address) |
3. By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Section 4 of the Warrant to Purchase Stock as of the date hereof.
HOLDER: | ||
| ||
By: | ||
Name: | ||
Title: | ||
(Date): |
Appendix 1
Exhibit 4.6
Issue Date: September 11, 2012
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED.
MAVENIR SYSTEMS, INC.
STOCK PURCHASE WARRANT
THIS CERTIFIES that Communities Foundation of Texas (the Holder) is entitled, upon the terms and subject to the conditions hereinafter set forth, at any time on or after the date of this Warrant and on or prior to the fifth anniversary hereof (the Expiration Date), to subscribe for and purchase, from Mavenir Systems, Inc., a Delaware corporation (the Company), 20,000 shares of Common Stock, $0.001 par value per share, (or other securities as to which purchase rights under this Warrant exist) (the Shares) at an exercise price of $0.73 per share (the Exercise Price). The Exercise Price and the Shares purchasable hereunder are subject to adjustment as set forth in Section 8.
1. Exercise of Warrant.
(a) The purchase rights represented by this Warrant are exercisable by the Holder, in whole or in part, at any time after the date hereof and before the close of business on the Expiration Date, by the surrender of this Warrant and the Notice of Exercise annexed hereto duly executed at the principal executive office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company), and upon payment of the Exercise Price of the Shares thereby purchased (by cash or by check or bank draft payable to the order of the Company); whereupon the Holder shall be entitled to receive a certificate for the number of Shares so purchased. The Company agrees that if at the time of the surrender of this Warrant and purchase of the Shares, the Holder shall be entitled to exercise this Warrant, the Shares so purchased shall be and be deemed to be issued to the Holder as the record owner of such Shares as of the close of business on the date on which this Warrant shall have been exercised as aforesaid.
(b) In lieu of exercising this Warrant by payment of cash or check pursuant to subsection (a) above, the Holder may elect to receive Shares equal to the value of this Warrant (or the portion thereof being exercised), at any time after the date hereof and before the close of business on the Expiration Date, by surrender of this Warrant at the principal executive office of the Company, together with the Notice of Conversion annexed hereto, in which event the Company will issue to the Holder Shares in accordance with the following formula:
X | = | Y(A-B) | ||||
A | ||||||
Where, | X | = | the number of Shares to be issued to Holder; | |||||||
Y | = | the number of Shares for which the Warrant is being exercised; | ||||||||
A | = | the fair market value of one Share; and | ||||||||
B | = | the Exercise Price. |
(i) For purposes of this subsection (b), the fair market value of a Share is defined as follows:
(1) if the exercise is in connection with an initial public offering of the Common Stock, and if the Companys registration statement relating to such offering has been declared effective by the Securities and Exchange Commission, then the fair market value shall be the initial Price to Public specified in the final prospectus with respect to the offering;
(2) if the exercise is in connection with a Change of Control (as defined below), then the fair market value shall be the value received in such Change of Control by the holders of the securities as to which purchase rights under this Warrant exist;
(3) if the exercise occurs after, and not in connection with the Companys initial public offering, and:
a) if traded on a securities exchange or the Nasdaq Stock Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange or market over the thirty (30) day period ending three (3) days prior to the date of the Notice of Conversion; or
b) if actively traded over-the-counter, the value shall be deemed to be the average of the closing bid prices over the thirty (30) day period ending three (3) days prior to the date of the Notice of Conversion;
(4) if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Companys Board of Directors.
(ii) A Change of Control shall mean (x) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any merger, consolidation or other form of reorganization in which outstanding shares of the Company are exchanged for securities or other consideration issued, or caused to be issued, by the acquiring entity or its subsidiary, but excluding any transaction effected primarily for the purpose of changing the Companys jurisdiction of incorporation), unless the Companys stockholders of record as constituted immediately prior to such transaction or series of related transactions will, immediately after such transaction or series of related transactions hold at least a majority of the voting power of the surviving or acquiring entity or (y) a sale of all or substantially all of the assets of the Company.
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2. Nonassessable. The Company covenants that all Shares which may be issued upon the exercise of rights represented by this Warrant will, upon exercise of the rights represented by this Warrant, be validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). Certificates for Shares purchased hereunder shall be delivered to the Holder within a reasonable time after the date on which this Warrant shall have been exercised as aforesaid.
3. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon the exercise of this Warrant, an amount equal to such fraction multiplied by the then current price at which each Share may be purchased hereunder shall be paid in cash to the Holder.
4. Charges, Taxes and Expenses. Issuance of certificates for Shares upon the exercise of this Warrant shall be made without charge to the Holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder.
5. No Rights as Stockholder. This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Company prior to the exercise hereof.
6. Loss, Theft, Destruction or Mutilation of Warrant. On receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount.
7. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, a Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.
8. Adjustments. The Exercise Price and the number of Shares purchasable hereunder are subject to adjustment from time to time as set forth in this Section 8.
(a) Reclassification, etc. If the Company, at any time while this Warrant, or any portion hereof, remains outstanding and unexpired by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities or any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under this Warrant immediately prior to such reclassification or other change and the Exercise Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section 8.
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(b) Subdivision or Combination of Shares. In the event that the Company shall at any time subdivide the outstanding securities as to which purchase rights under this Warrant exist, or shall issue a stock dividend on the securities as to which purchase rights under this Warrant exist, the number of securities as to which purchase rights under this Warrant exist immediately prior to such subdivision or to the issuance of such stock dividend shall be proportionately increased, and the Exercise Price shall be proportionately decreased, and in the event that the Company shall at any time combine the outstanding securities as to which purchase rights under this Warrant exist, the number of securities as to which purchase rights under this Warrant exist immediately prior to such combination shall be proportionately decreased, and the Exercise Price shall be proportionately increased, effective at the close of business on the date of such subdivision, stock dividend or combination, as the case may be.
(c) Cash Distributions. No adjustment on account of cash dividends or interest on the securities as to which purchase rights under this Warrant exist will be made to the Exercise Price under this Warrant.
9. Restrictions on Transferability of Securities.
(a) Restrictions on Transferability. This Warrant and the Shares issuable upon exercise of this Warrant (collectively the Securities) shall not be sold, assigned, transferred or pledged except upon the conditions specified in this Section 9.
(b) Restrictive Legend. Each certificate representing the Securities and any other securities issued in respect of the Securities upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall (unless otherwise permitted by the provisions of Section 9(c)) be stamped or otherwise imprinted with a legend in the following form (in addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED.
Each holder of Securities and each subsequent transferee consents to the Company making a notation on its records and giving instructions to any transfer agent of the Securities in order to implement the restrictions on transfer established in this Section 9.
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(c) Notice of Proposed Transfers. Each holder of a warrant or stock certificate, as the case may be, representing the Securities, by acceptance thereof, agrees to comply in all respects with the provisions of this Section 9(c). Such holder agrees not to make any disposition of all or any portion of the Securities unless and until (X) there is then in effect a registration statement under the Securities Act of 1933, as amended (the Securities Act) covering such proposed disposition and such disposition is made in accordance with such registration statement or (Y) such holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Company, such holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company that such disposition will not require registration of such shares under the Securities Act.
10. Investment Representations and Covenants of the Holder. With respect to the acquisition of any of the Securities, the Holder hereby represents and warrants to the Company as follows:
(a) Experience. The Holder is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests.
(b) Investment. The Holder is acquiring the Securities for investment for its own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof. The Holder understands that the Securities have not been, and will not be, registered under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Holders representations as expressed herein.
(c) Rule 144. The Holder acknowledges that the Securities must be held indefinitely unless subsequently registered under the Securities Act, or unless an exemption from such registration is available. The Holder understands that the Company is not under any obligation to register any of the Securities. The Holder is aware of the provisions of Rule 144 promulgated under the Securities Act that permit limited resale of securities purchased in a private placement subject to satisfaction of certain conditions.
(d) Market Standoff. The Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the Companys initial public offering and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (l80) calendar days) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired), whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of securities, in cash or otherwise. The Holder agrees to execute an agreement(s) reflecting (i) and (ii) above as may be requested by the managing
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underwriters at the time of the initial public offering, and further agrees that the Company may impose stop transfer instructions with its transfer agent in order to enforce the covenants in (i) and (ii) above. The underwriters in connection with the Companys initial public offering are intended third party beneficiaries of the covenants in this subsection and shall have the right, power and authority to enforce such covenants as though they were a party hereto.
11. Early Termination. The purchase rights represented by this Warrant shall terminate and be of no further force and effect upon the first to occur of (a) the closing of the Companys first firm commitment underwritten public offering of its Common Stock or other securities pursuant to an effective registration statement under the Securities Act or (b) the closing of a Change of Control. The Company shall will mail or cause to be mailed to the Holder a notice specifying the date on which either of the events specified in (a) or (b) of this Section 11 is to take place at least five (5) days prior to the date therein specified.
12. Notices. In the event (i) the Company shall take a record of the holders of the securities at the time receivable upon the exercise of this Warrant for the purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, (ii) of any capital reorganization of the Company, (iii) of any reclassification of the capital stock of the Company, (iv) of any Change of Control or (v) of any voluntary dissolution, liquidation or winding-up of the Company, then, and in each such case, the Company will mail or cause to be mailed to the Holder a notice specifying, as the case may be, (A) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (B) the date on which such reorganization, reclassification, Change of Control, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of the securities at the time receivable upon the exercise of this Warrant shall be entitled to exchange such securities for the securities or other property deliverable upon such reorganization, reclassification, Change of Control, dissolution, liquidation or winding-up. Such notice shall be mailed at least five (5) days prior to the date therein specified.
13. Miscellaneous.
(a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF DELAWARE AS SUCH LAWS ARE APPLIED TO AGREEMENTS BETWEEN DELAWARE RESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN DELAWARE, WITHOUT REGARD TO CONFLICT OF LAWS RULES.
(b) Restrictions. By acceptance hereof, the Holder acknowledges that the Shares acquired upon the exercise of this Warrant may have restrictions upon its resale imposed by state and federal securities laws.
(c) Waivers and Amendments. This Warrant and any provisions 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.
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(d) Assignment. This Warrant may be assigned or transferred by the Holder only with the prior written approval of the Company. This Warrant shall be binding upon any successors or assigns of the Company.
(e) Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be delivered personally by hand or by courier, mailed by United States first-class mail, postage prepaid, sent by facsimile or sent by electronic mail directed to the party to be notified at the address, facsimile number or electronic mail address indicated for such person on the signature page hereof, or at such other address, facsimile number or electronic mail address as such party may designate by ten (10) days advance written notice to the other parties hereto. All such notices and other communications shall be deemed given upon personal delivery, on the date of mailing, upon confirmation of facsimile transfer or when directed to the electronic mail address set forth on signature page hereof. With respect to any notice given by the Company under any provision of the Delaware General Corporation Law or the Companys charter or bylaws, the Holder agrees that such notice may given by facsimile or by electronic mail.
(f) Counterparts. This Warrant may be executed in any number of counterparts, each of which shall be enforceable, and all of which together shall constitute one instrument.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.
MAVENIR SYSTEMS, INC. | ||
By: | /s/ Terry Hungle | |
Its: | Chief Financial Officer | |
Address: | ||
1651 N. Glenville Dr., Suite 201 | ||
Richardson, Texas, 75081 | ||
Facsimile #: 469.916.4397 |
Communities Foundation of Texas hereby agrees and accepts this Warrant in accordance with its terms.
COMMUNITIES FOUNDATION OF TEXAS | ||
By: | /s/ Elizabeth W. Bull | |
| ||
Name: | ||
Title: | ||
| ||
Address: | 5500 Caruth Haven Lane | |
Dallas, Texas 75225 | ||
Fax No.: (214) 750-4210 |
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NOTICE OF EXERCISE
TO: | Mavenir Systems, Inc. |
1651 N. Glenville Dr., Suite 201
Richardson, Texas, 75081
Facsimile #: 469.916.4397
ATTN: Secretary
1. The undersigned hereby elects to purchase shares of the Stock (the Shares) of Mavenir Systems, Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full.
2. Please issue a certificate or certificates representing the Shares in the name of the undersigned or in such other name as is specified below:
(Print Name) | ||||||
Address: | ||||||
3. The undersigned confirms that the Shares are being acquired for the account of the undersigned for investment only and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or selling the Shares.
|
| |
(Date) | (Signature) | |
| ||
(Print Name) |
NOTICE OF CONVERSION
TO: | Mavenir Systems, Inc. |
1651 N. Glenville Dr., Suite 201
Richardson, Texas, 75081
Facsimile #: 469.916.4397
ATTN: Secretary
1. The undersigned hereby elects to convert the attached Warrant into shares of the Stock (the Shares) of Mavenir Systems, Inc. pursuant to Section 1(b) of such Warrant, which conversion shall be effected pursuant to the terms of the attached Warrant.
2. Please issue a certificate or certificates representing the Shares in the name of the undersigned or in such other name as is specified below:
(Print Name) | ||||||
Address: | ||||||
3. The undersigned represents that the Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares.
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(Date) | (Signature) | |
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(Print Name) |
Exhibit 4.7
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 8 OF THIS WARRANT.
MAVENIR SYSTEMS, INC.
WARRANT
THIS CERTIFIES THAT, for value received and subject to the provisions and upon the terms and conditions set forth in this Warrant, SILVER LAKE WATERMAN FUND, L.P. and its assignees are entitled to subscribe for and purchase 1,362,858 shares of Common Stock of MAVENIR SYSTEMS, INC., a Delaware corporation (the Company), at the price of $0.001 per share (such price and such other price as shall result, from time to time, from the adjustments specified in 5 hereof is referred to as the Exercise Price).
1. Definitions. As used herein, capitalized terms not otherwise defined herein shall have the following respective meanings:
(a) Acquisition means any transaction or series of related transactions involving (i) any consolidation or merger of the Company with another entity (other than a merger or consolidation effected exclusively to change the Companys domicile) or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Companys (or the surviving or successor entitys) outstanding voting power immediately after such merger, consolidation or reorganization, or (ii) the sale of all or substantially all of the assets of the Company.
(b) Act means the Securities Act of 1933, as amended.
(c) Common Stock means the Common Stock of the Company.
(d) Date of Grant means June 4, 2013.
(e) Holder means the initial holder of this Warrant set forth in the first paragraph of this Warrant and any other person or entity which becomes a holder of this Warrant pursuant to the terms of this Warrant.
(f) IPO means the initial public offering of the Companys Common Stock effected pursuant to a registration statement on Form S-l (or its successor) filed under the Act.
(g) Shares means the shares of Common Stock of Company issuable upon exercise of this Warrant.
2. Term. The purchase right represented by this Warrant is exercisable, in whole or in part, at any time and from time to time from the Date of Grant through the earlier of (i) the seventh anniversary of the Date of Grant, (ii) the third anniversary of the effective date of the registration statement filed in connection with the Companys IPO or (iii) the consummation of an Acquisition.
3. Method of Exercise; Payment; Issuance of New Warrant: Net Issuance.
(a) Subject to Section 2 hereof, the purchase right represented by this Warrant may be exercised by the Holder, in whole or in part and from time to time, at the election of the Holder, by (a) the delivery of the notice of exercise substantially in the form attached hereto as Exhibit A-l, duly completed and executed, at the principal office of the Company and by the payment to the Company, by certified or bank check, or by wire transfer to an account designated by the Company of an amount equal to the then applicable Exercise Price multiplied by the number of Shares then being purchased; (b) if in connection with a registered public offering of the Companys securities, the delivery of the notice of exercise form attached hereto as Exhibit A-2, duly completed and executed, at the principal office of the Company together with notice of arrangements reasonably satisfactory to the Company for payment to the Company from the proceeds of the sale of shares to be sold by the Holder in such public offering of an amount equal to the then applicable Exercise Price per share multiplied by the number of Shares then being purchased; or (c) exercise of the net issuance right provided for in Section 3(b) hereof. The person or persons in whose name(s) Shares shall be registered upon exercise of this Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the shares represented thereby (and such shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is exercised. In the event of any exercise of this Warrant, certificates for the shares of stock so purchased shall be delivered to the Holder as soon as possible and in any event within thirty (30) days after such exercise and, unless this Warrant has been fully exercised or expired, a new Warrant representing the portion of the Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder (subject to delivery of the old Warrant to the Company) as soon as possible and in any event within such thirty-day period; provided, however, that at such time as the Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, if requested by the Holder, the Company shall cause its transfer agent to deliver the certificate representing Shares issued upon exercise of this Warrant to, or credit the securities account of, a broker or other person (as directed by the Holder exercising this Warrant) within the time period required to settle any trade made by the Holder after exercise of this Warrant.
(b) Right to Convert Warrant into Stock: Net Issuance.
(i) Right to Convert. In addition to and without limiting the rights of the Holder under the terms of this Warrant, the Holder shall have the right to convert this Warrant or any portion thereof (the Conversion Right) into shares of Common Stock as provided in this Section 3(b) at any time or from time to time during the term of this Warrant. Upon exercise of the Conversion Right with respect to a particular number of shares subject to this Warrant (the Converted Warrant Shares), the Company shall deliver to the Holder (without payment by the Holder of any exercise price or any cash or other consideration) that number of shares of fully paid and nonassessable Common Stock as is determined according to the following formula:
X= | B A | |
Y |
Where: X = |
the number of shares of Common Stock that shall be issued to Holder | |
Y = |
the fair market value of one share of Common Stock | |
A = |
the aggregate Exercise Price of the specified number of Converted Warrant Shares immediately prior to the exercise of the Conversion Right (i.e., the number of Converted Warrant Shares multiplied by the Exercise Price) | |
B = | the aggregate fair market value of the specified number of Converted Warrant Shares (i.e., the number of Converted Warrant Shares multiplied by the fair market value of one Converted Warrant Share) |
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(ii) Method of Exercise. The Conversion Right may be exercised by the Holder by the delivery by Holder of a written statement (which may be in the form of Exhibit A-l or Exhibit A-2 hereto) specifying that the Holder thereby intends to exercise the Conversion Right and indicating the number of shares subject to this Warrant which are being surrendered (referred to in Section 3(b)(i) hereof as the Converted Warrant Shares) in exercise of the Conversion Right. Such conversion shall be effective upon receipt by the Company of the aforesaid written statement, or on such later date as is specified therein, and, at the election of the Holder, may be made contingent upon the closing of the sale of the Companys Common Stock to the public in a public offering pursuant to a registration statement under the Act (a Public Offering).
(iii) Determination of Fair Market Value. For purposes of this Section 3(b), fair market value of a share of Common Stock as of a particular date (the Determination Date) shall mean:
(1) If the Conversion Right is exercised in connection with and contingent upon a Public Offering, and if the Companys registration statement relating to such Public Offering (Registration Statement) has been declared effective by the Securities and Exchange Commission, then the initial Price to Public specified in the final prospectus with respect to such Public Offering.
(2) If the Conversion Right is exercised in connection with an Acquisition, then the fair market value shall be the value received in such Acquisition by the holders of Common Stock if the consideration is cash or stock for which there is a liquid public market, or if there is no liquid public market, then the fair market value shall be reasonably be determined in good faith by the board of directors of the Company.
(3) If the Conversion Right is not exercised in connection with and contingent upon a Public Offering or an Acquisition, then as follows:
(A) If regularly traded on a nationally recognized securities exchange, interdealer quotation system or over-the-counter market (not including any secondary market for securities of non-public companies), the fair market value of the Common Stock shall be deemed to be the closing price or last sale price of the Common Stock on the trading day immediately prior to the Determination Date; and
(B) If there is no liquid public market for the Common Stock, then fair market value shall be reasonably determined in good faith by the board of directors of the Company.
(iv) If closing prices or last sale prices are no longer reported by a securities exchange or other trading system, the closing price or last sale price shall be that which is reported by such securities exchange or other trading system at 4:00 p.m. New York City time on the applicable trading day.
4. Stock Fully Paid: Reservation of Shares. All Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance pursuant to the terms and conditions herein, be fully paid and nonassessable, and free from all preemptive rights and taxes, liens and charges with respect to the issue thereof. 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 the issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant.
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5. Adjustment of Exercise Price and Number of Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows:
(a) Corporate Events. In case of any reclassification or change of securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in case of any merger of the Company with or into another corporation (other than a merger with another corporation in which the Company is the acquiring and the surviving corporation and which does not result in any reclassification or change of outstanding securities issuable upon exercise of this Warrant and other than an Acquisition that results in the exercise or termination of this Warrant) (each, a Corporate Event), the Company, or such successor corporation, as the case may be, shall duly execute and deliver to the Holder a new Warrant (in form and substance satisfactory to the Holder), or the Company shall make appropriate provision without the issuance of a new Warrant, so that the Holder shall have the right to receive upon exercise of this Warrant, at a total purchase price not to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in lieu of the shares of Common Stock theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such Corporate Event by a holder of the number of shares of Common Stock then purchasable under this Warrant. Any new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 5. The provisions of this Section 5(a) shall similarly apply to successive Corporate Events.
(b) Subdivision or Combination of Shares. If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its outstanding shares of Common Stock, the Exercise Price shall be proportionately decreased and the number of Shares issuable hereunder shall be proportionately increased in the case of a subdivision and the Exercise Price shall be proportionately increased and the number of Shares issuable hereunder shall be proportionately decreased in the case of a combination.
(c) Stock Dividends and Other Distributions. If the Company at any time while this Warrant is outstanding and unexpired shall (i) pay a dividend with respect to Common Stock payable in Common Stock, then the Exercise Price shall be adjusted, from and after the date of determination of shareholders entitled to receive such dividend or distribution, to that price determined by multiplying the Exercise Price in effect immediately prior to such date of determination by a fraction (A) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution, and (B) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend or distribution; or (ii) make any other distribution with respect to Common Stock (except any distribution specifically provided for in Sections 5(a) and 5(b)), then, in each such case, provision shall be made by the Company such that the Holder shall receive upon exercise of this Warrant a proportionate share of any such dividend or distribution as though it were the holder of the Common Stock as of the record date fixed for the determination of the shareholders of the Company entitled to receive such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the Exercise Price, the number of Shares of Common Stock purchasable hereunder shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment in the Exercise Price by a fraction, the numerator of which shall be the Exercise Price immediately prior to such adjustment and the denominator of which shall be the Exercise Price immediately thereafter.
(e) Charter. A true and complete copy of the Companys Certificate of Incorporation, as amended through the Date of Grant, is attached hereto as Exhibit B (the Charter). The Company shall provide the Holder with any restatement, amendment, modification or waiver of the Charter promptly after the same has been made.
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6. Notice of Adjustments. Whenever the Exercise Price or the number of Shares purchasable hereunder shall be adjusted pursuant to Section 5 hereof, the Company shall deliver to Holder a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Exercise Price and the number of Shares purchasable hereunder after giving effect to such adjustment.
7. Fractional Shares. No fractional shares of Common Stock will be issued in connection with any exercise or conversion hereunder, but in lieu of such fractional shares the Company shall make a cash payment therefor based on the fair market value of the Common Stock on the date of exercise or conversion as reasonably determined in good faith by the Companys Board of Directors.
8. Compliance with Act; Disposition of Warrant or Shares of Common Stock.
(a) Compliance with Act. The Holder, by acceptance hereof, agrees that this Warrant, and the shares of Common Stock to be issued upon exercise hereof are being acquired for investment and that the Holder will not offer, sell or otherwise dispose of this Warrant, or any shares of Common Stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Act or any applicable state securities laws. Upon exercise of this Warrant, unless such exercise is registered under the Act and any applicable state securities laws or an exemption from such registration is available, the Holder shall confirm in writing that the shares of Common Stock so purchased are being acquired for investment and not with a view toward distribution or resale in violation of the Act and shall confirm such other matters related thereto as may be reasonably requested by the Company. This Warrant and all shares of Common Stock issued upon exercise of this Warrant (unless no longer required under applicable law) shall be stamped or imprinted with a legend in substantially the following form:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 8 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY.
Said legend shall be removed by the Company, upon the request of the Holder, at such time as the restrictions on the transfer of the applicable security shall have terminated. In addition, in connection with the issuance of this Warrant, the Holder specifically represents to the Company by acceptance of this Warrant as follows:
(1) The Holder is aware of the Companys business affairs and financial condition, and has acquired information about the Company sufficient to reach an informed and knowledgeable decision to acquire this Warrant. The Holder is acquiring this Warrant for its own account for investment purposes only and not with a view to, or for the resale in connection with, any distribution thereof in violation of the Act. The Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares. The Holder further represents that Holder does not currently have any contract, undertaking, agreement or arrangement with any unaffiliated person to sell or transfer to such person or any unaffiliated third person any of the Shares.
(2) The Holder understands that this Warrant has not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holders investment intent as expressed herein.
(3) The Holder further understands that this Warrant must be held indefinitely unless subsequently registered under the Act and qualified under any applicable state securities laws, or unless exemptions from registration and qualification are otherwise available. The Holder is aware of the provisions of Rule 144, promulgated under the Act.
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(4) The Holder agrees that the Shares shall be subject to the market standoff provisions in Section 1.14 of the Amended and Restated Investors Rights Agreement, dated May 26, 2011, by and among the Company and the investors named therein, as such agreement may be amended or restated from time to time and as the provisions thereof may be waived from time to time. The Holder further agrees that, in connection with the execution of this Warrant, the Holder will execute a lock-up agreement, a form of which is attached hereto as Exhibit C.
(5) The Holder is an accredited investor as such term is defined in Rule 501 of Regulation D promulgated under the Act.
(b) Disposition of Warrant or Shares. With respect to any offer, sale or other disposition of this Warrant or any shares of Common Stock acquired pursuant to the exercise of this Warrant, the Holder agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of counsel (at the Companys expense), or other evidence, if reasonably satisfactory to the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state securities law then in effect) of this Warrant or such shares of Common Stock and indicating whether or not under the Act certificates for this Warrant or such shares of Common Stock to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with such law. Upon receiving such written notice and reasonably satisfactory opinion or other evidence, the Company, as promptly as practicable but no later than fifteen (15) days after receipt of the written notice, shall notify the Holder that the Holder may sell or otherwise dispose of this Warrant or such shares of Common Stock, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 8(b) that the opinion of counsel or other evidence is not reasonably satisfactory to the Company, the Company shall so notify the Holder promptly with details thereof after such determination has been made. Notwithstanding the foregoing, this Warrant or such shares of Common Stock may, as to such federal laws, be offered, sold or otherwise disposed of (i) pursuant to an effective registration statement covering such securities or (ii) in accordance with Rule 144 or 144A under the Act, provided that the Company shall have been furnished with such information as the Company may reasonably request to provide a reasonable assurance that the provisions of Rule 144 or 144A have been satisfied. Each certificate representing this Warrant or the shares of Common Stock thus transferred (except a transfer pursuant to an effective registration statement or Rule 144 or 144A) shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the Holder, such legend is not required in order to ensure compliance with such laws. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.
(c) Applicability of Restrictions. Neither any restrictions of any legend described in this Warrant nor the requirements of Section 8(b) above shall apply to any transfer of, or grant of a security interest in, this Warrant (or the Common Stock obtainable upon exercise thereof) or any part hereof (i) to a partner of the Holder if the Holder is a partnership or to a member of the Holder if the Holder is a limited liability company, (ii) to a partnership of which the Holder is a partner or to a limited liability company of which the Holder is a member, or (iii) to a single affiliate of the Holder if the Holder is a corporation, where, in each case, the transferee is an accredited investor; provided, however, in any such transfer, if applicable, the transferee shall on the Companys request agree in writing to be bound by the terms of this Warrant as if an original holder hereof.
9. Rights as Shareholders; Information. No Holder, as a holder of this Warrant, shall be entitled to vote or receive dividends or be deemed the holder of Common Stock for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, until this Warrant shall have been exercised or converted and the Shares purchasable upon the exercise or conversion hereof shall have
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become deliverable, as provided herein. Notwithstanding the foregoing, the Company will transmit to the Holder such information, documents and reports as are generally distributed to the holders of any class or series of the securities of the Company concurrently with the distribution thereof to the shareholders. In addition, the Company agrees to provide in a timely manner any information reasonably requested by the Holder to enable the Holder and its affiliates to comply with their accounting reporting requirements. Prior to the effective date of an IPO, Company will also provide Holder the following information:
(a) As soon as practicable (and in any event within thirty (30) days after the end of each quarter), unaudited financial statements for such quarter, certified by Companys Chief Executive Officer or Chief Financial Officer to fairly present in all material respects the data reflected therein.
(b) As soon as practicable (and in any event within five (5) days after completion), audited financial statements for such year, setting forth in comparative form the corresponding figures for the preceding fiscal year, and accompanied by an audit report and unqualified opinion of the independent certified public accountants of recognized national standing selected by Company.
(c) Copies of 409(A) valuation reports, if any, within thirty (30) days of completion.
(d) Upon request by the Holder, detailed capitalization tables (by round and investor).
10. Additional Rights.
(a) Notice of Transactions. The Company shall provide the Holder with at least seven (7) days written notice prior to closing thereof of the terms and conditions of any of the following transactions (to the extent the Company has notice thereof): (i) any Acquisition of the Company or any liquidation or winding up of the Company, (ii) any declaration of a dividend or distribution, whether in cash, property, stock, or other securities; (iii) any offer for subscription or sale pro rata to the holders of the outstanding shares of Common Stock any additional shares of any class or series of the Companys stock (other than pursuant to contractual pre-emptive rights); or (iv) the effectiveness of the IPO.
(b) Exercise Prior to Expiration. To the extent this Warrant is not previously exercised as to all of the Shares subject hereto, and if the fair market value of one share of the Common Stock is greater than the Exercise Price then in effect, this Warrant shall be deemed automatically exercised pursuant to Section 3(b) above (even if not surrendered) immediately before its expiration. For purposes of such automatic exercise, the fair market value of one share of Common Stock upon such expiration shall be determined pursuant to Section 3(b). To the extent this Warrant or any portion thereof is deemed automatically exercised pursuant to this Section 10(b), the Company agrees to promptly notify the Holder of the number of Shares, if any, the Holder is to receive by reason of such automatic exercise.
11. Representations and Warranties. The Company represents and warrants to the Holder as of the date hereof as follows:
(a) This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and the rules of law or principles at equity governing specific performance, injunctive relief and other equitable remedies.
(b) The Shares have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and nonassessable and free from preemptive rights.
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(c) The rights, preferences, privileges and restrictions granted to or imposed upon the Common Stock and the holders thereof are as set forth in the Charter.
(d) The execution and delivery of this Warrant are not, and the issuance of the Shares upon exercise of this Warrant in accordance with the terms hereof will not be, inconsistent with the Companys Charter or by-laws, do not and will not contravene any law, governmental rule or regulation, judgment or order applicable to the Company, and do not and will not conflict with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound or require the consent or approval of, the giving of notice to, the registration or filing with or the taking of any action in respect of or by, any Federal, state or local government authority or agency or other person, except for the filing of notices pursuant to federal and state securities laws, which filings will be effected by the time required thereby.
(e) There are no actions, suits, audits, investigations or proceedings pending or, to the knowledge of the Company, threatened against the Company in any court or before any governmental commission, board or authority which, if adversely determined, could have a material adverse effect on the ability of the Company to perform its obligations under this Warrant.
(f) The number of shares of Common Stock of the Company outstanding on the date hereof, on a fully diluted basis (assuming the conversion of all outstanding convertible securities and the exercise of all outstanding options and warrants), does not exceed 163,832,081 shares.
12. 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.
13. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, by commercial delivery service, mailed by registered or certified mail (return receipt requested), sent via facsimile (with confirmation of receipt) or electronic mail to the parties at the address for each party as set forth on the signature page hereto (or at such other address for a party as such party may designate pursuant to this Section 13).
Notice given by personal delivery, courier service or mail shall be effective upon actual receipt. Notice given by facsimile shall be effective upon actual receipt if received during the recipients normal business hours, or at the beginning of the recipients next business day after receipt if not received during the recipients normal business hours. All notices by facsimile shall be confirmed by the sender promptly after transmission via certified mail or personal delivery. Any party may change any address to which notice is to be given to it by giving notice as provided above or such change of address.
An electronic communication (Electronic Notice) shall be deemed written notice for purposes of this Section 13 if sent with return receipt requested to the electronic mail address specified by the receiving party in a signed writing in a nonelectronic form. Electronic Notice shall be deemed received at the time the party sending Electronic Notice receives verification of receipt by the receiving party. Any party receiving Electronic Notice may request and shall be entitled to receive the notice on paper, in a nonelectronic form (Nonelectronic Notice) which shall be sent to the requesting party within ten (10) days of receipt of the written request for Nonelectronic Notice.
14. 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 Companys assets, and all of the obligations of the Company relating to the Common Stock issuable upon the exercise or conversion of this Warrant shall survive the exercise, conversion and termination of this Warrant and all of the covenants and agreements of the Company shall inure to the benefit of the successors and assigns of the Holder.
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15. Lost Warrants or Stock Certificates. The Company covenants to the Holder that, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant or any 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 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. Descriptive Headings. The descriptive headings of the various Sections of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. The language in this Warrant shall be construed as to its fair meaning without regard to which party drafted this Warrant.
17. Governing Law. 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 Delaware.
18. Survival of Representations, Warranties and Agreements. All representations and warranties of the Company and the Holder contained herein shall survive the Date of Grant, the exercise or conversion of this Warrant (or any part hereof) or the termination or expiration of rights hereunder. All agreements of the Company and the Holder contained herein shall survive indefinitely until, by their respective terms, they are no longer operative.
19. Remedies. In case any one or more of the covenants and agreements contained in this Warrant shall have been breached, the Holder (in the case of a breach by the Company), or the Company (in the case of a breach by the Holder), may proceed to protect and enforce their or its rights either by suit in equity and/or by action at law, including, but not limited to, an action for damages as a result of any such breach and/or an action for specific performance of any such covenant or agreement contained in this Warrant.
20. Severability. The invalidity or unenforceability of any provision of this Warrant in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction, or affect any other provision of this Warrant, which shall remain in full force and effect.
21. Recovery of Litigation Costs. If any legal action or other proceeding is brought for the enforcement of this Warrant, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Warrant, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled.
22. Entire Agreement. This Warrant constitutes the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations, and undertakings of the parties, whether oral or written, with respect to such subject matter.
23. Counterparts; Facsimile/Electronic Signatures. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement. Any signature page delivered electronically or by facsimile shall be binding to the same extent as an original signature page with regards to any agreement subject to the terms hereof or any amendment thereto.
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The Company has caused this Warrant to be duly executed and delivered as of the Date of Grant specified above.
MAVENIR SYSTEMS, INC. | ||
By | /S/ TERRY HUNGLE | |
Title | CHIEF FINANCIAL OFFICER | |
Address: 1700 International Parkway, Suite 200 Richardson, TX 75081 Telephone: 469-919-4393 Fax: 469-916-4397 Email: sam@mavenir.com Attention: Sam Garrett, General Counsel |
SILVER LAKE WATERMAN FUND, L.P. | ||
By | SILVER LAKE TECHNOLOGY ASSOCIATES WATERMAN, L.L.C., its General Partner | |
By | ||
Title | ||
Address: 2775 Sand Hill Road, Suite 100 Menlo Park, CA 94024 Telephone: 415-525-8705 Fax: 415-956-8233 Email: SLWContracts@silverlake.com Attention: Contract Administration |
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The Company has caused this Warrant to be duly executed and delivered as of the Date of Grant specified above.
MAVENIR SYSTEMS, INC. | ||
By | ||
Title | ||
Address: 1700 International Parkway, Suite 200 Richardson, TX 75081 Telephone: 469-919-4393 Fax: Email: sam@mavenir.com Attention: Sam Garrett, General Counsel |
SILVER LAKE WATERMAN FUND, L.P. | ||
By | SILVER LAKE TECHNOLOGY ASSOCIATES WATERMAN, L.L.C., its General Partner | |
By | /s/ Richard Stubblefield | |
Title | ||
Address: 2775 Sand Hill Road, Suite 100 Menlo Park, CA 94024 Telephone: 415-525-8705 Fax: 415-956-8233 Email: SLWContracts@silverlake.com Attention: Contract Administration |
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EXHIBIT A-l
NOTICE OF EXERCISE
To: MAVENIR SYSTEMS, INC. (the Company)
Re: Warrant dated , 2013, issued by the Company to SILVER LAKE WATERMAN FUND, L.P. (the Warrant)
1. | The undersigned hereby: |
¨ | elects to purchase shares of Common Stock of the Company pursuant to the terms of the Warrant, and tenders herewith payment of the purchase price of such shares in full, or |
¨ | elects to exercise its net issuance rights pursuant to Section 3(b) of the Warrant with respect to shares of Common Stock. |
2. Please issue a certificate or certificates representing shares in the name of the undersigned or in such other name or names as are specified below:
(Name)
(Address)
3. The undersigned represents that the aforesaid shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares, all except as in compliance with applicable securities laws.
(Signature) |
(Date) |
EXHIBIT A-2
NOTICE OF EXERCISE
To: MAVENIR SYSTEMS, INC. (the Company)
Re: Warrant dated , 2013 issued by Company to SILVER LAKE WATERMAN FUND, L.P. (the Warrant)
1. Contingent upon and effective immediately prior to the closing (the Closing) of the Companys public offering contemplated by the Registration Statement on Form S , filed , 20 , the undersigned hereby:
¨ elects to purchase shares of Common Stock of the Company (or such lesser number of shares as may be sold on behalf of the undersigned at the Closing) pursuant to the terms of the Warrant, or
¨ elects to exercise its net issuance rights pursuant to Section 3(b) of the Warrant with respect to Shares of Common Stock.
2. Please deliver to the custodian for the selling shareholders a stock certificate representing such shares.
3. The undersigned has instructed the custodian for the selling shareholders to deliver to the Company $ or, if less, the net proceeds due the undersigned from the sale of shares in the aforesaid public offering. If such net proceeds are less than the purchase price for such shares, the undersigned agrees to deliver the difference to the Company prior to the Closing.
(Signature) |
(Date) |
EXHIBIT B
CHARTER
PAGE 1
Delaware
The First State
I, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF MAVENIR SYSTEMS, INC., FILED IN THIS OFFICE ON THE TWENTY-FIFTH DAY OF MAY, A.D. 2011, AT 10:07 OCLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS.
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/s/ Jeffrey W. Bullock | |||
4134477 8100
110616227 You may verify this certificate online at corp.delaware.gov/authver.shtml |
Jeffrey W. Bullock, Secretary of State AUTHENTICATION: 8787289
DATE: 05-25-11 |
State of Delaware
Secretary of State
Division of Corporations
Delivered 10:10 AM 05/25/2011
FILED 10:07 AM 05/25/2011
SRV 110616227 4134477 FILE
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Mavenir Systems, Inc., a corporation organized and existing under the laws of the State of Delaware (the Corporation), hereby certifies as follows:
A. The name of the Corporation is Mavenir Systems, Inc.
B. The Certificate of Incorporation of this Corporation was originally filed on March 30, 2006.
C. This Amended and Restated Certificate of Incorporation (the Restated Certificate) was duly adopted by the Corporations directors and stockholders in accordance with the applicable provisions of Sections 228, 242 and 245 of the Delaware General Corporation Law (the DGCL).
D. This Restated Certificate restates, integrates and amends the provisions of the Certificate of Incorporation of this Corporation, as heretofore amended.
E. The text of the Certificate of Incorporation, as heretofore amended, is hereby amended and restated in its entirety to read as follows:
ARTICLE I
The name of this Corporation is Mavenir Systems, Inc.
ARTICLE II
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.
ARTICLE III
The address of the corporations registered office in the State of Delaware is 2711 Centerville Road, Suite 400, City of Wilmington, County of New Castle, State of Delaware 19808. The name of its registered agent at such address is the Corporation Service Company.
ARTICLE IV
The Corporation is authorized to issue two classes of stock to be designated, respectively, Common Stock and Preferred Stock. The total number of shares of capital stock that the Corporation shall have authority to issue is 276,987,915. The total number of shares of Common Stock the Corporation shall have authority to issue is 155,203,902 with a par value of $0.001 per share. The total number of shares of Preferred Stock the Corporation shall have authority to issue is 121,784,013 with a par value of $0,001 per share, 26,137,758 of which shares shall be designated Series A Preferred Stock (the Series A Preferred Stock), 26,727,505 of which shares shall be designated Series B Preferred Stock (the Series B Preferred Stock), 24,683,530 of which shares
shall be designated Series C Preferred Stock (the Series C Preferred Stock), 12,100,007 of which shares shall be designated Series D Preferred Stock (the Series D Preferred Stock) and 32,135,213 of which shares shall be designated Series E Preferred Stock (the Series E Preferred Stock).
The relative rights, preferences, privileges, limitations and restrictions granted to or imposed on the respective classes and series of the shares of capital stock or the holders thereof are as follows:
4.1 Dividends. The holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall be entitled to receive dividends, on a pari passu basis, when, as and if declared by the Corporations Board of Directors, out of any assets legally available therefor, prior and in preference to any declaration or payment of any dividend on the Corporations Common Stock or any other class or series of stock (payable other than in Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (Common Stock Equivalents)) at the rate of (i) $0.0428 per share of Series A Preferred Stock (as adjusted for any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event with respect to such share) per annum, (ii) $0.0614 per share of Series B Preferred Stock (as adjusted for any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event with respect to such share) per annum, (iii) $0.0763 per share of Series C Preferred Stock (as adjusted for any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event with respect to such share) per annum, (iv) $0.0898 per share of Series D Preferred Stock (as adjusted for any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event with respect to such share) per annum and (v) $0.1004 per share of Series E Preferred Stock (as adjusted for any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event with respect to such share) per annum. The right to receive dividends on shares of any series of Preferred Stock shall not be cumulative, and no right to such dividends shall accrue to holders of any series of Preferred Stock by reason of the fact that dividends on such shares are not declared or paid in any year. Upon conversion of any share of any series of Preferred Stock pursuant to subsection (A) or (B) of Section 4.3, all dividends declared but unpaid on such share at the time of conversion shall be paid in cash or shares of Common Stock at the option of the Corporations Board of Directors at the then fair market value as determined in good faith by the Corporations Board of Directors. Except as permitted in this Section 4.1, no dividends shall be declared or paid, and no distribution shall be made, on any shares of Common Stock or any other class or series of stock (other than a dividend payable solely in Common Stock or Common Stock Equivalents) unless (A) a dividend in an amount equal to the dividend described in the first sentence of this Section 4.1 for the current year is paid or set aside for payment on each outstanding share of each series of Preferred Stock and (B) any additional dividends declared or paid in any year are declared or paid, or any distributions made on any shares of Common Stock, among the holders of Preferred Stock and Common Stock then outstanding based on the number of shares of Common Stock held by each such holder (assuming full conversion of each series of Preferred Stock).
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4.2 Liquidation Preference.
(A) Preferred Stock Preference. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the holders of shares of Series E Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the Corporations assets or funds to the holders of the other series of the Preferred Stock, the Corporations Common Stock or any other capital stock of the Corporation ranking junior to the Preferred Stock by reason of their ownership thereof, an amount equal to $1.2545 per share (as adjusted for any stock dividend, stock split or combination with respect to such share after the date upon which the Restated Certificate is filed with the Secretary of State of the State of Delaware (the Filing Date) (the Series E Original Issue Price) for each share of Series E Preferred Stock held by them, plus an additional amount equal to any dividends declared but unpaid on each such share. If, upon such liquidation, dissolution or winding up, the assets and funds distributed are insufficient to permit the payment to each holder of Series E Preferred Stock of the full aforesaid preferential amounts, the entire assets and funds legally available for distribution shall be distributed ratably to such holders in proportion to the preferential amount each such holder is otherwise entitled to receive with respect to the shares of Series E Preferred Stock held by such holder. Upon the completion of the distribution to the holders of Series E Preferred Stock required by this subsection (A) of Section 4.2, the holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be entitled to receive, on a pari passu basis, prior and in preference to any distribution of any of the Corporations assets or funds to the holders of the Corporations Common Stock or any other capital stock of the Corporation ranking junior to the Preferred Stock by reason of their ownership thereof, an amount equal to (i) $0.535 per share (as adjusted for any stock dividend, stock split or combination with respect to such share after the Filing Date) (the Series A Original Issue Price) for each share of Series A Preferred Stock held by them, plus an additional amount equal to any dividends declared but unpaid on each such share, (ii) $0.767 per share (as adjusted for any stock dividend, stock split or combination with respect to such share after the Filing Date) (the Series B Original Issue Price) for each share of Series B Preferred Stock held by them, plus an additional amount equal to any dividends declared but unpaid on each such share, (iii) $0.9542 per share (as adjusted for any stock dividend, stock split or combination with respect to such share after the Filing Date) (the Series C Original Issue Price) for each share of Series C Preferred Stock held by them, plus an additional amount equal to any dividends declared but unpaid on each such share, and (iv) $1.1219 per share (as adjusted for any stock dividend, stock split or combination with respect to such share after the Filing Date) (the Series D Original Issue Price) for each share of Series D Preferred Stock held by them, plus an additional amount equal to any dividends declared but unpaid on each such share. If, upon such liquidation, dissolution or winding up, the assets and funds distributed are insufficient to permit the payment to each holder of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock of the full aforesaid preferential amounts, the entire assets and funds legally available for distribution shall be distributed ratably to such holders in proportion to the preferential amount each such holder is otherwise entitled to receive with respect to the shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock held by such holder. The Series A Original Issue Price, Series B Original Issue Price, Series C Original Issue Price, Series D Original Issue Price and Series E Original Issue Price are sometimes referred to herein as the Original Issue Price.
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(B) Remaining Assets. Upon the completion of the distribution required by subsection (A) of this Section 4.2, the Corporations remaining assets or funds available for distribution to stockholders shall be distributed ratably to the holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Common Stock, on a pari passu basis, based on the number of shares of Common Stock held by each such holder (assuming full conversion of each series of Preferred Stock) until (i) with respect to the holders of Series A Preferred Stock, such holders shall have received an aggregate of $1.07 per share (as adjusted for any stock dividend, stock split or combination with respect to such share and including amounts paid pursuant to subsection (A) of this Section 4.2), (ii) with respect to the holders of Series B Preferred Stock, such holders shall have received an aggregate of $1.534 per share (as adjusted for any stock dividend, stock split or combination with respect to such share and including amounts paid pursuant to subsection (A) of this Section 4.2), (iii) with respect to the holders of Series C Preferred Stock, such holders shall have received an aggregate of $1.908 per share (as adjusted for any stock dividend, stock split or combination with respect to such share and including amounts paid pursuant to subsection (A) of this Section 4.2), (iv) with respect to the holders of Series D Preferred Stock, such holders shall have received an aggregate of $2.2438 per share (as adjusted for any stock dividend, stock split or combination with respect to such share and including amounts paid pursuant to subsection (A) of this Section 4.2) and (v) with respect to the holders of Series E Preferred Stock, such holders shall have received an aggregate of $3.7635 per share (as adjusted for any stock dividend, stock split or combination with respect to such share and including amounts paid pursuant to subsection (A) of this Section 4.2). After the payment or setting aside for payment to the holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock of the full amounts specified in this Section 4.2(B), the entire remaining assets of the Corporation legally available for distribution shall be distributed ratably to holders of the Common Stock of the Corporation in proportion to the number of shares of Common Stock held by them.
(C) Notwithstanding subsections (A) and (B) of this Section 4.2, solely for purposes of determining the amount each holder of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock is entitled to receive with respect to a liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, each series of Preferred Stock shall be treated as if all holders of such series had converted such holders shares of Preferred Stock into shares of Common Stock immediately prior to such liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, if, as a result of an actual conversion of such series of Preferred Stock (including taking into account the operation of subsection (B) of this Section 4.2 with respect to all Preferred Stock), holders of such series of Preferred Stock would receive (with respect to the shares of such series of Preferred Stock), in the aggregate, an amount greater than the amount that would be distributed to holders of such series of Preferred Stock if such holders had not converted such shares of Preferred Stock into shares of Common Stock. If shares of any series of Preferred Stock are converted to Common Stock or are treated as if they had been converted into Common Stock pursuant to this subsection, then holders of such series of Preferred Stock shall not be entitled to receive any distributions pursuant to subsections (A) and (B) of this Section 4.2 that would otherwise be made to holders of such series of Preferred Stock.
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(D) (1) Unless otherwise determined by the holders of (i) a majority of the Series E Preferred Stock, voting as a separate series and (ii) a majority of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock then outstanding, voting together as a single class on an as-converted basis for the purposes of this Section 4.2, a liquidation, dissolution or winding up of the Corporation shall be deemed to include (Y) the acquisition of the Corporation by another entity by means of any transaction or series of related transactions (including, without limitation, any merger, consolidation or other form of reorganization in which outstanding shares of the Corporation are exchanged for securities or other consideration issued, or caused to be issued, by the acquiring entity or its subsidiary, but excluding any transaction effected primarily for the purpose of changing the Corporations jurisdiction of incorporation) that results in the transfer or acquisition of at least a majority of the Corporations voting power to such entity, or (Z) a sale of all or substantially all of the assets of the Corporation or the exclusive license of all or substantially all of the Corporations intellectual property by means of any transaction or series of related transactions (collectively, a Deemed Liquidation).
(2) If any assets of the Corporation distributed to stockholders in connection with any liquidation, dissolution or winding up of the Corporation are other than cash, then the value of such assets shall be their fair market value as determined in good faith by the Corporations Board of Directors; provided, however, any publicly-traded securities shall be valued as follows:
(a) If the securities are then traded on a national securities exchange, then the value of the securities shall be deemed to be the average of the closing prices of the securities on such exchange over the ten (10) trading day period ending five (5) trading days prior to the distribution; and
(b) If the securities are actively traded over-the-counter, then the value of the securities shall be deemed to be the average of the closing bid prices of the securities over the ten (10) trading day period ending five (5) trading days prior to the distribution.
The foregoing methods for valuing non-cash consideration to be distributed in connection with any liquidation, dissolution or winding up of the Corporation shall, with the appropriate approval of the definitive agreements governing such liquidation, dissolution or winding up of the Corporation by the stockholders under the DGCL and this subsection (D), be superseded by the determination of such value set forth in the definitive agreements governing such liquidation, dissolution or winding up of the Corporation.
(3) The Corporation shall give each holder of record of Preferred Stock written notice of a transaction described in subsection (D)(1) not later than twenty (20) days prior to the stockholders meeting called to approve such transaction, or twenty (20) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 4.2, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than twenty (20) days after the Corporation has given the first notice provided for herein or sooner than ten (10) days after the Corporation has given notice of any material changes provided for herein; provided, however, that, subject to compliance with the DGCL, all notice periods set forth in this subsection (D)(3) may be shortened or waived entirely, either prospectively or retroactively and either generally or in a particular instance, upon the written consent of the holders of a majority of the shares of Preferred Stock then outstanding (voting together as a single class, on an as-converted basis).
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(4) In the event the requirements of this subsection (D) are not complied with, the Corporation shall forthwith either:
(a) Cause the closing of the Deemed Liquidation to be postponed until such time as the requirements of this Section 4.2 have been complied with, or
(b) Cancel such transaction, in which event the rights, preferences, privileges and restrictions of the holders of the Preferred Stock shall revert to and be the same as such rights, preferences, privileges and restrictions existing immediately prior to the date of the first notice referred to in subsection (D)(3).
4.3 Conversion. The holders of Preferred Stock have conversion rights as follows:
(A) Right to Convert. Each share of each series of Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price for such series of Preferred Stock by the Conversion Price for such series of Preferred Stock, determined as hereinafter provided, in effect at the time of the conversion (the Conversion Rate). The initial Conversion Price per share for the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall be the Series A Original Issue Price, the Series B Original Issue Price, the Series C Original Issue Price, the Series D Original Issue Price and the Series E Original Issue Price, respectively. Such initial Conversion Price for each series of Preferred Stock shall be subject to adjustment as provided in subsection (D) of this Section 4.3.
(B) Automatic Conversion.
(1) Each share of each series of Preferred Stock shall automatically be converted into fully paid and nonassessable shares of Common Stock at its then effective Conversion Rate immediately prior to the closing of a firm commitment underwritten public offering pursuant to an effective registration statement on Form S-l under the Securities Act of 1933, as amended (the Securities Act), covering the offer and sale of Common Stock to the public for the account of the Corporation in which the aggregate gross proceeds to the Corporation equal or exceed $50,000,000 (a Qualified IPO).
(2) Each share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall automatically be converted into fully paid and nonassessable shares of Common Stock at its then effective Conversion Rate on the date specified by written consent or agreement of the holders of a majority of the then outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, voting together as a single class on an as-converted basis, delivering written notice of such election to the Company. No series of Preferred Stock listed under this subsection (2) shall be automatically converted pursuant to this Section 4.3(B), unless all series of Preferred Stock listed under subsection (2) then outstanding shall be automatically converted into Common Stock, at the applicable Conversion Rate.
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(3) Each share of Series E Preferred Stock shall automatically be converted into fully paid and nonassessable shares of Common Stock at its then effective Conversion Rate on the date specified by written consent or agreement of the holders of a majority of the then outstanding Series E Preferred Stock, voting as a separate series, by delivering written notice of such election to the Company (each of the events causing conversion referred to in (1), (2) and (3) are referred to herein as an Automatic Conversion Event).
(C) Mechanics of Conversion.
(1) Before any holder of Preferred Stock shall be entitled to convert the same into shares of Common Stock pursuant to Section 4.3(A) above, such holder shall surrender the certificate or certificates therefor, duly endorsed, or an affidavit of loss in a form reasonably acceptable to the Corporation, at the office of the Corporation or of any transfer agent for such Preferred Stock, and shall give written notice to the Corporation at such office that such holder elects to convert the same and shall state therein the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of surrender of the shares of Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date; provided, however, that on the date of an Automatic Conversion Event, the outstanding shares of Preferred Stock to be converted in such Automatic Conversion Event shall be converted automatically without any further action by the holders of such shares and each holder of record of shares of Preferred Stock shall be deemed on such date to be the holder of record of the Common Stock issuable upon such conversion, whether or not (i) the certificates representing such shares are surrendered to the Corporation or its transfer agent, (ii) notice from the Corporation shall have been received by any holder of record of shares of Preferred Stock, or (iii) the certificates evidencing such shares of Common Stock shall not then be actually delivered to such holder; provided further, however, that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such Automatic Conversion Event unless either the certificates evidencing such shares of Preferred Stock are delivered to the Corporation or its transfer agent as provided above, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates. The Corporation shall, as soon as practicable after such delivery, or after such agreement and indemnification, issue and deliver at such office to such holder of Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which the holder shall be entitled as aforesaid and a check payable to the holder in the amount of any cash amounts payable as the result of a conversion into fractional shares of Common Stock, plus any declared and unpaid dividends on the converted Preferred Stock.
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(2) If the conversion is in connection with an underwritten offer of securities registered pursuant to the Securities Act or a merger, sale, financing, or liquidation of the Corporation or other event, the conversion may, at the option of any holder tendering Preferred Stock for conversion, be conditioned upon the closing of such transaction or upon the occurrence of such event, in which case the person(s) entitled to receive the Common Stock issuable upon such conversion of the Preferred Stock shall not be deemed to have converted such Preferred Stock until immediately prior to the closing of such transaction or the occurrence of such event.
(D) Adjustment of Conversion Price. The Conversion Price for each series of Preferred Stock shall be subject to adjustment from time to time as follows:
(1) (a) If the Corporation shall issue, after the Filing Date, any Additional Stock (as defined in subsection (D)(2)) without consideration or for a consideration per share less than the Conversion Price for any series of Preferred Stock in effect immediately prior to the issuance of such Additional Stock, then (A) with respect to the Series A Preferred Stock, Series B Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, the Conversion Price for such series in effect immediately prior to each such issuance of Additional Stock shall forthwith (except as otherwise provided in this subsection (1)) be adjusted to a price equal to (calculated to the nearest one one-hundredth of one cent) the product obtained by multiplying the Conversion Price for such series of Preferred Stock in effect immediately prior to such issuance of Additional Stock by a fraction, the numerator of which is equal to the sum of (x) the total number of shares of Common Stock outstanding (including any shares of Common Stock deemed to be issued pursuant to subsection (D)(l)(e)(i) and (ii) of this Section 4.3) immediately prior to such issuance of Additional Stock plus (y) the number of shares of Common Stock that the aggregate consideration received by this Corporation for such issuance of Additional Stock would purchase at the Conversion Price for such series of Preferred Stock in effect immediately prior to such issuance of Additional Stock, and the denominator of which is equal to the sum of (x) the total number of shares of Common Stock outstanding (including any shares of Common Stock deemed to be issued pursuant to subsection (D)(l)(e)(i) and (ii) of this Section 4.3) immediately prior to such issuance of Additional Stock plus (y) the number of shares of Additional Stock issued and (B) with respect to the Series C Preferred Stock, the Conversion Price for such series in effect immediately prior to each such issuance of Additional Stock shall forthwith (except as otherwise provided in this subsection (1)) be adjusted to a price equal to the price paid per share for such Additional Stock, unless the price paid per share of such Additional Stock is less than the Series B Original Issue Price, in which case the Conversion Price of the Series C Preferred Stock shall be adjusted to a price equal to the Conversion Price of the Series B Preferred Stock as determined in clause (A) of this subsection (D)(1)(a).
(b) No adjustment in the Conversion Price for any series of Preferred Stock need be made if such adjustment would result in a change in the Conversion Price of less than $0.01. Any adjustment of less than $0.01 that is not made shall be carried forward and shall be made at the time of and together with any subsequent adjustment that, on a cumulative basis, amounts to an adjustment of $0.01 or more in the Conversion Price. Except to the limited extent provided for in subsections (D)(l)(e)(iii) or (iv), no adjustment of the Conversion Price for any series of Preferred Stock pursuant to this subsection (D)(1) shall have the effect of increasing such Conversion Price above the Conversion Price in effect immediately prior to such adjustment.
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(c) In the case of the issuance of Additional Stock for cash, the consideration shall be deemed to be the amount of cash paid therefor before deducting any discounts, commissions or other expenses allowed, paid or incurred by the Corporation for any underwriting or otherwise in connection with the issuance and sale thereof.
(d) In the case of the issuance of Additional Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as determined in good faith by the Corporations Board of Directors (including each of the Preferred Directors (as such term is defined in Section 4.5(C)) irrespective of any accounting treatment.
(e) In the case of the issuance (whether before, on or after the Filing Date) of (i) options to purchase or rights to subscribe for Common Stock, (ii) securities by their terms convertible into or exchangeable for Common Stock or (iii) options to purchase or rights to subscribe for securities by their terms convertible into or exchangeable for Common Stock, the following provisions shall apply for all purposes of subsections (D)(1) and (2):
(i) The aggregate maximum number of shares of Common Stock deliverable upon exercise (assuming the satisfaction of any conditions to exercisability, including without limitation, the passage of time, but without taking into account potential antidilution adjustments) of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in subsections (D)(1)(c) and (D)(1)(d)), if any, received by the Corporation upon the issuance of such options or rights plus the minimum exercise price provided in such options or rights (without taking into account potential antidilution adjustments) for the Common Stock covered thereby.
(ii) The aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange (assuming the satisfaction of any conditions to convertibility or exchangeability, including without limitation, the passage of time, but without taking into account potential antidilution adjustments) for any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a consideration equal to the consideration, if any, received by the Corporation for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the minimum additional consideration, if any, to be received by the Corporation (without taking into account potential antidilution adjustments) upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in subsections (D)(1)(c) and (D)(1)(d)).
(iii) In the event of any change in the number of shares of Common Stock deliverable or in the consideration payable to the Corporation upon exercise of such options or rights or upon conversion of or exchange for such convertible or exchangeable securities, including, but not limited to, a change resulting from the antidilution provisions thereof, the Conversion Price for each series of Preferred Stock, to the extent in any way affected by or computed using such options, rights or securities, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the exercise of any such options or rights or the conversion or exchange of such securities.
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(iv) Upon the expiration of any such options or rights, the termination of any such rights to convert or exchange or the expiration of any options or rights related to such convertible or exchangeable securities, the Conversion Price for each series of Preferred Stock, to the extent in any way affected by or computed using such options, rights or securities or options or rights related to such securities, shall be recomputed to reflect the issuance of only the number of shares of Common Stock (and convertible or exchangeable securities that remain in effect) actually issued upon the exercise of such options or rights, upon the conversion or exchange of such securities or upon the exercise of the options or rights related to such securities.
(v) The number of shares of Common Stock deemed issued and the consideration deemed paid therefor pursuant to subsections (D)(l)(e)(i) and (ii) shall be appropriately adjusted to reflect any change, termination or expiration of the type described in either subsection (D)(l)(e)(iii) or (iv).
(2) Additional Stock shall mean any shares of Common Stock issued (or deemed to have been issued pursuant to subsection (D)(1)(e) of this Section 4.3) by the Corporation after the Filing Date other than:
(a) Shares of Common Stock or Common Stock Equivalents issued pursuant to an event or transaction described in subsection (D)(3) of this Section 4.3;
(b) Shares of Common Stock issued or issuable upon conversion of any series of Preferred Stock, or as dividends or distributions on any series of Preferred Stock;
(c) Shares of Common Stock issued (or deemed to have been issued pursuant to subsection (D)(1)(e) of this Section 4.3) to the Corporations employees, officers, directors, consultants, advisors or services providers or for charitable purposes pursuant to and in accordance with Corporations 2005 Stock Plan or any other plan, agreement or similar arrangement approved by the Corporations Board of Directors, provided such issuance is approved by the Corporations Board of Directors;
(d) Shares of Common Stock issued (or deemed to have been issued pursuant to subsection (D)(1)(e) of this Section 4.3) to vendors, banks or equipment lessors, provided such issuance is approved by the Corporations Board of Directors with such approval including at least two (2) of the Preferred Directors and is primarily for non-equity financing purposes;
(e) Shares of Common Stock issued (or deemed to have been issued pursuant to subsection (D)(1)(e) of this Section 4.3) in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships, provided such issuance is approved by the Corporations Board of Directors with such approval including at least two (2) of the Preferred Directors and is primarily for nonequity financing purposes;
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(f) Shares of Common Stock issued (or deemed to have been issued pursuant to subsection (D)(1)(e) of this Section 4.3) in connection with a bona fide business acquisition of or by the Corporation (whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise), provided such acquisition is approved by the Corporations Board of Directors with such approval including at least two (2) of the Preferred Directors; or
(g) Shares of Common Stock issued in a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act pursuant to which all outstanding shares of each series of Preferred Stock are converted to Common Stock.
(3) Subdivision, etc. In the event the Corporation should at any time or from time to time after the Filing Date, fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or Common Stock Equivalents without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price for each series of Preferred Stock shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents.
(4) Combination. If the number of shares of Common Stock outstanding at any time after the Filing Date is decreased by a combination of the outstanding shares of Common Stock, then, on the effective date of such combination, the Conversion Price for each series of Preferred Stock shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of any shares of Preferred Stock shall be decreased in proportion to such decrease in outstanding shares.
(E) Other Distributions. In the event the Corporation shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by the Corporation or other persons, assets (excluding cash dividends) or options or rights not referred to in subsection (D)(3) of this Section 4.3, then, in each such case for the purpose of this subsection (E), the holders of Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock of the Corporation into which their respective shares of Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of the Corporation entitled to receive such distribution.
(F) Recapitalizations. If, at any time or from time to time after the Filing Date there shall be a recapitalization of the Corporations Common Stock (other than (x) a subdivision or combination provided for in subsections (D)(3) or (D)(4) of this Section 4.3 or (y) a Deemed Liquidation as defined in Section 4.2(D)(1)) provision shall be made so that the holders of each series of Preferred Stock shall thereafter be entitled to receive upon conversion of each such series of Preferred Stock the number of shares of stock or other securities or property of the Corporation or
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otherwise, to which a holder of Common Stock deliverable upon conversion of such series of Preferred Stock would have been entitled on such recapitalization. In any such case appropriate adjustment shall be made in the application of the provisions of this Section 4.3 with respect to the rights of the holders of each series of Preferred Stock after the recapitalization to the end that the provisions of this Section 4.3 (including adjustment of the Conversion Price then in effect and the number of shares issuable upon conversion of each series of Preferred Stock) shall be applicable after that event as nearly equivalent as prior to that event as may be practicable.
(G)No Impairment. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4.3 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of each series of Preferred Stock set forth in this Section 4.3 against impairment. Notwithstanding the foregoing, any action taken with the requisite stockholder consent pursuant to the terms of the Restated Certificate or the DGCL shall not be deemed to be an impairment.
(H)No Fractional Shares and Certificate as to Adjustment.
(1) No fractional shares shall be issued upon the conversion of any share of any series of Preferred Stock and, in lieu of any fractional shares to which any holder of Preferred Stock would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock on the date of conversion as determined in good faith by a majority of the Board of Directors. Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion.
(2) Upon the occurrence of each adjustment or readjustment of the Conversion Rate for any series of Preferred Stock pursuant to this Section 4.3, the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of such series of Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon written request at any time of any holder of any series of Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) all such adjustments and readjustments, (ii) the Conversion Rate at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property that at the time would be received upon the conversion of such holders shares of Preferred Stock.
(I) Notices of Record Date. In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property or to receive any other right, the Corporation shall mail to each holder of Preferred Stock
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at least fifteen (15) business days prior to such record date, a notice specifying the date on which any such record is to be taken for the purpose of such dividend or distribution or right, and the amount and character of such dividend, distribution or right; provided, however, that, subject to compliance with the DGCL, all notice periods set forth in this subsection (I) may be shortened or waived entirely, either prospectively or retroactively and either generally or in a particular instance, upon the written consent of the holders of a majority of the shares of Preferred Stock then outstanding (voting together as a single class, on an as-converted basis).
(J) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of Preferred Stock such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Preferred Stock, the Corporation will take such corporate action as may, based upon advice of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose, including, without limitation, engaging commercially reasonable efforts to obtain the requisite stockholder approval for any necessary amendment to these Restated Certificate.
(K) Special Mandatory Conversion.
(1) In the event that:
(a) the Corporation consummates one or more sales of its equity securities (each, a Financing) after the date that the Corporation first issues shares of Series E Preferred Stock (the Series E Original Issue Date) and:
(i) following the approval and determination that such Financing shall constitute a Mandatory Offering (as defined below) by the Corporations Board of Directors (with such approval including at least two (2) of the Preferred Directors), the Corporation shall have delivered a notice (Notice) to each holder of at least 1,000,000 shares (as adjusted for any stock dividend, stock split or combination with respect to such shares) of Preferred Stock and any of their transferees or assignees of Preferred Stock (each, a Major Holder): (1) stating the Corporations bona fide intention to consummate the Financing, (2) indicating the aggregate number of securities to be offered in the Financing and the number of such securities to be offered to the Major Holders, as determined by the Corporations Board of Directors in its sole discretion, (3) indicating the price and terms upon which it proposes to offer such securities, (4) identifying the Pro Rata Share (as defined below) of each Major Holder, and (5) offering each Major Holder the right to purchase such Major Holders Pro Rata Share within the time periods set forth in the Notice;
(ii) at least one (1) of the Major Holders participates in the Financing (a Financing that meets each of the requirements set forth in subsections (i) and (ii) of this subsection (K)(l)(a), a Mandatory Offering) in a portion not less than such Major Holders full Pro Rata Share; and
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(iii) a Major Holder does not acquire or cause an affiliate or partner of such Major Holder to acquire at least its Pro Rata Share within the time periods set forth in the Notice (a Non-Participating Major Holder);
(b) then a percentage of each Non-Participating Major Holders shares of each series of Preferred Stock equal to the percentage of such Non-Participating Major Holders Pro Rata Share not acquired by such Non-Participating Major Holder shall automatically and without further action on the part of such holder be converted, effective upon, subject to, and concurrently with, the consummation of the Mandatory Offering (the Mandatory Offering Date), into shares of Common Stock of the Corporation at the Conversion Rate in effect for such shares immediately prior to, and without giving effect to any adjustment to such Conversion Rate that may otherwise occur as a result of, the Mandatory Offering. For purposes of this Section 4.3(K), each Major Holders Pro Rata Share shall be an amount determined by multiplying the aggregate number of equity securities to be offered to the Major Holders as specified in the Notice by a fraction, the numerator of which shall be the number of shares of Common Stock then issued or issuable upon conversion of the Preferred Stock (and all securities convertible into, or exercisable or exchangeable for shares of Preferred Stock) then held by such Major Holder and the denominator of which shall be the total number of shares of Common Stock then issued or issuable upon conversion of the Preferred Stock (and all securities convertible into, or exercisable or exchangeable for shares of Preferred Stock) then held by all Major Holders. For purposes of calculating a Major Holders Pro Rata Share, the applicable number of shares of Common Stock then issued or issuable upon conversion of the Preferred Stock shall be calculated based on the number of shares of Preferred Stock (and all securities convertible into, or exercisable or exchangeable for shares of Preferred Stock) outstanding immediately prior to the closing of, and without giving effect to any adjustment to such Conversion Rate that may otherwise occur as a result of, the Mandatory Offering.
(2) The holder of any shares of any series of Preferred Stock converted pursuant to this Section 4.3(K) shall deliver to the Corporation during regular business hours at the office of any transfer agent of the Corporation for the Preferred Stock, or at such other place as may be designated by the Corporation, the certificate or certificates for the shares so converted, duly endorsed or assigned in blank or to the Corporation. As promptly as practicable thereafter, the Corporation shall issue and deliver to such holder, at the place designated by such holder, a certificate or certificates for the number of full shares of Common Stock to be issued and such holder shall be deemed to have become a stockholder of record of Common Stock on the Mandatory Offering Date, unless the transfer books of the Corporation are closed on that date, in which event such holder shall be deemed to have become a stockholder of record of Common Stock on the next succeeding date on which the transfer books are open.
(3) Notwithstanding the foregoing, paragraphs (1) and (2) of this Section 4.3(K) shall not apply to Starent Networks LLC, Cisco Systems, Inc., or any of their respective affiliates.
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(L) Waiver of Adjustment of Conversion Price. The holders of a majority of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock then outstanding, voting as a single class on an as-converted basis (which determination may be either prospective or retroactive and either generally or in a particular instance, and shall bind all future holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock) may waive the rights provided by subsection (D) of this Section 4.3 with respect to the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock. The holders of a majority of the Series E Preferred Stock then outstanding (which determination may be either prospective or retroactive and either generally or in a particular instance, and shall bind all future holders of Series E Preferred Stock) may waive the rights provided by subsection (D)of this Section 4.3 with respect to the Series E Preferred Stock.
4.4 Redemption.
(A) Right to Redemption. Upon receipt of a written request from the holders of a majority of the then outstanding shares of (x) Series E Preferred Stock, voting as a separate series, and (y) Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, voting together as a single class (the Redemption Request), at any time on or after the fourth (4th) anniversary of the Series E Original Issue Date, the Corporation shall redeem all, but not less than all, of the shares of Preferred Stock then outstanding in three (3) equal annual installments (each installment date, a Redemption Date), commencing on a date not more than forty five (45) days after the receipt of the Redemption Request, for a price per share equal to the appropriate Original Issue Price plus any declared and unpaid dividends per share for such series of Preferred Stock (the Redemption Price). On each Redemption Date, the Corporation shall redeem, on a pro rata basis in accordance with the number of shares of each series of Preferred Stock owned by each holder (except as set forth in this Section 4.4(A)), that number of outstanding shares of each series of Preferred Stock determined by dividing (i) the total number of shares of such series of Preferred Stock outstanding immediately prior to such Redemption Date by (ii) the number of remaining Redemption Dates (including the Redemption Date to which such calculation applies) (such number, the Eligible Shares in respect of such series). The Corporation shall on each such Redemption Date redeem up to the maximum amount the Corporation may lawfully redeem out of funds legally available therefore in accordance with subsection (B) of this Section 4.4. If on any Redemption Date, the number of shares of Preferred Stock that may then be legally redeemed by the Corporation is less than the number of such shares to be redeemed, then all of the Eligible Shares of Series E Preferred Stock in respect of such Redemption Date shall be redeemed for the applicable Redemption Price prior to the redemption of the Eligible Shares of any other series of Preferred Stock in respect of such Redemption Date and then the remaining Eligible Shares that should have been redeemed in respect of such Redemption Date, but were not, will be redeemed on a pro rata basis from any additional legally available funds or as soon as the Corporation has legally available funds therefor.
(B) Redemption Procedure. Subject to subsection (A) of this Section 4.4, within fifteen (15) days of the receipt by the Corporation of the Redemption Request, with respect to the first Redemption Date, and not less than thirty (30) days prior to the second and third Redemption Dates, the Corporation shall mail, first class postage prepaid, written notice (the Notice of Redemption) to each holder of record (at the close of business on the business day preceding the day on which notice is given) of Preferred Stock, at the address last shown on the records of the Corporation for such holder or given by the holder to the Corporation, for the purpose of notifying such holder of the redemption to be effected. The Notice of Redemption shall specify the applicable
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Redemption Date, the number of shares of each series of Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date specified in the Notice of Redemption, and the place at which payment shall be made, which shall be the principal offices of the Corporation or such other place as shall be mutually agreeable to the Corporation and holders of a majority of the shares of Preferred Stock then outstanding, on an as-converted basis. The Notice of Redemption shall call upon each holder of Preferred Stock to either (i) surrender to the Corporation, in the manner and at the place designated, such holders certificate or certificates representing the shares to be redeemed or (ii) convert such Preferred Stock into Common Stock prior to the applicable Redemption Date in accordance with the provisions of Section 4.3 above. Subject to Section 4.4 (C), on each Redemption Date, the Corporation shall pay the Redemption Price in cash or by check to the order of the person whose name appears on the certificate or certificates of the Preferred Stock that (i) shall not have been converted pursuant to Section 4.3 hereof and (ii) shall have been surrendered to the Corporation in the manner and at the place designated in the Notice of Redemption and thereupon each surrendered certificate shall be canceled.
(C) Effect of Redemption. From and after each Redemption Date, unless there shall have been a default in payment of the Redemption Price, all rights of the holders of the shares of any series of Preferred Stock to be redeemed on a Redemption Date (except the right to receive their respective Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever. Subject to the last sentence of Section 4.4(A), if the funds of the Corporation legally available for redemption on any Redemption Date are insufficient to redeem the total number of shares requested to be redeemed on such date, those funds which are legally available will be used to redeem the maximum possible number of such shares ratably among the holders of such shares to be redeemed based upon the proceeds to be received by them pursuant to this Section 4.4. The shares not redeemed shall remain outstanding and be entitled to all the rights and preferences provided herein. At any time and from time to time thereafter when additional funds of the Corporation are legally available for the redemption of shares not redeemed, such funds will immediately be irrevocably (subject to such funds becoming legally unavailable for distribution) set aside for the redemption of the balance of the shares which the Corporation has become obligated to redeem on any Redemption Date but which it has not redeemed.
4.5 Voting.
(A) General. Each holder of each outstanding share of each series of Preferred Stock shall be entitled to the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such holder are then convertible (as adjusted from time to time pursuant to Section 4.3 hereof) at each meeting of stockholders of the Corporation (and pursuant to written consent of stockholders in lieu of meetings) with respect to any and all matters presented to the stockholders of the Corporation for their action or consideration. Except as provided by law or by the provisions of this Section 4.5 or by Section 4.6 below, holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall vote together with the holders of Common Stock as a single class on all actions to be taken by the stockholders of the Corporation, including, but not limited to actions amending this Restated Certificate to increase the number of authorized shares of Common Stock. Fractional votes shall not, however, be permitted and any fractional voting resulting from the above formula (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted) shall be rounded down to the nearest whole number.
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(B) Adjustment in Authorized Common Stock. Without limiting the generality of Section 4.5(A), and in accordance with the provisions of Section 242(b)(2) of the DGCL, the number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares of Common Stock then outstanding) by the affirmative vote of the holders of a majority of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Common Stock, voting together as one class and not as separate classes or series, with each holder of Preferred Stock having that number of votes per share as is equal to the number of shares of Common Stock into which each such share of Preferred Stock held by such holder could be converted on the date for determination of stockholders entitled to vote on such increase or decrease.
(C) Election of Directors.
. (1) The holders of Common Stock, voting as a single class, shall be entitled to elect two (2) members of the Corporations Board of Directors at each meeting or pursuant to each written consent of the Corporations holders of Common Stock for the election of directors (the Common Directors). The holders of Series A Preferred Stock shall be entitled to elect two (2) members of the Corporations Board of Directors at each meeting or pursuant to each written consent of the Corporations holders of Series A Preferred Stock for the election of directors (the Series A Directors). The holders of Series B Preferred Stock shall be entitled to elect one (1) member of the Corporations Board of Directors at each meeting or pursuant to each written consent of the Corporations holders of Series B Preferred Stock for the election of directors (the Series B Director,). The holders of Series E Preferred Stock shall be entitled to elect one (1) member of the Corporations Board of Directors at each meeting or pursuant to each written consent of the Corporations holders of Series E Preferred Stock for the election of directors (the Series E Director, and together with the Series A Directors and the Series B Director, the Preferred Directors). The holders of a majority of the then outstanding Preferred Stock and Common Stock, voting together as a single class and on an as-converted basis, shall be entitled to elect the remaining members of the Corporations Board of Directors at each meeting or pursuant to each written consent of the Corporations stockholders for the election of directors.
(2) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by Section 4.5(C)(1), vacancies and newly created directorships of such class or classes or series may be filled by at least a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected, or, if there is no sole remaining director then in office, by the affirmative vote of the holders of at least a majority of the shares of that class or classes or series.
(3) Any director who was elected by a specified class or classes of stock or series thereof may be removed during his or her term of office, either for or without cause, by, and only by, the affirmative vote of the holders of at least a majority of the shares of the class or classes of stock or series thereof that are entitled to elect such director. Such vote may be given at a special meeting of such stockholders duly called or by an action by written consent for that purpose.
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4.6 Protective Provisions.
(A) So long as any shares of Preferred Stock are outstanding, the Corporation shall not, without first obtaining the approval (by vote or written consent) of the holders of a majority of the Preferred Stock then outstanding, voting as a single class on an as-converted basis, either directly or by amendment, merger, consolidation or otherwise:
(1) Authorize, create or issue any new class or series of equity securities, or reclassify any existing capital stock into any new class or series of equity securities, having any preference or priority as to voting, dividends, or distribution of assets upon liquidation, merger or otherwise that is superior to or on a parity with any such preference or priority of any series of Preferred Stock then outstanding;
(2) Effect a liquidation, dissolution or winding up of the Corporation, including any Deemed Liquidation;
(3) Authorize, issue, or obligate the Corporation to issue any shares of any series of Preferred Stock after the first date on which any shares of such series were issued, or increase or decrease (other than by redemption or conversion) the number of authorized shares of any series of Preferred Stock;
(4) Declare or pay any cash dividends or other distribution (other than liquidation payments pursuant to Section 4.2 hereof or dividends to the holders of Preferred Stock pursuant to the first sentence of Section 4.1 hereof) on any equity securities prior to any series of Preferred Stock;
(5) Redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any shares of capital stock of the Corporation; provided, however, that this restriction shall not apply to (i) the repurchase of shares of Common Stock at the original cost from employees, officers, directors, consultants or other persons performing services for this Corporation pursuant to agreements under which this Corporation has the right to repurchase such shares upon the occurrence of certain events, such as the termination of services, (ii) the redemption of Preferred Stock by the Corporation pursuant to Section 4.4, (iii) the net exercise of any warrant of the Corporation, and (iv) the cashless exercise of stock options pursuant to the Corporations 2005 Stock Plan;
(6) Issue any new equity securities for consideration other than cash other than pursuant to the Corporations 2005 Stock Plan, unless such issuance is approved by the Corporations Board of Directors (including the approval of at least two (2) of the Preferred Directors);
(7) Enter into any transaction with any employee, officer, director or stockholder of the Corporation or member of his or her immediate family, other than advances to employees for travel or other business expenses incurred in the ordinary course of business, unless such transaction is approved by the Corporations Board of Directors (including the approval of at least two (2) of the Preferred Directors);
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(8) Incur indebtedness in excess of $2,000,000 in the aggregate;
(9) Make any loans or advances to, or guarantee the indebtedness or obligations of, any person, other than advances to employees for travel or other business expenses incurred in the ordinary course of business, unless such loan, advance or guarantee is approved by the Corporations Board of Directors (including the approval of at least two (2) of the Preferred Directors);
(10) Change the Corporations primary line of business, unless such change is approved by the Corporations Board of Directors (including the approval of at least two (2) of the Preferred Directors);
(11) Hire any senior executive officer of the Company, unless such hiring is approved by the Corporations Board of Directors (including the approval of at least two (2) of the Preferred Directors);
(12) Own or control, directly or indirectly, any interest in any corporation, partnership, limited liability company, association or other business entity that is not a wholly-owned subsidiary of the Corporation, unless such ownership or control is approved by the Corporations Board of Directors (including the approval of at least two (2) of the Preferred Directors);
(13) Increase or decrease the number of authorized directors of the Corporations Board of Directors;
(14) Increase the number of shares of Common Stock reserved for issuance pursuant to the Corporations 2005 Stock Plan or create any new equity incentive plan;
(15) Amend, alter or repeal any provision of the Restated Certificate or Bylaws; or
(16) Enter into any agreement or commitment to do any of the things described in this Section 4.6(A), unless the effectiveness of such agreement or commitment or action described in this Section 4.6(A) is conditioned upon the Corporation obtaining the approval required by this Section 4.6(A).
The provisions of this Section 4.6(A) shall be in addition to any rights which any holder of Preferred Stock may have under the DGCL.
(B) So long as any shares of Series B Preferred Stock are outstanding, the Corporation shall not, without first obtaining the approval (by vote or written consent) of the holders of at least two-thirds (2/3) of the Series B Preferred Stock then outstanding, voting as a separate class, either directly or by amendment, merger, consolidation or otherwise:
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(1) Authorize, issue, or obligate the Corporation to issue any shares of Series B Preferred Stock after the initial date that shares of Series B Preferred Stock were initially issued (the Series B Original Issue Date) (other than pursuant to the terms of the Series B Preferred Stock Purchase Agreement dated as of the Series B Original Issue Date), or increase or decrease (other than by redemption or conversion) the number of authorized shares of Series B Preferred Stock;
(2) Take any action that would alter, change or amend the powers, preferences or rights of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock in such a manner that would affect the powers, preferences or rights of the Series B Preferred Stock in an adversely different manner from the Series A Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock; or
(3) Enter into any agreement or commitment to do any of the things described in this Section 4.6(B), unless the effectiveness of such agreement or commitment or action described in this Section 4.6(B) is conditioned upon the Corporation obtaining the approval required by this Section 4.6(B).
The provisions of this Section 4.6(B) shall be in addition to any rights which any holder of Series B Preferred Stock may have under the DGCL.
(C) So long as any shares of Series C Preferred Stock are outstanding, the Corporation shall not, without first obtaining the approval (by vote or written consent) of the holders of at least two-thirds (2/3) of the Series C Preferred Stock then outstanding, voting as a separate class, either directly or by amendment, merger, consolidation or otherwise:
(1) Authorize, issue, or obligate the Corporation to issue any shares of Series C Preferred Stock after the initial date that shares of Series C Preferred Stock were initially issued (the Series C Original Issue Date) (other than pursuant to the terms of the Series C Preferred Stock Purchase Agreement dated as of the Series C Original Issue Date, as amended after the date of the Series C Original Issue Date (including pursuant to any subsequent closing provisions contained therein), or pursuant to the terms of any stock purchase warrant issued by the Corporation and outstanding on the date of filing of this Restated Certificate) or increase or decrease (other than by redemption or conversion) the number of authorized shares of Series C Preferred Stock;
(2) Take any action that would alter, change or amend the powers, preferences or rights of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock in such a manner that would affect the powers, preferences or rights of the Series C Preferred Stock in an adversely different manner from the Series A Preferred Stock, Series B Preferred Stock, Series D Preferred Stock or Series E Preferred Stock; or
(3) Enter into any agreement or commitment to do any of the things described in this Section 4.6(C), unless the effectiveness of such agreement or commitment or action described in this Section 4.6(C) is conditioned upon the Corporation obtaining the approval required by this Section 4.6(C).
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The provisions of this Section 4.6(C) shall be in addition to any rights which any holder of Series C Preferred Stock may have under the DGCL.
(D) So long as any shares of Series D Preferred Stock are outstanding, the Corporation shall not, without first obtaining the approval (by vote or written consent) of the holders of at least two-thirds (2/3) of the Series D Preferred Stock then outstanding, voting as a separate class, either directly or by amendment, merger, consolidation or otherwise:
(1) Authorize, issue, or obligate the Corporation to issue any shares of Series D Preferred Stock after the initial date that shares of Series D Preferred Stock were initially issued (the Series D Original Issue Date) (other than pursuant to the terms of the Series D Preferred Stock Purchase Agreement dated as of the Series D Original Issue Date, as amended after the date of the Series D Original Issue Date (including pursuant to any subsequent closing provisions contained therein) or increase or decrease (other than by redemption or conversion) the number of authorized shares of Series D Preferred Stock;
(2) Take any action that would alter, change or amend the powers, preferences or rights of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock or Series E Preferred Stock in such a manner that would affect the powers, preferences or rights of the Series D Preferred Stock in an adversely different manner from the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series E Preferred Stock; or
(3) Enter into any agreement or commitment to do any of the things described in this Section 4.6(D), unless the effectiveness of such agreement or commitment or action described in this Section 4.6(D) is conditioned upon the Corporation obtaining the approval required by this Section 4.6(D).
The provisions of this Section 4.6(D) shall be in addition to any rights which any holder of Series D Preferred Stock may have under the DGCL.
(E) So long as any shares of Series E Preferred Stock are outstanding, the Corporation shall not, without first obtaining the approval (by vote or written consent) of the holders of a majority of the Series E Preferred Stock then outstanding, voting as a separate class, either directly or by amendment, merger, consolidation or otherwise:
(1) Authorize, issue, or obligate the Corporation to issue any shares of Series E Preferred Stock after the Series E Original Issue Date (other than pursuant to the terms of the Series E Preferred Stock Purchase Agreement dated as of the Series E Original Issue Date, as amended after the date of the Series E Original Issue Date (including pursuant to any subsequent closing provisions contained therein)) or increase or decrease (other than by redemption or conversion) the number of authorized shares of Series E Preferred Stock;
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(2) Take any action that would alter, change or amend the powers, preferences or rights of the Series E Preferred Stock;
(3) Reclassify any existing equity security into any new class or series of equity securities, having any preference or priority as to voting, dividends, or distribution of assets upon liquidation, merger or otherwise that is superior to or on a parity with any such preference or priority of the Series E Preferred Stock;
(4) Authorize, create or issue any new equity security having any preference or priority as to voting, dividends, or distribution of assets upon liquidation, merger or otherwise that is superior to any such preference or priority of the Series E Preferred Stock or having a per share preference or priority as to distribution of assets upon liquidation, merger or otherwise that is greater than the actual cost per share paid for such security, plus declared but unpaid dividends thereon;
(5) Declare or pay any cash dividends or other distribution on any equity securities (other than liquidation payments pursuant to Section 4.2 hereof);
(6) Redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any shares of capital stock of the Corporation; provided, however, that this restriction shall not apply to (i) the repurchase of shares of Common Stock at the original cost from employees, officers, directors, consultants or other persons performing services for this Corporation pursuant to agreements under which this Corporation has the right to repurchase such shares upon the occurrence of certain events, such as the termination of services, (ii) the redemption of Preferred Stock by the Corporation pursuant to Section 4.4, (iii) the net exercise of any warrant of the Corporation, and (iv) the cashless exercise of stock options pursuant to the Corporations 2005 Stock Plan;
(7) Take any action that would result in the Series E Preferred Stock automatically converting to Common Stock in any situation other than a Qualified IPO or pursuant Section 4.3(K) of this Restated Certificate; or
(8) Enter into any agreement or commitment to do any of the things described in this Section 4.6(D), unless the effectiveness of such agreement or commitment or action described in this Section 4.6(D) is conditioned upon the Corporation obtaining the approval required by this Section 4.6(D).
The provisions of this Section 4.6(D) shall be in addition to any rights which any holder of Series E Preferred Stock may have under the DGCL.
(F) So long as any shares of Preferred Stock are outstanding, the Company shall not, without the approval of the holders of at least two-thirds of the Preferred Stock, voting as a single class on an as-converted basis, either directly or by amendment, merger, consolidation or otherwise, consummate a public offering of its equity securities, unless the public offering price per share (before deducting underwriting commissions and expenses) is at least $3.7635 per share (as adjusted for any stock dividend, stock split or combination with respect to such share), in which case the separate vote of the Preferred Stock will not be required.
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4.7 Status of Redeemed or Converted Stock. In the event any shares of any series of Preferred Stock are converted pursuant to Section 4.3 or redeemed pursuant to Section (K), the Corporation shall never again issue the shares so converted or redeemed and all such shares so converted or redeemed shall, upon such conversion or redemption, cease to be a part of the Corporations authorized or outstanding stock. The Corporations Certificate of Incorporation shall be appropriately amended to effect the corresponding reduction in the Corporations authorized stock.
4.8 Notices. Any notice required by the provisions of Sections 4.2, 4.3 and 4.4 to be given to the holders of shares of any series of Preferred Stock shall be in writing and shall be delivered personally by hand or by courier, mailed by United States first-class mail, postage prepaid, sent by facsimile or sent by electronic mail directed to each holder of record at such holders address, facsimile number or electronic mail address appearing on the Corporations books, or, if to an overseas address, via a recognized overseas air courier service. Any such notice shall be effective or deemed given on the date of delivery, mailing, or confirmed facsimile transfer (or if overseas, two (2) business days after delivery to a recognized overseas air courier service).
4.9 Common Stock
(A) Dividend Rights. Subject to the prior rights of holders of all classes of stock at the time outstanding having prior rights as to dividends, the holders of the Common Stock shall be entitled to receive noncumulative dividends, when, as and if declared by the Board of Directors, out of any assets of the Corporation legally available therefor.
(B) Liquidation Rights. Upon the liquidation, dissolution or winding up of the Corporation, the assets of the Corporation shall be distributed as provided in Section 4.2 hereof.
(C) Voting Rights. The holder of each share of Common Stock shall have the right to one (1) vote, shall be entitled to notice of any stockholders meeting in accordance with the Bylaws of the Corporation, and shall be entitled to vote upon such matters and in such manner as may be provided by law and as provided in Section 4.5 hereof.
(D) Redemption. The holders of shares of Common Stock shall not have the right to require the redemption of such shares by the Corporation.
ARTICLE V
Except as may otherwise be provided in this Restated Certificate, in furtherance and not in limitation of the powers conferred by the laws of the state of Delaware, the Corporations Board of Directors is expressly authorized to make, alter, amend or repeal the Corporations Bylaws.
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ARTICLE VI
Elections of directors need not be by written ballot unless the Corporations Bylaws shall so provide.
ARTICLE VII
7.1 Limitation of Directors Liability. To the fullest extent permitted by the DGCL, as the same exists or may hereafter be amended, a director of this Corporation shall not be personally liable to this Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.
7.2 Indemnification of Directors and Officers. To the fullest extent permitted by applicable law, this Corporation shall provide indemnification of, and advancement of expenses to, directors and officers, and is authorized to provide indemnification of, and advancement of expenses to, directors, officers, employees and other agents of this Corporation and any other persons to which applicable law permits this Corporation to provide indemnification.
7.3 Repeal or Modification. Any repeal or modification of this Article VII, by amendment of this Article VII or by operation of law, shall not adversely affect any right or protection of a director, officer, employee or other agent of this Corporation existing at the time of, or increase the liability of any such person with respect to any acts or omissions in their capacity as a director, officer, employee, or other agent of the corporation occurring prior to, such repeal or modification.
ARTICLE VIII
Subject to Section 4.6 of Article IV of this Restated Certificate, the Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
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IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be signed by its President on May 24, 2011.
MAVENIR SYSTEMS, INC. |
/s/Pardeep Kohli |
Pardeep Kohli, President |
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
SIGNATURE PAGE
EXHIBIT C
LOCK-UP AGREEMENT
Exhibit 10.1
MAVENIR SYSTEMS, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (Agreement) is effective as of [ , 20 ], by and between Mavenir Systems, Inc., a Delaware corporation (the Company), and [ ] (Indemnitee).
A. The Company recognizes the continued difficulty in obtaining liability insurance for its directors, officers, employees, controlling persons, fiduciaries and other agents and affiliates, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance.
B. The Company further recognizes the substantial increase in corporate litigation in general, subjecting directors, officers, employees, controlling persons, fiduciaries and other agents and affiliates to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited.
C. The current protection available to directors, officers, employees, controlling persons, fiduciaries and other agents and affiliates of the Company may not be adequate under the present circumstances, and directors, officers, employees, controlling persons, fiduciaries and other agents and affiliates of the Company (or persons who may be alleged or deemed to be the same), including Indemnitee, may not be willing to continue to serve or be associated with the Company in such capacities without additional protection.
D. The Company (a) desires to attract and retain the involvement of highly qualified persons, such as Indemnitee, to serve and be associated with the Company and, accordingly, (b) wishes to provide for the indemnification and advancement of expenses to Indemnitee to the maximum extent permitted by applicable law.
E. In view of the considerations set forth above, the Company desires that Indemnitee shall be indemnified and advanced expenses by the Company as set forth herein.
In consideration of the mutual promises and covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Bylaws means the Companys Bylaws as currently in effect, as hereafter amended or amended and restated from time to time.
(b) Certificate of Incorporation means the Companys Certificate of Incorporation as currently in effect, as hereafter amended or amended and restated from time to time.
(c) Change in Control shall be deemed to have occurred if, on or after the date of this Agreement, (i) any person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company acting in such capacity or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than thirty percent (30%) of the total voting power represented by the Companys then outstanding Voting Securities (as defined below); (ii) during any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Sections 1(c)(i), 1(c)(iii) or 1(c)(iv) herein) whose election by the Board of Directors or nomination for election by the Companys stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least eighty percent (80%) of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of related transactions) all or substantially all of the Companys assets.
(d) Claim means with respect to an Indemnification Event, any threatened, asserted, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, whether brought in the right of the Company or otherwise, or any hearing, inquiry or investigation (formal or informal) that Indemnitee in good faith believes might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, investigative or other, including any appeal therefrom.
(e) References to the Company includes, in addition to Mavenir Systems, Inc., any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger to which the Company (or any of its wholly owned subsidiaries) is a party, which, if its separate existence had continued, would have had the power and authority to indemnify its directors, trustees, partners, managing members, officers, employees, agents or fiduciaries, so that if Indemnitee is or was a director, trustee, partner, managing member, officer, employee, agent or fiduciary of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, trustee, partner, managing member, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.
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(f) DGCL means the General Corporation Law of the State of Delaware.
(g) Enterprise means the Company and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, trustee, partner, managing member, employee, agent or fiduciary.
(h) Exchange Act means the Securities Exchange Act of 1934, as hereafter amended from time to time.
(i) Expense Advance means a payment to Indemnitee pursuant to Section 3 of Expenses in advance of the settlement of, or final judgment in, any action, suit, proceeding or alternative dispute resolution mechanism, hearing, inquiry or investigation, which constitutes a Claim.
(j) Expenses shall mean any and all direct and indirect costs, losses, claims, damages, fees, expenses and liabilities, joint or several (including attorneys fees and all other costs, expenses and obligations incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, to be a witness in or to participate in, any action, suit, proceeding, alternative dispute resolution mechanism, hearing, inquiry or investigation), judgments, fines, penalties and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) actually and reasonably incurred, of any Claim and any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Claim, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent; (ii) Expenses incurred in connection with recovery under any directors and officers liability insurance policies maintained by the Company, regardless of whether Indemnitee is ultimately determined to be entitled to such indemnification, advancement of Expenses or insurance recovery, as the case may be; and (iii) for purposes of Section 13(e) only, Expenses incurred by or on behalf of Indemnitee in connection with the interpretation, enforcement or defense of Indemnitees rights under this Agreement, by litigation or otherwise. The parties agree that for the purposes of any advancement of Expenses for which Indemnitee has made written demand to the Company in accordance with this Agreement, all Expenses included in such demand that are certified by affidavit of Indemnitees counsel as being reasonable shall be presumed conclusively to be reasonable.
(k) Indemnification Event means any event or occurrence by reason of the fact that Indemnitee is or was a director, trustee, partner, managing member, officer, employee, agent or fiduciary of the Company, or any subsidiary of the Company, or is or was serving at the request of the Company as a director, trustee, partner, managing member, officer, employee, agent or fiduciary of another corporation, limited liability company, partnership, joint venture, trust or other enterprise, or by reason of any action or inaction on the part of Indemnitee while serving in such capacity.
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(l) Independent Legal Counsel means an attorney or firm of attorneys, selected in accordance with the provisions of Section 2(d) hereof, who shall not have otherwise performed services for (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnity agreements); or (ii) any other party to the Claim giving rise to a claim for indemnification under this Agreement, within the last three (3) years. Notwithstanding the foregoing, the term Independent Legal Counsel shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitees rights under this Agreement.
(m) Reference to other enterprises includes employee benefit plans; reference to fines includes any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and reference to serving at the request of the Company includes any service as a director, officer, trustee, partner, managing member, employee, agent or fiduciary of the Company which imposes duties on, or involves services by, such director, trustee, partner, managing member, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or its beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner not opposed to the best interests of the Company as referred to in this Agreement.
(n) Reviewing Party means, subject to the provisions of Section 2(d), any person or body appointed by the Board of Directors in accordance with applicable law to review the Companys obligations under this Agreement and under applicable law, which may include a member or members of the Companys Board of Directors, Independent Legal Counsel or any other person or body not a party to the particular Claim for which Indemnitee is seeking indemnification.
(o) Section refers to a section of this Agreement unless otherwise indicated.
(p) Securities Act means the Securities Act of 1933, as hereafter amended from time to time.
(q) Third-Party Indemnitor means any person or entity that has provided or may in the future provide to Indemnitee any indemnification or Expense advancement rights and/or insurance benefits other than (i) the Company, and (ii) any entity or entities through which the Company maintains liability insurance applicable to Indemnitee.
(r) Voting Securities means any securities of the Company that vote generally in the election of directors.
2. Indemnification.
(a) Indemnification of Expenses.
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(i) Subject to the provisions of Section 2(b) below, the Company shall indemnify Indemnitee for Expenses to the fullest extent permitted by applicable law if Indemnitee was or is or becomes a party or potential party to or witness or other participant in, or is threatened to be made a party to or other participant in, any Claim (whether by reason of or arising in part out of an Indemnification Event), including all interest, assessments and other charges incurred in connection with or in respect of such Expenses. The parties hereto intend that this Agreement shall provide to the fullest extent permitted by applicable law for indemnification in excess of that expressly permitted by statute, including, without limitation, any indemnification provided by the Certificate of Incorporation, the Bylaws, or by statute, any other agreement, a vote of its stockholders or disinterested directors, or otherwise.
(ii) Notwithstanding any other provision of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is, by reason of an Indemnification Event, a witness or otherwise asked to participate in any aspect of a Claim to which Indemnitee is not a party, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitees behalf in connection therewith.
(b) Review of Indemnification Obligations.
(i) Notwithstanding the foregoing, in the event any Reviewing Party shall have determined (in a written opinion, in any case in which Independent Legal Counsel is the Reviewing Party) that Indemnitee is not entitled to be indemnified under this Agreement under applicable law, (A) the Company shall have no further obligation under Section 2(a) to make any payments to Indemnitee not made prior to such determination by such Reviewing Party; and (B) the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all Expenses theretofore paid in indemnifying Indemnitee (within thirty (30) days after the Indemnitee receives notice of such determination); provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee is entitled to be indemnified under this Agreement under applicable law, any determination made by any Reviewing Party that Indemnitee is not entitled to be indemnified under this Agreement under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expenses theretofore paid in indemnifying Indemnitee unless, until and only to the extent that a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed) and until such time, Indemnitee shall be entitled to receive interim payments of expenses pursuant to this Section 2. Indemnitees obligation to reimburse the Company for any Expenses shall be unsecured and no interest shall be charged thereon.
(ii) Subject to Section 2(b)(iii) below, if the Reviewing Party shall not have made a determination within forty-five (45) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall, to the fullest extent not prohibited by applicable law, be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (A) a misstatement by Indemnitee of a material fact, or Indemnitees omission of a material fact necessary to make Indemnitees statement not materially misleading, in connection with the request for indemnification; or (B) a prohibition of such indemnification under applicable law; provided, however, that such forty-five (45) day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the
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Reviewing Party in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto. In the event that the Reviewing Party extends the forty-five (45) day review period, the Company will provide written notice of such extension to the Indemnitee.
(iii) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of the Claim.
(c) Indemnitee Rights on Unfavorable Determination; Binding Effect. If any Reviewing Party determines that Indemnitee substantively is not entitled to be indemnified under this Agreement in whole or in part under applicable law, Indemnitee shall have the right to commence litigation seeking an initial determination by the court or challenging any such determination by such Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and, subject to the provisions of Section 15, the Company hereby consents to service of process and to appear in any such proceeding. Absent such litigation, any determination by any Reviewing Party shall be conclusive and binding on the Company and Indemnitee.
(d) Selection of Reviewing Party; Change in Control. If there has not been a Change in Control, any Reviewing Party shall be selected (i) by a majority vote of the directors of the Company who are not and were not a party to the Claim in respect of which indemnification is sought by Indemnitee (Disinterested Directors), even if less than a quorum of the Board; (ii) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even if less than a quorum of the Board; (iii) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Legal Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (iv) if so directed by the Board, by the stockholders of the Company; and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Companys Board of Directors who were directors immediately prior to such Change in Control), any Reviewing Party with respect to all matters thereafter arising concerning Indemnitees indemnification rights for Expenses under this Agreement or any other agreement or under the Certificate of Incorporation or Bylaws as now or hereafter in effect, or under any other applicable law, if desired by Indemnitee, shall be Independent Legal Counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be entitled to be indemnified under this Agreement under applicable law and the Company agrees to abide by such opinion. The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to fully indemnify such counsel against any and all expenses (including attorneys fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. Notwithstanding any other provision of this Agreement, the Company shall not be required to pay Expenses of more than one Independent Legal Counsel in connection with all matters concerning a single Indemnitee, and such Independent Legal Counsel shall be the Independent Legal Counsel for any or all other Indemnitees unless (A) the Company otherwise determines; or (B) any Indemnitee shall provide a written statement setting forth in detail a reasonable objection to such Independent Legal Counsel representing other Indemnitees.
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(e) Mandatory Payment of Expenses. Notwithstanding any other provision of this Agreement other than Section 10 hereof, to the fullest extent permitted by applicable law and to the extent that Indemnitee was a party to (or participant in) and has been successful on the merits or otherwise, in any Claim or in defense of any claim, issue or matter therein, in whole or in part, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee in connection therewith. If Indemnitee is not wholly successful in such Claim but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Claim, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitees behalf in connection with or related to each successfully resolved claim, issue or matter to the fullest extent permitted by applicable law. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Claim by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
(f) Contribution.
(i) To the fullest extent permitted by applicable law, if the indemnification rights provided for in this Agreement are for any reason whatsoever unavailable to an Indemnitee, then in lieu of indemnifying Indemnitee thereunder, the Company shall contribute to the amount incurred by or on behalf of Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, including all interest, assessments and other charges incurred in connection with or in respect of such Expenses (i) in such proportion as is deemed fair and reasonable in light of all of the circumstances in order to reflect the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Claim; or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and its directors, officers, employees and agents, other than Indemnitee, on the one hand, and of the Indemnitee alone, on the other hand, in connection with the action or inaction which resulted in such Expenses, as well as any other relevant equitable considerations. In connection with any registration of the Companys securities under any securities laws (including, without limitation, under the Securities Act or the Exchange Act), the relative benefits received by the Company and Indemnitee shall be deemed to be in the same respective proportions that the net proceeds from the relevant registered offering(s) (before deducting expenses) received by the Company and Indemnitee, in each case as set forth in the applicable prospectus, bear to the aggregate public offering price of the securities so offered. The relative fault of the Company and its directors, officers, employees and agents, other than Indemnitee, on the one hand, and of the Indemnitee alone, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or its directors, officers, employees and agents, other than Indemnitee, or supplied by the Indemnitee and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
(ii) The Company and Indemnitee agree that it would not be just and equitable if contribution pursuant to this Section 2(f) were determined by pro rata or by any other method of allocation which does not take account of the equitable considerations referred to in
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the immediately preceding paragraph. In connection with the registration of the Companys securities, in no event shall Indemnitee be required to contribute any amount under this Section 2(f) in excess of the net proceeds received by Indemnitee from Indemnitees sale of securities under such registration statement. No person found guilty of fraudulent misrepresentation (within the meaning of Section 12 of the Securities Act) shall be entitled to contribution from any person who was not found guilty of such fraudulent misrepresentation.
3. Expense Advances. Notwithstanding any provision of this Agreement to the contrary, the Company shall make Expense Advances, to the extent not prohibited by applicable law, to an Indemnitee in connection with any Claim (or any part of any Claim) not initiated by Indemnitee, and such advancement shall be made within twenty (20) days after the receipt by the Company of a statement or statements requesting such advances from time to time (which shall include invoices received by Indemnitee in connection with such Expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditures made that would cause Indemnitee to waive any privilege accorded by applicable law shall not be so included), whether prior to or after final disposition of any Claim. Expense Advances shall be unsecured and interest free. Expense Advances shall be made without regard to Indemnitees ability to repay the Expenses and without regard to Indemnitees ultimate entitlement to indemnification under the other provisions of this Agreement. In accordance with Section 13(e), advances shall include any and all Expenses incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. Indemnitee shall qualify for advances upon the execution and delivery to the Company of this Agreement, which shall constitute an undertaking providing that Indemnitee undertakes to repay the amounts advanced (without interest) to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company. No other form of undertaking shall be required other than the execution of this Agreement. This Section 3 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 10.
4. Procedures for Indemnification and Expense Advances.
(a) Timing of Payments. All payments of Expenses by the Company to Indemnitee pursuant to this Agreement shall be made to the fullest extent permitted by applicable law as soon as practicable after written demand by Indemnitee therefor is presented to the Company, but in no event later than forty-five (45) days after such written demand by Indemnitee is presented to the Company, except in the case of Expense Advances, which shall be paid in accordance with Section 3 of this Agreement. If the Company disputes a portion of the amounts for which indemnification is requested, the undisputed portion shall be paid and only the disputed portion withheld pending resolution of any such dispute.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall give the Company notice in writing as soon as practicable of any Claim made against Indemnitee for which indemnification or Expense Advances will or could be sought under this Agreement. Notice to
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the Company shall be directed to the President or Chief Executive Officer of the Company at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to Indemnitee) and shall include a summary description of the nature of the Claim and the facts underlying the Claim, in each case to the extent reasonably known to and understood by Indemnitee. To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of such Claim. In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitees power. The failure by Indemnitee to notify the Company under this Agreement will not relieve the Company from any liability which it may have to Indemnitee under this Agreement or otherwise than under this Agreement, and any delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights under this Agreement, except to the extent (solely with respect to the indemnity under this Agreement) that such failure or delay materially prejudices the Company.
(c) Presumptions and Effect of Certain Proceedings.
(i) In making a determination with respect to entitlement to indemnification under this Agreement, the person or persons or entity making such determination shall, to the fullest extent not prohibited by applicable law, presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 4 of this Agreement, and the Company shall, to the fullest extent not prohibited by applicable law, have the burden of proof and burden of persuasion by clear and convincing evidence to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (including by its directors or Independent Legal Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Legal Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.
(ii) The termination of any Claim or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Claim, that Indemnitee had reasonable cause to believe that Indemnitees conduct was unlawful.
(iii) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitees action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by any of the directors or officers of the Enterprise in the course of their duties, or on the advice of any legal counsel for the Enterprise or on information or records given or reports
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made to the Enterprise by any independent certified public accountant or by any appraiser or other expert selected with reasonable care by the Enterprise. The provisions of this Section 4(c) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement. Whether or not the foregoing provisions of this Section 4(c) are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.
(iv) The knowledge and/or actions, or failure to act, of any other director, officer, trustee, partner, managing member, fiduciary, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.
(d) Notice to Insurers. If, at the time of the receipt by the Company of a notice of a Claim pursuant to Section 4(b) hereof, the Company has liability insurance in effect which may cover such Claim, the Company shall give prompt notice of the commencement of such Claim to the insurers in accordance with the procedures set forth in the respective insurance policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Claim in accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be obligated under this Agreement to provide indemnification for or make any Expense Advances with respect to the Expenses of any Claim, the Company, if appropriate, shall be entitled to assume the defense of such Claim with counsel approved by Indemnitee (which approval shall not be unreasonably withheld) upon the delivery to Indemnitee of written notice of the Companys election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees or expenses of separate counsel subsequently employed by or on behalf of Indemnitee with respect to the same Claim; provided, however, that (i) Indemnitee shall have the right to employ Indemnitees separate counsel in any such Claim at Indemnitees expense; and (ii) if (A) the employment of separate counsel by Indemnitee has been previously authorized by the Company; (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense; or (C) the Company shall not continue to retain such counsel to defend such Claim, then the fees and expenses of Indemnitees separate counsel shall be Expenses for which Indemnitee may receive indemnification or Expense Advances under this Agreement. Subject to the preceding terms and other terms of this Agreement, the Company shall have the right to conduct such defense as it sees fit in its sole discretion, including the right to settle any Claim against Indemnitee without the consent of Indemnitee, so long as the terms of such settlement include either: (x) a full release of Indemnitee by the claimant from all liabilities or potential liabilities under such Claim; or (y) in the event such full release is not obtained, the terms of such settlement do not limit any indemnification right Indemnitee may now, or hereafter, be entitled to under this Agreement, the Certificate of Incorporation, the Bylaws, any other agreement, or by statute, a vote of stockholders or disinterested directors, the DGCL or otherwise. Notwithstanding the foregoing, the Company shall not settle any Claim in any manner that would impose any Expenses on Indemnitee without Indemnitees prior written consent, which consent shall not be unreasonably withheld.
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5. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. The Company hereby agrees to indemnify Indemnitee to the fullest extent permitted by applicable law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Companys Certificate of Incorporation, the Bylaws or by statute, any other agreement, a vote of stockholders or disinterested directors, or otherwise. The rights of indemnification and to receive Expense Advances as provided by this Agreement shall be interpreted independently of, and without reference to, any other such rights to which Indemnitee may be entitled at any time. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of a Delaware corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, such change, to the extent not otherwise required by such applicable law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties rights and obligations under this Agreement except as set forth in Section 10(a) hereof.
(b) Nonexclusivity. The indemnification rights and the payment of Expense Advances provided by this Agreement shall be cumulative and in addition to any rights to which Indemnitee may be entitled under the Certificate of Incorporation, the Bylaws, any other agreement, or by statute, a vote of stockholders or disinterested directors, the DGCL, or otherwise. The indemnification rights and the payment of Expense Advances provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though subsequent thereto Indemnitee may have ceased to serve in such capacity.
6. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, provision of the Certificate of Incorporation, the Bylaws or otherwise) of the amounts otherwise payable under this Agreement, except as provided in Section 18 below.
7. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses incurred in connection with any Claim, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
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8. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge that, in certain instances, federal law or applicable public policy may prohibit the Company from indemnifying its directors, officers, employees, agents or fiduciaries under this Agreement or otherwise. Indemnitee understands and acknowledges that the Company may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification rights to a court in certain circumstances for a determination of the Companys right under public policy to indemnify Indemnitee.
9. Liability Insurance. To the extent the Company maintains liability insurance applicable to directors, officers, employees, agents or fiduciaries, Indemnitee shall be covered by such policies in such a manner as to provide Indemnitee the same rights and benefits as are provided to the most favorably insured of the Companys directors, if Indemnitee is a director; or of the Companys officers, if Indemnitee is not a director of the Company but is an officer; or of the Companys key employees, agents or fiduciaries, if Indemnitee is not an officer or director but is a key employee, agent or fiduciary.
10. Exceptions. Notwithstanding any other provision of this Agreement:
(a) Excluded Action or Omissions. The Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee for Expenses resulting from acts, omissions or transactions for which Indemnitee is prohibited from receiving indemnification under this Agreement or applicable law; provided, however, that notwithstanding any limitation set forth in this Section 10(a) regarding the Companys obligation to provide indemnification to Indemnitee, Indemnitee shall be entitled under Section 3 to receive Expense Advances under this Agreement with respect to any such Claim unless and until a court having jurisdiction over the Claim shall have made a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that Indemnitee has engaged in acts, omissions or transactions for which Indemnitee is prohibited from receiving indemnification under this Agreement or applicable law.
(b) Claims Initiated by Indemnitee. The Company shall not be obligated pursuant to the terms of this Agreement to indemnify or make Expense Advances to Indemnitee with respect to Claims initiated or brought voluntarily by Indemnitee and not by way of defense, counterclaim or cross-claim, except (i) with respect to actions or proceedings brought to establish or enforce an indemnification or Expense Advances right under this Agreement or any other agreement or insurance policy or under the Certificate of Incorporation or the Bylaws relating to Claims for Indemnification Events; (ii) in specific cases if the Board of Directors has approved the initiation or bringing of such Claim; or (iii) as otherwise required under Section 145 of the DGCL, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification right, Expense Advances or insurance recovery, as the case may be.
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(c) Claims Under Section 16(b) or Sarbanes-Oxley Act. The Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee for expenses and the payment of profits arising from (i) the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Exchange Act, or any similar successor statute; or (ii) any reimbursement of the Company by Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act); provided, however, that notwithstanding any limitation set forth in this Section 10(c) regarding the Companys obligation to provide indemnification, Indemnitee shall be entitled under Section 3 to receive Expense Advances with respect to any such Claim unless and until a court having jurisdiction over the Claim shall have made a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that Indemnitee has violated such statute.
11. Counterparts. This Agreement may be executed in counterparts and by facsimile or electronic transmission, each of which shall constitute an original and all of which, together, shall constitute one instrument.
12. Binding Effect; Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, and assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director, officer, employee, agent or fiduciary (as applicable) of the Company or of any other enterprise at the Companys request. The Company and Indemnitee agree that the Third-Party Indemnitors are express third party beneficiaries of this Agreement.
13. Remedies of Indemnitee.
(a) Subject to Section 2(b)(iii), in the event that (i) a determination is made pursuant to this Agreement that Indemnitee is not entitled to indemnification under this Agreement; (ii) Expense Advances are not timely made pursuant to Section 3 of this Agreement; (iii) no determination of entitlement to indemnification shall have been made pursuant to the
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provisions of this Agreement within ninety (90) days after receipt by the Company of the request for indemnification; (iv) payment of indemnification is not made pursuant to Sections 2(a)(i), 2(e) or 7, of this Agreement within ten (10) days after receipt by the Company of a written request therefor; (v) payment of indemnification pursuant to the provisions of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification by a Reviewing Party; or (vi) the Company or any other person or entity takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, Indemnitee the benefits provided or intended to be provided to Indemnitee under this Agreement, Indemnitee shall be entitled to an adjudication by a court regarding Indemnitees entitlement to such indemnification or Expense Advances. Alternatively, Indemnitee, at Indemnitees option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first becomes aware or reasonably should be aware that Indemnitee has the right to commence such proceeding pursuant to this Section 13(a). The Company shall not oppose Indemnitees right to seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant to this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 13 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 13, the Company shall have the burden of proof and the burden of persuasion by clear and convincing evidence that Indemnitee is not entitled to indemnification or Expense Advances, as the case may be.
(c) If a determination shall have been made pursuant to this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 13, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitees statement not materially misleading, in connection with the request for indemnification; or (ii) a determination by a court that such indemnification is prohibited under applicable law .
(d) The Company shall, to the fullest extent not prohibited by applicable law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 13 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.
(e) It is the intent of the Company that, to the fullest extent permitted by applicable law, Indemnitee not be required to incur legal fees or other Expenses associated with the interpretation, enforcement or defense of Indemnitees rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to Indemnitee under this Agreement. In the event that any action is instituted by Indemnitee under this Agreement or under any liability insurance policies
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maintained by the Company to enforce or interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be indemnified for all Expenses incurred by Indemnitee with respect to such action (including without limitation attorneys fees), regardless of whether Indemnitee is ultimately successful in such action, unless as a part of such action a court having jurisdiction over such action makes a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that each of the material assertions made by Indemnitee as a basis for such action was not made in good faith or was frivolous; provided, however, that until such final judicial determination is made, Indemnitee shall be entitled under Section 3 to receive payment of Expense Advances under this Agreement with respect to such action. In the event of an action instituted by or in the name of the Company under this Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be indemnified for all Expenses incurred by Indemnitee in defense of such action (including without limitation costs and expenses incurred with respect to Indemnitees counterclaims and cross-claims made in such action), unless as a part of such action a court having jurisdiction over such action makes a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that each of the material defenses asserted by Indemnitee in such action was made in bad faith or was frivolous; provided, however, that until such final judicial determination is made, Indemnitee shall be entitled under Section 3 to receive payment of Expense Advances with respect to such action.
14. Notices. All notices and other communications required or permitted under this Agreement shall be in writing, shall be effective when given, and shall in any event be deemed to be given (a) three calendar days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid; (b) upon delivery, if delivered by hand; (c) one business day after the business day of deposit with an overnight courier, freight prepaid; or (d) one day after the business day of delivery by facsimile transmission, if deliverable by facsimile transmission, with a copy by first class mail, postage prepaid, and shall be addressed if to Indemnitee, at Indemnitees address as set forth beneath Indemnitees signature to this Agreement and if to the Company, at the address of its principal corporate offices (attention: Chief Financial Officer) or at such other address as such party may designate by ten calendar days advance written notice to the other party hereto.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be commenced, prosecuted and continued only in the Court of Chancery of the State of Delaware in and for New Castle County, which shall be the exclusive and only proper forum for adjudicating such a claim.
16. Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are
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held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by applicable law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including without limitation each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
17. Choice of Law. This Agreement, and all rights, remedies, liabilities, powers and duties of the parties to this Agreement, shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws.
18. Primacy of Indemnification; Subrogation.
(a) The Company hereby acknowledges that Indemnitee has or may in the future have certain indemnification or Expense advancement rights and/or insurance provided by one or more Third-Party Indemnitors. The Company hereby agrees (i) that it is the indemnitor of first resort (i.e., its obligations to Indemnitee are primary and any obligation of any Third-Party Indemnitors to advance Expenses or to provide indemnification or insurance for the same Expenses incurred by Indemnitee are secondary); (ii) that it shall be required to advance the full amount of Expenses incurred by Indemnitee and shall be liable for the full amount of all Expenses, to the extent legally permitted and as required or permitted by the Certificate of Incorporation or the Bylaws (or any agreement between the Company and Indemnitee), without regard to any rights Indemnitee may have against the Third-Party Indemnitors; and (iii) that it irrevocably waives, relinquishes and releases the Third-Party Indemnitors from any and all claims against the Third-Party Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Third-Party Indemnitors on behalf of Indemnitee with respect to any Claim for which Indemnitee has sought indemnification from the Company shall affect the foregoing and the Third-Party Indemnitors shall have a right to receive from the Company, contribution and/or be subrogated, to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company.
(b) Except as provided in Section 18(a) above, in the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee from any insurance policy purchased by the Company, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights. In no event, however, shall the Company or any other person have any right of recovery, through subrogation or otherwise, against (i) Indemnitee; (ii) any Third-Party Indemnitor; or (iii) any insurance policy purchased or maintained by Indemnitee or any Third-Party Indemnitor.
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19. Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing signed by both the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed to be or shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver.
20. Integration and Entire Agreement. This Agreement sets forth the entire understanding between the parties hereto and supersedes and merges all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto; provided, however, that this Agreement is a supplement to and in furtherance of the Certificate of Incorporation, the Bylaws, any directors and officers insurance maintained by the Company and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.
21. No Construction as Employment Agreement. Nothing contained in this Agreement shall be construed as giving Indemnitee any right to employment by the Company or any of its subsidiaries or affiliated entities.
22. Additional Acts. If, for the validation of any of the provisions in this Agreement, any act, resolution, approval or other procedure is required, the Company undertakes to cause such act, resolution, approval or other procedure to be effected or adopted in a manner that will enable the Company to fulfill its obligations under this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement as of the effective date set forth above.
MAVENIR SYSTEMS, INC. |
By: |
Name: |
Title: |
Address: |
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AGREED TO AND ACCEPTED BY: |
INDEMNITEE |
By: |
Address: |
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Telephone: |
Facsimile: |
Email: |
MAVENIR SYSTEMS, INC.
INDEMNIFICATION AGREEMENT
SIGNATURE PAGE
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Exhibit 10.2
MAVENIR SYSTEMS, INC.
AMENDED AND RESTATED 2005 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees, Directors and Consultants and to promote the success of the Companys business. Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) Administrator means the Board or any of its Committees as shall be administering the Plan in accordance with Section 4 hereof.
(b) Applicable Laws means the requirements relating to the administration of Stock Plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any other country or jurisdiction where Options or Stock Purchase Rights are granted under the Plan.
(c) Board means the Companys Board of Directors.
(d) Change of Control means (i) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any merger, consolidation or other form of reorganization in which outstanding shares of the Company are exchanged for securities or other consideration issued, or caused to be issued, by the acquiring entity or its subsidiary, but excluding any transaction effected primarily for the purpose of changing the Companys state of incorporation), unless the Companys stockholders of record as constituted immediately prior to such transaction or series of related transactions will, immediately after such transaction or series of related transactions hold at least a majority of the voting power of the surviving or acquiring entity or (ii) a sale of all or substantially all of the assets of the Company by means of any transaction or series of related transactions.
(e) Code means the Internal Revenue Code of 1986, as amended.
(f) Committee means a committee of Directors or of other individuals satisfying Applicable Laws appointed by the Board in accordance with Section 4 hereof.
(g) Common Stock means the Companys common stock, par value $0.001.
(h) Company means Mavenir Systems, Inc., a Texas corporation.
(i) Consultant means any person who is engaged by the Company or any Parent or Subsidiary to render consulting or advisory services to such entity.
(j) Director means a member of the Board.
(k) Disability means total and permanent disability as defined in Section 22(e)(3) of the Code.
(l) Employee means any person, including officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a directors fee by the Company shall be sufficient to constitute employment by the Company.
(m) Exchange Act means the Securities Exchange Act of 1934, as amended.
(n) Exchange Program means a program under which (a) outstanding Options are surrendered or cancelled in exchange for Options of the same type (which may have lower exercise prices and different terms), Options of a different type, and/or cash, and/or (b) the exercise price of an outstanding Option is reduced. The terms and conditions of any Exchange Program will be determined by the Administrator in its sole discretion.
(o) Fair Market Value means, as of any date, the value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for the Common Stock on the day of determination; or
(iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator.
(p) Incentive Stock Option means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.
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(q) Nonstatutory Stock Option means an Option not intended to qualify as an Incentive Stock Option.
(r) Option means a stock option granted pursuant to the Plan.
(s) Option Agreement means a written or electronic agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan.
(t) Optioned Stock means the Common Stock subject to an Option or a Stock Purchase Right.
(u) Optionee means the holder of an outstanding Option or Stock Purchase Right granted under the Plan.
(v) Parent means a parent corporation, whether now or hereafter existing, as defined in Section 424(e) of the Code.
(w) Plan means this 2005 Stock Plan.
(x) Purchaser means a holder of Restricted Stock.
(y) Restricted Stock means Shares issued pursuant to the exercise of an Option or a Stock Purchase Right.
(z) Securities Act means the Securities Act of 1933, as amended.
(aa) Service Provider means an Employee, Director or Consultant.
(bb) Share means a share of the Common Stock, as adjusted in accordance with Section 13 below.
(cc) Stock Purchase Right means a right to purchase Common Stock pursuant to Section 11 below.
(dd) Subsidiary means a subsidiary corporation, whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 below, the maximum aggregate number of Shares that may be subject to option and sold under the Plan is 24,315,515 Shares. The Shares may be authorized but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Exchange Program, the unpurchased
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Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). However, Shares that have actually been issued under the Plan, upon exercise of either an Option or Stock Purchase Right, shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if Shares of unvested Restricted Stock are repurchased by the Company, such Shares shall become available for future grant under the Plan.
4. Administration of the Plan.
(a) Administrator. The Plan shall be administered by the Board or a Committee appointed by the Board, which Committee shall be constituted to comply with Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan and, in the case of a Committee, the specific duties delegated by the Board to such Committee, and subject to the approval of any relevant authorities, the Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by each award granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, of any Option or Stock Purchase Right granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options or Stock Purchase Rights may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or Stock Purchase Rights or the Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;
(vi) to initiate an Exchange Program;
(vii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws;
(viii) to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or Stock Purchase Right that number of Shares having a Fair Market Value equal to the minimum
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amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by Optionees to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable; and
(ix) to construe and interpret the terms of the Plan and Options and Stock Purchase Rights granted pursuant to the Plan.
(c) Effect of Administrators Decision. All decisions, determinations and interpretations of the Administrator shall be final and binding on all Optionees.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.
6. Limitations.
(a) Incentive Stock Option Limit. Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.
(b) At-Will Employment. Neither the Plan nor any Option or Stock Purchase Right shall confer upon any Optionee any right with respect to continuing the Optionees relationship as a Service Provider with the Company, nor shall it interfere in any way with the Optionees right or the Companys right to terminate such relationship at any time, with or without cause, and with or without notice.
7. Term of Plan. Subject to stockholder approval in accordance with Section 19, the Plan shall become effective upon its adoption by the Board. Unless sooner terminated under Section 15, it shall continue in effect for a term of ten (10) years from the later of (i) the effective date of the Plan or (ii) the date of the most recent Board approval of an increase in the number of Shares reserved for issuance under the Plan.
8. Term of Option. The term of each Option shall be stated in the Option Agreement; provided, however, that the term shall be no more than ten (10) years from the date of grant thereof. In the case of an Incentive Stock Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Option Agreement.
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9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to be issued upon exercise of an Option shall be such price as is determined by the Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to any other Service Provider, the per Share exercise price shall be determined by the Administrator.
(iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price other than as required above pursuant to a merger or other corporate transaction.
(b) Forms of Consideration. The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant). Such consideration may consist of, without limitation, (1) cash, (2) check, (3) promissory note, (4) other Shares, provided Shares acquired directly from the Company (x) have been owned by the Optionee for more than six (6) months on the date of surrender, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option shall be exercised, (5) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan, or (6) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company.
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10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder shall be exercisable according to the terms hereof at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. An Option may not be exercised for a fraction of a Share.
(i) An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and the Optionees spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 13.
(ii) Exercise of an Option in any manner shall result in a decrease in the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee ceases to be a Service Provider other than upon such Optionees death or Disability, such Optionee may exercise such Optionees Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of the Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the Optionees termination. If, on the date of termination, the Optionee is not vested as to such Optionees entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise such Optionees Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service Provider as a result of the Optionees Disability, such Optionee may exercise such Optionees Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionees termination. If, on the date of termination, the Optionee is not vested as to such Optionees entire Option, the Shares covered by
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the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise such Optionees Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider, the Option may be exercised within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of death (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement) by the Optionees designated beneficiary, provided such beneficiary has been designated prior to such Optionees death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Optionee, then such Option may be exercised by the personal representative of the Optionees estate or by the person(s) to whom the Option is transferred pursuant to the Optionees will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionees death. If, at the time of death, the Optionee is not vested as to the entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Leaves of Absence.
(i) Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be suspended during any unpaid leave of absence.
(ii) A Service Provider shall not cease to be an Employee in the case of (A) any leave of absence approved by the Company or (B) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor.
(iii) For purposes of Incentive Stock Options, no such leave may exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then three (3) months following the 91st day of such leave, any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing or electronically of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid, and the time within which such person must accept such offer. The offer shall be accepted by execution of a Restricted Stock Purchase Agreement in the form determined by the Administrator.
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(b) Repurchase Option. Unless the Administrator determines otherwise, the Restricted Stock Purchase Agreement shall grant the Company a repurchase option exercisable within 90 days of the voluntary or involuntary termination of the purchasers service with the Company for any reason (including death or disability). The purchase price for Shares repurchased pursuant to the Restricted Stock Purchase Agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at such rate as the Administrator may determine.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Stockholder. Once the Stock Purchase Right is exercised, the purchaser shall have rights equivalent to those of a stockholder and shall be a stockholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 13 of the Plan.
12. Limited Transferability of Options. Unless determined otherwise by the Administrator, Options and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent and distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee.
13. Adjustments; Dissolution or Liquidation; Merger or Change of Control.
(a) Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, may (in its sole discretion) adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an Option will terminate immediately prior to the consummation of such proposed action.
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(c) Merger or Change of Control.
(i) In the event of (x) a merger of the Company with or into another entity (other than a merger effected primarily for the purpose of changing the Companys state of incorporation) or (y) any other Change of Control, each outstanding Option and Stock Purchase Right, to the extent vested as of the transaction date, shall be (i) assumed, (ii) an equivalent option or right substituted by the successor entity (or a Parent or Subsidiary of the successor entity) or (iii) cancelled in exchange for a payment to the Optionee with respect to each Share subject to the portion of the Option or Stock Purchase that is vested as of the transaction date equal to the excess of (A) the value, as determined by the Board in its absolute discretion, of the property (including cash) received by the holder of a share of Stock as a result of the transaction, over (B) the per-Share exercise price of the Option or the per-Share purchase price of such Stock Purchase Right (such excess, the Spread). In the event of a payment described in Clause (iii) of the preceding sentence, such payment shall be made in the form of cash, cash equivalents, or securities of the surviving corporation or its parent having a value equal to the Spread; in addition, any escrow, holdback, earn-out or similar provisions in the transaction agreement may apply to such payment to the same extent and in the same manner as such provisions apply to the holders of Stock. If the Spread applicable to an Option is zero or a negative number, then the Option may be cancelled without making a payment to the Optionee. In the event that the successor entity (or a Parent or Subsidiary of the successor entity) refuses to assume, substitute or cancel an Option or Stock Purchase Right as described above, such Option or Stock Purchase shall terminate as of the closing date of such transaction without the payment of any consideration to the Optionee; provided that the Administrator shall notify the Optionee in writing or electronically that the Option or Stock Purchase Right shall be exercisable for a period of time as determined by the Administrator, and the Option or Stock Purchase Right shall terminate upon expiration of such period. For the purposes of this paragraph, an Option or Stock Purchase Right shall be considered assumed if, following the merger or Change of Control, the option or right confers the right to purchase or receive, for each Share of Optioned Stock subject to such Option or Stock Purchase Right immediately prior to the merger or Change of Control, the consideration (whether stock, cash, or other securities or property) received in the merger or Change of Control by holders of Common Stock for each Share held on the effective date of the merger or Change of Control (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or Change of Control is not solely common stock of the successor entity or its Parent, the Administrator may, with the consent of the successor entity, provide for the consideration to be received upon the exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock subject to the Option or Stock Purchase Right, to be solely common stock of the successor entity or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or Change of Control.
(ii) In the event of (x) a merger of the Company with or into another entity (other than a merger effected primarily for the purpose of changing the Companys state of incorporation) or (y) any other Change of Control, each outstanding Option and Stock Purchase
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Right, to the extent unvested as of the transaction date, may, at the discretion of the Board, fully vest and become exercisable as to all of the Optioned Stock, including Shares as to which such Option or Stock Purchase Right would not otherwise be vested or exercisable, be assumed or an equivalent option or right substituted as provided in Section 13(c)(1) above, be canceled without the payment of any consideration, or be treated in any other manner permitted by applicable law.
14. Time of Granting Options and Stock Purchase Rights. The date of grant of an Option or Stock Purchase Right shall, for all purposes, be the date on which the Administrator makes the determination granting such Option or Stock Purchase Right, or such later date as is determined by the Administrator. Notice of the determination shall be given to each Service Provider to whom an Option or Stock Purchase Right is so granted within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Board shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the Administrators ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an Option, the Administrator may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.
17. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Companys counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
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18. Reservation of Shares. The Company, during the term of this Plan, shall at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.
19. Stockholder Approval. The Plan shall be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted. Such stockholder approval shall be obtained in the degree and manner required under Applicable Laws.
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APPENDIX A
TO
MAVENIR SYSTEMS, INC. 2005 STOCK PLAN
California Residents Only
This Appendix A to the Mavenir Systems, Inc. 2005 Stock Plan shall apply only to Optionees and Purchasers who are residents of the State of California and who are receiving Awards under the Plan. Capitalized terms contained herein shall have the same meanings given to them in the Plan, unless otherwise provided by this Appendix A. Notwithstanding any provisions contained in the Plan to the contrary and to the extent required by Applicable Laws, the following terms shall apply to all Awards granted to residents of the State of California, until such time as the Administrator amends this Appendix A.
(a) Nonstatutory Stock Options granted to a person who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, shall have an exercise price not less than 110% of the Fair Market Value per Share on the date of grant. Nonstatutory Stock Options granted to any other person shall have an exercise price that is not less than eighty-five percent (85%) of the Fair Market Value per Share on the date of grant. Notwithstanding the foregoing, Options may be granted with a per Share exercise price other than as required above pursuant to a merger or other corporate transaction.
(b) Restricted Stock may only be issued pursuant to the exercise of a Stock Purchase Right granted under the Plan. The purchase price of such Restricted Stock shall be in an amount the Administrator deems appropriate in accordance with Applicable Laws.
(c) The term of each Option shall be stated in the Option Agreement, provided, however, that the term shall be no more than ten (10) years from the date of grant thereof. The term of each Restricted Stock Purchase Agreement shall be no more than ten (10) years from the date the agreement is entered into.
(d) Unless determined otherwise by the Administrator, Options or Stock Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or the laws of descent and distribution, and may be exercised during the lifetime of the Optionee, only by the Optionee. If the Administrator in its sole discretion makes an Option or Stock Purchase Right transferable, such Option or Stock Purchase Right may only be transferred (i) by will, (ii) by the laws of descent and distribution, or (iii) to family members (within the meaning of Rule 701 of the Securities Act of 1933, as amended) through gifts or domestic relations orders, as permitted by Rule 701 of the Securities Act of 1933, as amended.
(e) Any Option granted hereunder shall be exercisable according to the terms hereof at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. Except in the case of Options granted to officers, Directors and Consultants, Options shall become exercisable at a rate of no less than twenty percent (20%) per year over five (5) years from the date the Options are granted.
(f) Unless employment or service is terminated for cause (as defined by the Administrator), the Optionee may exercise his or her Option within thirty (30) days of termination, or such longer period of time as specified in the Option Agreement, to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of the Option as set forth in the Option Agreement).
(g) If Optionees employment or service terminates as a result of the Optionees Disability, Optionee may exercise his or her Option within six (6) months of termination, or such longer period of time as specified in the Option Agreement, to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement).
(h) If Optionee dies while a Service Provider, the Option may be exercised within six (6) months following Optionees death, or such longer period of time as specified in the Option Agreement, to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement) by the Optionees designated beneficiary, personal representative, or by the person(s) to whom the Option is transferred pursuant to the Optionees will or in accordance with the laws of descent and distribution.
(i) No Option or Stock Purchase Right shall be granted to a resident of California more than ten (10) years after the earlier of the date of adoption of the Plan or the date the Plan is approved by the stockholders.
(j) The Company shall provide to each Optionee and Purchaser, not less frequently than annually during the period such Optionee or Purchaser has one or more Awards outstanding, copies of annual financial statements. The Company shall not be required to provide such statements to key Employees whose duties in connection with the Company assure their access to equivalent information.
(k) In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, may (in its sole discretion) adjust the number and class of shares of common stock that may be delivered under the Plan and/or the number, class, and price of shares covered by each outstanding Option; provided, however, that the Administrator shall make such adjustments to the extent required by Section 25102(o) of the California Corporations Code.
(l) This Appendix A shall be deemed to be part of the Plan and the Administrator shall have the authority to amend this Appendix A in accordance with Section 15 of the Plan.
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APPENDIX B
MAVENIR SYSTEMS, INC.
ADDITIONAL TERMS AND CONDITIONS FOR EMPLOYEES RESIDENT IN INDIA
The additional terms and conditions detailed below are to be read in conjunction with the Plan and the Option Agreement. Any terms and provisions not specifically defined below for Employees subject to the laws of India will have the same meaning as defined in the Plan and the Option Agreement.
1. Definitions. Notwithstanding the provisions of the Plan, the following definitions will have the meaning given to them for Options granted to Employees resident in India.
(a) Employee means any person permanently employed by the Company or any Indian Subsidiary of the Company or a director, whether whole-time or not, of the Company or any Indian Subsidiary of the Company, within the meaning of the Employees Stock Option Plan or Scheme Guidelines issued by the Ministry of Finance of the Government of India on October 11, 2001. The term Employee, however, will not include an individual who is a Promoter (or belongs to the Promoter Group) or a director of the Company or any Indian Subsidiary of the Company who either by himself or through his Relative or through a corporate entity, holds, directly or indirectly, more than 10% of the equity of the Company.
(b) Relative means immediate relative, namely ones spouse, parent, brother, sister or child of the person or spouse.
(c) FEMA means the Foreign Exchange Management Act, 1999 of India, the rules and regulations notified thereunder and any amendments thereto. The restrictions under FEMA, as referred to in this Appendix B and as existing on the effective date of this Appendix B, will be read to include the amendments made to FEMA subsequent to the effective date of this Appendix B and will be deemed to have always included such amendments.
(d) Indian Subsidiary for the purpose of this Appendix B, means Mavenir Systems Private Limited for so long as the holding-subsidiary relationship exits between the Company and Mavenir Systems Private Limited, as per the provisions of Section 4 of the Indian Companies Act, 1956.
(e) Promoter the person or persons who are in over-all control of the Indian Subsidiary, who are instrumental in the formation of the Indian Subsidiary or program pursuant to which the shares were offered to the public, or the person or persons named in the offer document as promoter(s), provided that a director or officer of the Indian Subsidiary, if he is acting as such only in his professional capacity, will not be deemed to be a Promoter. Where a Promoter of the Indian Subsidiary is a body corporate, the promoters of that body corporate will also be deemed to be Promoters of the Indian Subsidiary.
(f) Promoter Group means a Relative of the Promoter, persons whose shareholding is aggregated for the purpose of disclosing in the offer document shareholding of the promoter group.
2. Purpose. The purpose of this Appendix B is to establish certain rules applicable to Shares which may be granted under the Plan from time to time to Employees of the Indian Subsidiary, who are residents of the Republic of India, in compliance with the exchange control, securities and other Applicable Laws currently in force in India. Except as otherwise provided by this Appendix B, all Shares granted pursuant to this Appendix B shall be governed by the terms of the Plan. In the event of a conflict between the provisions of the Plan and the provisions of this Appendix B, the provisions of this Appendix B shall prevail.
3. Consideration. Except as otherwise provided below, payment of the exercise price for the number of Shares being purchased pursuant to any Option will be made (i) in cash, by check or cash equivalent, (ii) pursuant to a cashless exercise program implemented by the Company in connection with the Plan, (iii) by such other consideration as may be approved by the Administrator from time to time to the extent permitted by Applicable Law, or (iv) by any combination thereof. Notwithstanding the foregoing, the above procedures will be subject to compliance with the applicable regulations under FEMA.
4. Eligibility. Notwithstanding the provisions of the Plan, Options in the form of Shares granted to residents of India may only be granted to Employees who are, on the date of grant, resident in India in accordance with the provisions of FEMA and satisfy the provisions in Section 5 of the Plan regarding eligibility, as applicable. Consultants resident in India will not be eligible to receive Options under this Appendix B.
Options may be granted to Employees in accordance with the terms of the Plan and this Appendix B to the Plan as the Administrator deems appropriate. The number of Shares that may be granted subject to Options under the Plan and this Appendix B to an individual Employee of the Indian Subsidiary will not exceed 11,287,500 (subject to adjustment as provided in Section 13 of the Plan). In determining which Employees may be granted Options and for determining the quantum of Options to be granted, the Administrator will take into account whether Options will provide additional incentive to Employees, whether such Options will promote the success of the Companys business, the potential for future contribution to the Company and the Indian Subsidiary, integrity, number of employment years and any other factor(s) as deemed appropriate by the Administrator.
5. Basis of Valuation of the Shares. The Administrator will determine the fair market value of the Shares based upon the Companys accounts for the previous three financial years (or those that may be available to the Administrator, in case the accounts for three financial years is not available at the time of such determination), current book value per Share, the price at which Shares have previously been issued by the Company, the liquidation rights and other preferences to which the holders of those Shares are entitled, the lack of marketability of the Shares, the start-up nature of the Company and other factors that the Administrator considers appropriate in good faith.
6. Exercise Price. The per share exercise price for the Shares to be issued upon exercise of an Option will be such price as is determined by the Administrator in a manner consistent with Section 9(a) of the Plan.
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7. Non-Transferability of Options. Unless determined otherwise by the Administrator, Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or the laws of descent and distribution, and may be exercised during the lifetime of the Participant, only by the Participant. If the Administrator in its sole discretion makes an Option transferable, such Option may only be transferred pursuant to the provisions of Section 12 of the Plan.
8. Restrictions on Shares. The Administrator may place restrictions on the transferability of Shares acquired pursuant to an Option as it deems appropriate in its sole discretion, including, without limitation, (i) rights to repurchase upon termination as an Employee, (ii) rights of first refusal, and (iii) market lock-up provisions.
9. Corporate Transaction. Notwithstanding the provisions of the Plan, if the successor corporation (or its Parent) in a transaction described in Section 13(c) of the Plan intends to assume or substitute each outstanding Option and the rules and regulations governing Options granted to Employees in India (the Indian Options) do not permit assumption or substitution of Indian Options in the same manner as the other Options then the Administrator, in its discretion, may provide for the termination of the Indian Options upon the consummation of the transaction or provide for the assumption or substitution of the Indian Options in a different manner than the assumption or substitution of the other Options.
10. Stockholder Approval. The Plan (and therefore the authority of the Administrator to adopt this Appendix B) will be subject to approval by the stockholders of the Company as provided in Section 19 of the Plan.
11. Currency Exchange Rates. Except as otherwise determined by the Administrator, all monetary values under this Appendix B including, without limitation, the Fair Market Value per share of Common Stock and the Exercise Price shall be stated in US Dollars. Any changes or fluctuations in the exchange rate at which amounts paid by an Optionee in currencies other than US Dollars are converted into US Dollars or amounts paid to an Optionee in US Dollars are converted into currencies other than US Dollars shall be borne solely by the Optionee.
12. Amendment and Termination. The conditions contained in the Plan shall not be changed as it applies to Options granted under this Appendix B after the Plan is approved by the Board and filed with the Chief Commissioner of Income-tax. In the event the Board decides, pursuant to Section 15(a) of the Plan, to amend, alter, suspend or terminate the Plan as it applies to Options granted under this Appendix B, the same shall be furnished to the Chief Commissioner of Income Tax or such other governmental body as directed by it and consent be sought to such amendments.
B-3
APPENDIX C
MAVENIR SYSTEMS, INC.
ADDITIONAL TERMS AND CONDITIONS FOR EMPLOYEES RESIDENT IN UNITED KINGDOM
The additional terms and conditions detailed below are to be read in conjunction with the Plan and the Option Agreement. Any terms and provisions not specifically defined below for Employees subject to the laws of the United Kingdom will have the same meaning as defined in the Plan and the Option Agreement.
The purpose of this Sub-Plan is to provide incentive for present and future service providers of Mavenir Systems, Inc. through the grant of options over Common Stock.
This Sub-Plan is governed by the Mavenir Systems, Inc. 2005 Stock Plan and all its provisions shall be identical to those of the Plan save that the provisions set out below shall be as stated in this Sub-Plan in order to accommodate the specific requirements of UK law.
Purposes of the Sub-Plan. The purposes of this Stock Sub-Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to service providers and to promote the success of the Companys business. Options granted under the Sub-Plan will be Nonstatutory Stock Options (UK Unapproved Options). Stock Purchase Rights may also be granted under the Sub-Plan.
Exhibit 10.3
MAVENIR SYSTEMS, INC.
2005 STOCK PLAN
STOCK OPTION AGREEMENT
(Early Exercise)
Unless otherwise defined herein, the terms defined in the 2005 Stock Plan shall have the same defined meanings in this Stock Option Agreement.
I. | NOTICE OF STOCK OPTION GRANT |
«Optionee»
The undersigned Optionee has been granted an Option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows:
Date of Grant | : | «Date_of_Grant» | ||
Vesting Commencement Date | : | «Vesting_Commencement_Date» | ||
Exercise Price per Share | : | «Price» | ||
Total Number of Shares Granted | : | «Shares» | ||
Total Exercise Price | : | «ExercisePrice» | ||
Type of Option | : | x Incentive Stock Option | ||
: | ¨ Nonstatutory Stock Option | |||
Term/Expiration Date | : | Tenth Anniversary of Date of Grant |
Standard Vesting Schedule: One fourth (1/4th) of the shares of Common Stock subject to the option shall become vested on the first anniversary of the Vesting Commencement Date and an additional one forty-eighth (1/48th) of the shares of Common Stock subject to the option shall become vested on the corresponding day of each calendar month thereafter or, to the extent such calendar month does not have the corresponding day, on the last day of such calendar month, until all such shares are vested and exercisable, provided that the Optionee continues to be a Service Provider (as defined in the Companys 2005 Stock Plan) on such dates.
Termination Period: This Option shall be exercisable for three (3) months after Optionee ceases to be a Service Provider. Upon Optionees death or Disability, this Option may be exercised for twelve (12) months after Optionee ceases to be a Service Provider. In no event may Optionee exercise this Option after the Term/Expiration Date as provided above.
Stock Option Agreement - Early Exercise |
II. | AGREEMENT |
1. Grant of Option.
(a) The Administrator hereby grants to the Optionee named in the Notice of Grant (the Optionee), an option (the Option) to purchase the number of Shares set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the Exercise Price), and subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 14(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail.
(b) If designated in the Notice of Grant as an Incentive Stock Option (ISO), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated as a Nonstatutory Stock Option (NSO).
2. Exercise of Option. This Option shall be exercisable during its term in accordance with the provisions of Section 9 of the Plan as follows:
(a) Right to Exercise.
(i) Subject to subsections 2(a)(ii) and 2(a)(iii) below, this Option shall be exercisable cumulatively according to the vesting schedule set forth in the Notice of Grant. Alternatively, at the election of the Optionee, this Option may be exercised in whole or in part at any time as to Shares that have not yet vested. Vested Shares shall not be subject to the Companys repurchase right (as set forth in the Restricted Stock Purchase Agreement, attached hereto as Exhibit C-1).
(ii) As a condition to exercising this Option for unvested Shares, the Optionee shall execute the Restricted Stock Purchase Agreement.
(iii) This Option may not be exercised for a fraction of a Share.
(b) Method of Exercise.
(i) This Option shall be exercisable by delivery of an exercise notice in the form attached as Exhibit A (the Exercise Notice) which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised (the Exercised Shares), and such other representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price.
(ii) No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise comply with Applicable Laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares.
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3. Optionees Representations. In the event the Shares have not been registered under the Securities Act at the time this Option is exercised, the Optionee shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B.
4. Market Standoff Agreement. Optionee hereby agrees that, if requested by the managing underwriter, it will not, without the prior written consent of the Company, during the period commencing on the date of the final prospectus relating to the Companys initial public offering or any secondary public offering, as applicable, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) calendar days in the case of an initial public offering and, solely in the case of a holder of shares of the Companys Common Stock, ninety (90) calendar days in the case of any secondary public offering (or such other period as may be requested by the Company or managing underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto)) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired), whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of securities, in cash or otherwise. Optionee agrees that any transferee of the Option or shares acquired pursuant to the Option shall be bound by this Section 4.
5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee:
(a) cash or check;
(b) consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or
(c) surrender of other Shares which, (i) in the case of Shares acquired from the Company, either directly or indirectly, have been owned by the Optionee for more than six (6) months on the date of surrender, and (ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Exercised Shares.
6. Restrictions on Exercise. This Option may not be exercised until such time as the Plan has been approved by the stockholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any Applicable Law.
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7. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option.
9. Tax Obligations.
(a) Withholding Taxes. Optionee agrees to make appropriate arrangements with the Company (or the Parent or Subsidiary employing or retaining Optionee) for the satisfaction of all federal, state, local and foreign income and employment tax withholding requirements applicable to the Option exercise. Optionee acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver the Shares if such withholding amounts are not delivered at the time of exercise.
(b) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (1) the date two years after the Date of Grant, and (2) the date one year after the date of exercise, the Optionee shall immediately notify the Company in writing of such disposition. Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee.
(c) Code Section 409A. Under Code Section 409A, an Option that vests after December 31, 2004 that was granted with a per Share exercise price that is determined by the Internal Revenue Service (the IRS) to be less than the fair market value of a Share on the date of grant (a discount option) is considered deferred compensation. An Option that is a discount option may result in (i) income recognition by the Optionee prior to the exercise of the Option (when the Option vests), (ii) an additional twenty percent (20%) income tax, and (iii) potential interest charges. Optionee acknowledges that the Company cannot and has not guaranteed that the IRS will determine that the per Share exercise price of this Option equals or exceeds the fair market value of a Share on the date of grant. Optionee agrees that if the IRS determines that the Option was granted with a per Share exercise price that was less than the fair market value of a Share on the date of grant, Optionee will be solely responsibly for any of costs related to such a determination.
10. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionees interest except by means of a writing signed by the Company and Optionee. This Option Agreement is governed by the internal substantive laws but not the choice of law rules of Texas.
11. No Guarantee of Continued Service. OPTIONEE AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY
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CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS OPTION AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEES RIGHT OR THE COMPANYS RIGHT TO TERMINATE OPTIONEES RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated below.
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EXHIBIT A
2005 STOCK PLAN
EXERCISE NOTICE
Mavenir Systems, Inc.
1651 Glenville Road, Suite 201
Richardson, TX 75081
Attn: Secretary
1. Exercise of Option. Effective as of today, , , the undersigned (Optionee) hereby elects to exercise Optionees option (the Option) to purchase shares of the Common Stock (the Shares) of Mavenir Systems, Inc. (the Company) under and pursuant to the 2005 Stock Plan (the Plan) and the Stock Option Agreement dated , (the Option Agreement).
2. Delivery of Payment. Optionee herewith delivers to the Company the full purchase price of the Shares as set forth in the Option Agreement, and any and all withholding taxes due in connection with the exercise of the Option.
3. Representations of Optionee. Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares shall be issued to the Optionee as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in Section 12 of the Plan.
5. Companys Right of First Refusal. Before any Shares held by Optionee or any transferee (either being sometimes referred to herein as the Holder) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section (the Right of First Refusal).
(a) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the Company a written notice (the Notice) stating: (i) the Holders bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (Proposed Transferee); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the Offered Price), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase up to all of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.
(c) Purchase Price. The purchase price (Purchase Price) for the Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within 30 days after receipt of the Notice or in the manner and at the times set forth in the Notice.
(e) Holders Right to Transfer. To the extent that the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within 120 days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary contained in this Section notwithstanding, the transfer of any or all of the Shares during the Optionees lifetime or on the Optionees death by will or intestacy to the Optionees immediate family or a trust for the benefit of the Optionees immediate family shall be exempt from the provisions of this Section. Immediate Family as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section, and there shall be no further transfer of such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First Refusal shall terminate as to any Shares upon the first sale of Common Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act.
6. Tax Consultation. Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionees purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.
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7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS, IN THE OPINION OF COUNSEL (WHICH MAY BE COUNSEL TO THE CORPORATION) SATISFACTORY TO THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, INCLUDING A 180-DAY MARKET STANDOFF AGREEMENT, AND A RIGHT OF FIRST REFUSAL HELD BY THE CORPORATION AS SET FORTH IN AN EXERCISE NOTICE BETWEEN THE CORPORATION AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate stop transfer instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
8. Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Exercise Notice shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns.
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9. Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Optionee or by the Company forthwith to the Administrator which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties.
10. Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be delivered personally by hand or by courier, mailed by United States first-class mail, postage prepaid, sent by facsimile or sent by electronic mail directed (a) if to the Optionee, at the Optionees address, facsimile number or electronic mail address set forth on the signature page to the Option Agreement, or at such other address, facsimile number or electronic mail address as the Optionee may designate by ten (10) days advance written notice to the Company or (b) if to the Company, to its principal executive office, or at such other address as the Company may designate by ten (10) days advance written notice to the Optionee. All such notices and other communications shall be deemed given upon personal delivery, on the date of mailing, upon confirmation of facsimile transfer or when directed to the electronic mail address set forth on the signature page to the Option Agreement. With respect to any notice given by the Company under any provision of the Texas Business Corporation Act or the Companys charter or bylaws, the Optionee agrees that such notice may given by facsimile or by electronic mail.
11. Governing Law; Severability. This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of Texas. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, the remaining provisions hereof will continue in full force and effect.
12. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. This Exercise Notice, the Plan, the Restricted Stock Purchase Agreement, the Option Agreement and the Investment Representation Statement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionees interest except by means of a writing signed by the Company and Optionee.
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OPTIONEE: | MAVENIR SYSTEMS, INC. | |||||
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EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE | : | |||||
COMPANY | : | MAVENIR SYSTEMS, INC. | ||||
SECURITY | : | COMMON STOCK | ||||
AMOUNT | : | |||||
DATE | : |
In connection with the purchase of the above-listed Securities, the undersigned Optionee represents to the Company the following:
(a) Optionee is aware of the Companys business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Optionee is acquiring these Securities for investment for Optionees own account only and not with a view to, or for resale in connection with, any distribution thereof within the meaning of the Securities Act.
(b) Optionee acknowledges and understands that the Securities constitute restricted securities under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Optionees investment intent as expressed herein. In this connection, Optionee understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Optionees representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Optionee further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Optionee further acknowledges and understands that the Company is under no obligation to register the Securities. Optionee understands that the certificate evidencing the Securities will be imprinted with the legends set forth in Section 7(a) of the Exercise Notice and with any other legend required under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of restricted securities acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to the Optionee, the exercise will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including (1) the resale being made through a broker in an unsolicited brokers transaction or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than one year after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than two years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph immediately above.
(d) Optionee further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Optionee understands that no assurances can be given that any such other registration exemption will be available in such event.
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EXHIBIT C-1
MAVENIR SYSTEMS, INC.
2005 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made between (the Purchaser) and Mavenir Systems, Inc. (the Company) or its assignees of rights hereunder as of , .
Unless otherwise defined herein, the terms defined in the 2005 Stock Plan shall have the same defined meanings in this Agreement.
R E C I T A L S
A. Pursuant to the exercise of the option granted to Purchaser under the Plan and pursuant to the Option Agreement dated by and between the Company and Purchaser with respect to such grant (the Option), which Plan and Option Agreement are hereby incorporated by reference, Purchaser has elected to purchase of those shares of Common Stock which have not become vested under the vesting schedule set forth in the Option Agreement (Unvested Shares). The Unvested Shares and the shares subject to the Option Agreement that have become vested are sometimes collectively referred to herein as the Shares.
B. As required by the Option Agreement, as a condition to Purchasers election to exercise the option, Purchaser must execute this Agreement, which sets forth the rights and obligations of the parties with respect to Shares acquired upon exercise of the Option.
1. Repurchase Option.
(a) If Purchasers status as a Service Provider is terminated for any reason, including for death and Disability, the Company shall have the right and option for ninety (90) days from such date to purchase from Purchaser, or Purchasers personal representative, as the case may be, all of the Purchasers Unvested Shares as of the date of such termination at the lower of (i) the fair market value of the Unvested Shares on the date of repurchase and (ii) the price paid by the Purchaser for such Shares (the Repurchase Option).
(b) Upon the occurrence of such termination, the Company may exercise its Repurchase Option by delivering personally or by registered mail, to Purchaser (or his transferee or legal representative, as the case may be) with a copy to the Escrow Agent described in Section 2 below, a notice in writing indicating the Companys intention to exercise the Repurchase Option AND, at the Companys option, (i) by delivering to the Purchaser (or the Purchasers transferee or legal representative) a check in the amount of the aggregate repurchase price, (ii) by the Company canceling an amount of the Purchasers indebtedness to the Company equal to the aggregate repurchase price or (iii) by a combination of (i) and (ii) so that the combined payment and cancellation of indebtedness equals such aggregate repurchase price. Upon delivery of such notice and payment of the aggregate repurchase price in any of the ways described above, the Company
shall become the legal and beneficial owner of the Unvested Shares being repurchased and the rights and interests therein or relating thereto, and the Company shall have the right to retain and transfer to its own name the number of Unvested Shares being repurchased by the Company.
(c) Whenever the Company shall have the right to repurchase Unvested Shares hereunder, the Company may designate and assign one or more employees, officers, directors or stockholders of the Company or other persons or organizations to exercise all or a part of the Companys Repurchase Option under this Agreement and purchase all or a part of such Unvested Shares.
(d) If the Company does not elect to exercise the Repurchase Option conferred above by giving the requisite notice within ninety (90) days following the termination, the Repurchase Option shall terminate.
(e) The Repurchase Option shall terminate in accordance with the vesting schedule contained in Purchasers Option Agreement.
2. Transferability of the Shares; Escrow.
(a) Purchaser hereby authorizes and directs the Secretary of the Company, or such other person designated by the Company, to transfer the Unvested Shares as to which the Repurchase Option has been exercised from Purchaser to the Company.
(b) To insure the availability for delivery of Purchasers Unvested Shares upon repurchase by the Company pursuant to the Repurchase Option under Section 1, Purchaser hereby appoints the Secretary, or any other person designated by the Company as Escrow Agent (the Escrow Agent), as its attorney-in-fact to sell, assign and transfer unto the Company, such Unvested Shares, if any, repurchased by the Company pursuant to the Repurchase Option and shall, upon execution of this Agreement, deliver and deposit with the Escrow Agent, the share certificates representing the Unvested Shares, together with the stock assignment duly endorsed in blank, attached hereto as Exhibit C-2. The Unvested Shares and stock assignment shall be held in escrow by the Escrow Agent, pursuant to the Joint Escrow Instructions of the Company and Purchaser attached as Exhibit C-3 hereto, until the Company exercises its Repurchase Option, until such Unvested Shares are vested, or until such time as this Agreement no longer is in effect. As a further condition to the Companys obligations under this Agreement, the spouse of the Purchaser, if any, shall execute and deliver to the Company the Consent of Spouse attached hereto as Exhibit C-4. Upon vesting of the Unvested Shares, the Escrow Agent shall promptly deliver to the Purchaser the certificate or certificates representing such Shares in the Escrow Agents possession belonging to the Purchaser, and the Escrow Agent shall be discharged of all further obligations hereunder; provided, however, that the Escrow Agent shall nevertheless retain such certificate or certificates as Escrow Agent if so required pursuant to other restrictions imposed pursuant to this Agreement.
(c) Neither the Company nor the Escrow Agent shall be liable for any act it may do or omit to do with respect to holding the Shares in escrow and while acting in good faith and in the exercise of its judgment.
(d) Transfer or sale of the Shares is subject to restrictions on transfer imposed by any applicable state and federal securities laws. Any transferee shall hold such Shares subject to all the provisions hereof and the Exercise Notice executed by the Purchaser with respect to any Unvested Shares purchased by Purchaser and shall acknowledge the same by signing a copy of this Agreement.
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3. Ownership, Voting Rights, Duties. This Agreement shall not affect in any way the ownership, voting rights or other rights or duties of Purchaser, except as specifically provided herein.
4. Legends. The share certificate evidencing the Shares issued hereunder shall be endorsed with the following legend (in addition to any legend required under applicable federal and state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS, IN THE OPINION OF COUNSEL (WHICH MAY BE COUNSEL TO THE CORPORATION) SATISFACTORY TO THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.
5. Adjustment for Stock Split. All references to the number of Shares and the purchase price of the Shares in this Agreement shall be appropriately adjusted to reflect any stock split, stock dividend or other change in the Shares that may be made by the Company pursuant to Section 12 of the Plan after the date of this Agreement.
6. Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be delivered personally by hand or by courier, mailed by United States first-class mail, postage prepaid, sent by facsimile or sent by electronic mail directed (a) if to the Purchaser, at the Purchasers address, facsimile number or electronic mail address set forth on the signature page to the Option Agreement, or at such other address, facsimile number or electronic mail address as the Purchaser may designate by ten (10) days advance written notice to the Company or (b) if to the Company, to the address of its principal executive office, or at such other address as the Company may designate by ten (10) days advance written notice to the Purchaser. All such notices and other communications shall be deemed given upon personal delivery, on the date of mailing, upon confirmation of facsimile transfer or when directed to the electronic mail address set forth on the signature page to the Option Agreement. With respect to any notice given by the Company under any provision of the Texas Business Corporation Act or the Companys charter or bylaws, the Purchaser agrees that such notice may given by facsimile or by electronic mail.
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7. Survival of Terms. This Agreement shall apply to and bind Purchaser and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors.
8. Section 83(b) Election. Purchaser hereby acknowledges that he or she has been informed that, with respect to the exercise of an Option for Unvested Shares, an election (the Election) may be filed by the Purchaser with the Internal Revenue Service, within 30 days of the purchase of the exercised Shares, electing pursuant to Section 83(b) of the Code to be taxed currently on any difference between the purchase price of the exercised Shares and their Fair Market Value on the date of purchase. In the case of a Nonstatutory Stock Option, this will result in a recognition of taxable income to the Purchaser on the date of exercise, measured by the excess, if any, of the Fair Market Value of the exercised Shares, at the time the Option is exercised over the purchase price for the exercised Shares. Absent such an Election, taxable income will be measured and recognized by Purchaser at the time or times on which the Companys Repurchase Option lapses. In the case of an Incentive Stock Option, such an Election will result in a recognition of income to the Purchaser for alternative minimum tax purposes on the date of exercise, measured by the excess, if any, of the Fair Market Value of the exercised Shares, at the time the option is exercised, over the purchase price for the exercised Shares. Absent such an Election, alternative minimum taxable income will be measured and recognized by Purchaser at the time or times on which the Companys Repurchase Option lapses. Purchaser is strongly encouraged to seek the advice of his or her own tax consultants in connection with the purchase of the Shares and the advisability of filing of the Election under Section 83(b) of the Code. A form of Election under Section 83(b) is attached hereto as Exhibit C-5 for reference.
PURCHASER ACKNOWLEDGES THAT IT IS PURCHASERS SOLE RESPONSIBILITY AND NOT THE COMPANYS TO FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON PURCHASERS BEHALF.
9. Representations. Purchaser has reviewed with his own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. Purchaser is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Purchaser understands that he (and not the Company) shall be responsible for his own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.
10. Governing Law. This Agreement shall be governed by the internal substantive laws, but not the choice of law rules, of Texas.
Purchaser represents that he has read this Agreement and is familiar with its terms and provisions. Purchaser hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under this Agreement.
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IN WITNESS WHEREOF, this Agreement is deemed made as of the date first set forth above.
OPTIONEE: | MAVENIR SYSTEMS, INC. | |||
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EXHIBIT C-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, , hereby sell, assign and transfer unto Mavenir Systems, Inc. shares of the Common Stock of Mavenir Systems, Inc. standing in my name of the books of said corporation represented by Certificate No. herewith and do hereby irrevocably constitute and appoint , to transfer the said stock on the books of the within named corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted Stock Purchase Agreement between Mavenir Systems, Inc. and the undersigned dated , .
Dated: |
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INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise its repurchase option, as set forth in the Agreement, without requiring additional signatures on the part of the Purchaser.
EXHIBIT C-3
JOINT ESCROW INSTRUCTIONS
,
Mavenir Systems, Inc.
1651 Glenville Road, Suite 201
Richardson, TX 75081
Attn: Secretary
Dear Secretary:
As Escrow Agent for both Mavenir Systems, Inc. (the Company), and the undersigned purchaser of stock of the Company (the Purchaser), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Restricted Stock Purchase Agreement (Agreement) between the Company and the undersigned, in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred to collectively for convenience herein as the Company) exercises the Companys repurchase option set forth in the Agreement, the Company shall give to Purchaser and you a written notice specifying the number of shares of stock to be purchased, the purchase price, and the time for a closing hereunder at the principal office of the Company. Purchaser and the Company hereby irrevocably authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver the stock assignments, together with the certificate evidencing the shares of stock to be transferred, to the Company or its assignee, against the simultaneous delivery to you of the purchase price (by cash, a check, or some combination thereof) for the number of shares of stock being purchased pursuant to the exercise of the Companys repurchase option.
3. Purchaser irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you as Purchasers attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated, including but not limited to the filing with any applicable state blue sky authority of any required applications for consent to, or notice of transfer of, the securities. Subject to the provisions of this paragraph 3, Purchaser shall exercise all rights and privileges of a stockholder of the Company while the stock is held by you.
4. Upon written request of the Purchaser, but no more than once per calendar year, unless the Companys repurchase option has been exercised, you will deliver to Purchaser a certificate or certificates representing so many shares of stock as are not then subject to the Companys repurchase option. Within 120 days after cessation of Purchasers continuous
employment by or services to the Company, or any parent or subsidiary of the Company, you will deliver to Purchaser a certificate or certificates representing the aggregate number of shares held or issued pursuant to the Agreement and not purchased by the Company or its assignees pursuant to exercise of the Companys repurchase option.
5. If at the time of termination of this escrow you should have in your possession any documents, securities or other property belonging to Purchaser, you shall deliver all of the same to Purchaser and shall be discharged of all further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.
10. You shall not be liable for the outlawing of any rights under the Statute of Limitations with respect to these Joint Escrow Instructions or any documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be an officer or agent of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized
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and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at the following addresses or at such other addresses as a party may designate by ten days advance written notice to each of the other parties hereto.
16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by the internal substantive laws, but not the choice of law rules, of Texas.
PURCHASER: | MAVENIR SYSTEMS, INC. | |||
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Dated: , |
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EXHIBIT C-4
CONSENT OF SPOUSE
I, , spouse of , have read and approve the foregoing Restricted Stock Purchase Agreement (the Agreement). In consideration of granting of the right to my spouse to purchase shares of Mavenir Systems, Inc., as set forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreement and agree to be bound by the provisions of the Agreement insofar as I may have any rights in said Agreement or any shares issued pursuant thereto under the community property laws or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreement.
Dated: |
, | Signature: |
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EXHIBIT C-5
ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Sections 55 and 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayers gross income or alternative minimum taxable income, as the case may be, for the current taxable year the amount of any compensation taxable to taxpayer in connection with taxpayers receipt of the property described below:
1. | The name, address, taxpayer identification number and taxable year of the undersigned are as follows: |
NAME: | TAXPAYER: | SPOUSE: | ||
ADDRESS: | ||||
IDENTIFICATION NO.: | TAXPAYER: | SPOUSE: | ||
TAXABLE YEAR: |
2. | The property with respect to which the election is made is described as follows: shares (the Shares) of the Common Stock of Mavenir Systems, Inc. (the Company). |
3. | The date on which the property was transferred is: , . |
4. | The property is subject to the following restrictions: |
The Shares may not be transferred and are subject to forfeiture under the terms of an agreement between the taxpayer and the Company. These restrictions lapse upon the satisfaction of certain conditions contained in such agreement.
5. | The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: $ . |
6. | The amount (if any) paid for such property is: $ . |
The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigneds receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.
Dated: , |
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Taxpayer |
The undersigned spouse of taxpayer joins in this election.
Dated: , |
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Spouse of Taxpayer |
Exhibit 10.4
MAVENIR SYSTEMS, INC.
2005 STOCK PLAN
STOCK OPTION AGREEMENT
(Standard)
Unless otherwise defined herein, the terms defined in the 2005 Stock Plan shall have the same defined meanings in this Stock Option Agreement.
I. | NOTICE OF STOCK OPTION GRANT |
«Optionee»
The undersigned Optionee has been granted an Option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows:
Date of Grant | : | «Date_of_Grant» | ||||
Vesting Commencement Date | : | «Vesting_Commencement_Date» | ||||
Exercise Price per Share | : | «Price» | ||||
Total Number of Shares Granted | : | «Shares» | ||||
Total Exercise Price | : | «ExercisePrice» | ||||
Type of Option | : | xIncentive Stock Option | ||||
: | ¨Nonstatutory Stock Option | |||||
Term/Expiration Date | : | Tenth Anniversary of Date of Grant |
Standard Vesting Schedule: One fourth (1/4th) of the shares of Common Stock subject to the option shall become vested on the first anniversary of the Vesting Commencement Date and an additional one forty-eighth (1/48th) of the shares of Common Stock subject to the option shall become vested on the corresponding day of each calendar month thereafter or, to the extent such calendar month does not have the corresponding day, on the last day of such calendar month, until all such shares are vested and exercisable, provided that the Optionee continues to be a Service Provider (as defined in the Companys 2005 Stock Plan) on such dates.
Termination Period: This Option shall be exercisable for three (3) months after Optionee ceases to be a Service Provider. Upon Optionees death or Disability, this Option may be exercised for twelve (12) months after Optionee ceases to be a Service Provider. In no event may Optionee exercise this Option after the Term/Expiration Date as provided above.
Stock Option Agreement Standard |
II. | AGREEMENT |
1. Grant of Option.
(a) The Administrator hereby grants to the Optionee named in the Notice of Grant (the Optionee), an option (the Option) to purchase the number of Shares set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the Exercise Price), and subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 14(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail.
(b) If designated in the Notice of Grant as an Incentive Stock Option (ISO), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated as a Nonstatutory Stock Option (NSO).
2. Exercise of Option.
(a) Right to Exercise. This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise.
(i) This Option shall be exercisable by delivery of an exercise notice in the form attached as Exhibit A (the Exercise Notice) which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised (the Exercised Shares), and such other representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price.
(ii) No Shares shall be issued pursuant to the exercise of this Option unless such issuance and such exercise comply with Applicable Laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares.
3. Optionees Representations. In the event the Shares have not been registered under the Securities Act at the time this Option is exercised, the Optionee shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B.
4. Market Standoff Agreement. Optionee hereby agrees that, if requested by the managing underwriter, it will not, without the prior written consent of the Company, during the period commencing on the date of the final prospectus relating to the Companys initial public offering or any secondary public offering, as applicable, and ending on the date specified by the Company and
- 2 - | Stock Option Agreement Standard |
the managing underwriter (such period not to exceed one hundred eighty (180) calendar days in the case of an initial public offering and, solely in the case of a holder of shares of the Companys Common Stock, ninety (90) calendar days in the case of any secondary public offering (or such other period as may be requested by the Company or managing underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto)) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired), whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of securities, in cash or otherwise. Optionee agrees that any transferee of the Option or shares acquired pursuant to the Option shall be bound by this Section 4.
5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee:
(a) cash or check;
(b) consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or
(c) surrender of other Shares which, (i) in the case of Shares acquired from the Company, either directly or indirectly, have been owned by the Optionee for more than six (6) months on the date of surrender, and (ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Exercised Shares.
6. Restrictions on Exercise. This Option may not be exercised until such time as the Plan has been approved by the stockholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any Applicable Law.
7. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option.
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9. Tax Obligations.
(a) Withholding Taxes. Optionee agrees to make appropriate arrangements with the Company (or the Parent or Subsidiary employing or retaining Optionee) for the satisfaction of all federal, state, local and foreign income and employment tax withholding requirements applicable to the Option exercise. Optionee acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.
(b) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (1) the date two years after the Date of Grant or (2) the date one year after the date of exercise, the Optionee shall immediately notify the Company in writing of such disposition. Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee.
(i) Code Section 409A. Under Code Section 409A, an Option that vests after December 31, 2004 that was granted with a per Share exercise price that is determined by the Internal Revenue Service (the IRS) to be less than the fair market value of a Share on the date of grant (a discount option) is considered deferred compensation. An Option that is a discount option may result in (i) income recognition by the Optionee prior to the exercise of the Option (when the Option vests), (ii) an additional twenty percent (20%) income tax, and (iii) potential interest charges. Optionee acknowledges that the Company cannot and has not guaranteed that the IRS will determine that the per Share exercise price of this Option equals or exceeds the fair market value of a Share on the date of grant. Optionee agrees that if the IRS determines that the Option was granted with a per Share exercise price that was less than the fair market value of a Share on the date of grant, Optionee will be solely responsibly for any of costs related to such a determination.
10. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionees interest except by means of a writing signed by the Company and Optionee. This Option Agreement is governed by the internal substantive laws but not the choice of law rules of the State of Texas.
11. No Guarantee of Continued Service. OPTIONEE AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS OPTION AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY
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WAY WITH OPTIONEES RIGHT OR THE COMPANYS RIGHT TO TERMINATE OPTIONEES RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
12. Acknowledgment. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated below.
OPTIONEE: | MAVENIR SYSTEMS, INC. | |||||
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- 5 - | Stock Option Agreement Standard |
EXHIBIT A
2005 STOCK PLAN
EXERCISE NOTICE
Mavenir Systems, Inc.
1651 Glenville Road, Suite 201
Richardson, TX 75081
Attn: Secretary
1. Exercise of Option. Effective as of today, , , the undersigned (Optionee) hereby elects to exercise Optionees option to purchase shares of the Common Stock (the Shares) of Mavenir Systems, Inc. (the Company) under and pursuant to the 2005 Stock Plan (the Plan) and the Stock Option Agreement dated , (the Option Agreement).
2. Delivery of Payment. Optionee herewith delivers to the Company the full purchase price of the Shares, as set forth in the Option Agreement, and any and all withholding taxes due in connection with the exercise of the Option.
3. Representations of Optionee. Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares shall be issued to the Optionee as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in Section 12 of the Plan.
5. Companys Right of First Refusal. Before any Shares held by Optionee or any transferee (either being sometimes referred to herein as the Holder) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section 5 (the Right of First Refusal).
(a) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the Company a written notice (the Notice) stating: (i) the Holders bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (Proposed Transferee); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the Offered Price), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase up to all of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.
(c) Purchase Price. The purchase price (the Purchase Price) for the Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of the Notice or in the manner and at the times set forth in the Notice.
(e) Holders Right to Transfer. To the extent the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within 120 days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary contained in this Section notwithstanding, the transfer of any or all of the Shares during the Optionees lifetime or on the Optionees death by will or intestacy to the Optionees immediate family or a trust for the benefit of the Optionees immediate family shall be exempt from the provisions of this Section. Immediate Family as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section, and there shall be no further transfer of such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First Refusal shall terminate as to any Shares upon the first sale of Common Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act.
6. Tax Consultation. Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionees purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.
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7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS, IN THE OPINION OF COUNSEL (WHICH MAY BE COUNSEL TO THE CORPORATION) SATISFACTORY TO THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, INCLUDING A 180-DAY MARKET STANDOFF AGREEMENT, AND A RIGHT OF FIRST REFUSAL HELD BY THE CORPORATION AS SET FORTH IN AN EXERCISE NOTICE BETWEEN THE CORPORATION AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate stop transfer instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
8. Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Exercise Notice shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns.
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9. Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Optionee or by the Company forthwith to the Administrator which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties.
10. Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be delivered personally by hand or by courier, mailed by United States first-class mail, postage prepaid, sent by facsimile or sent by electronic mail directed (a) if to the Optionee, at the Optionees address, facsimile number or electronic mail address set forth on the signature page to the Option Agreement, or at such other address, facsimile number or electronic mail address as the Optionee may designate by ten (10) days advance written notice to the Company or (b) if to the Company, to its principal executive office, or at such other address as the Company may designate by ten (10) days advance written notice to the Optionee. All such notices and other communications shall be deemed given upon personal delivery, on the date of mailing, upon confirmation of facsimile transfer or when directed to the electronic mail address set forth on the signature page to the Option Agreement. With respect to any notice given by the Company under any provision of the Texas Business Corporation Act or the Companys charter or bylaws, the Optionee agrees that such notice may given by facsimile or by electronic mail.
11. Governing Law; Severability. This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of Texas. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, the remaining provisions hereof will continue in full force and effect.
12. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. This Exercise Notice, the Plan, the Option Agreement and the Investment Representation Statement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionees interest except by means of a writing signed by the Company and Optionee.
Submitted by: | Accepted by: | |||||
OPTIONEE: | MAVENIR SYSTEMS, INC. | |||||
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Signature | Its: |
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EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE: |
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COMPANY: | MAVENIR SYSTEMS, INC. | |||
SECURITY: | COMMON STOCK | |||
AMOUNT: |
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DATE: |
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In connection with the purchase of the above-listed Securities, the undersigned Optionee represents to the Company the following:
1. Optionee is aware of the Companys business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Optionee is acquiring these Securities for investment for Optionees own account only and not with a view to, or for resale in connection with, any distribution thereof within the meaning of the Securities Act.
2. Optionee acknowledges and understands that the Securities constitute restricted securities under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Optionees investment intent as expressed herein. In this connection, Optionee understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Optionees representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Optionee further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Optionee further acknowledges and understands that the Company is under no obligation to register the Securities. Optionee understands that the certificate evidencing the Securities will be imprinted with the legends set forth in Section 7(a) of the Exercise Notice and any other legend required under applicable state securities laws.
3. Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of restricted securities acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to the Optionee, the exercise will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including (1) the resale being made through a broker in an unsolicited brokers transaction or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than one year after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than two years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph immediately above.
4. Optionee further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Optionee understands that no assurances can be given that any such other registration exemption will be available in such event.
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- 2 -
Exhibit 10.5
MAVENIR SYSTEMS, INC.
2005 STOCK PLAN
STOCK OPTION AGREEMENT FOR UK SERVICE PROVIDERS
(Early Exercise)
Unless otherwise defined herein, the terms defined in the 2005 Stock Plan shall have the same defined meanings in this Option Agreement.
I. | NOTICE OF STOCK OPTION GRANT |
«Optionee»
The undersigned Optionee has been granted an Option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan, this Option Agreement and the Joint Election (as defined in section 11 of this Option Agreement), as follows:
Date of Grant | : | «Date_of_Grant» | ||||
Vesting Commencement Date | : | «Vesting_Commencement_Date» | ||||
Exercise Price per Share | : | «Price» | ||||
Total Number of Shares Granted | : | «Shares» | ||||
Total Exercise Price | : | «ExercisePrice» | ||||
Type of Option | : | |||||
: | xNonstatutory Stock Option (UK Unapproved Option) | |||||
Term/Expiration Date | : | Tenth Anniversary of Date of Grant |
Standard Vesting Schedule: One fourth (1/4th) of the shares of Common Stock subject to the option shall become vested on the first anniversary of the Vesting Commencement Date and an additional one forty-eighth (1/48th) of the shares of Common Stock subject to the option shall become vested on the corresponding day of each calendar month thereafter or, to the extent such calendar month does not have the corresponding day, on the last day of such calendar month, until all such shares are vested and exercisable, provided that the Optionee continues to be a Service Provider (as defined in the Companys 2005 Stock Plan) on such dates.
Termination Period: This Option shall be exercisable for thirty (30) days after Optionee ceases to be a Service Provider. Upon Optionees death or Disability, this Option may be exercised for twelve (12) months after Optionee ceases to be a Service Provider. In no event may Optionee exercise this Option after the Term/Expiration Date as provided above.
II. | AGREEMENT |
1. Grant of Option.
(a) The Administrator of the Company hereby grants to the Optionee named in the Notice of Grant (the Optionee), an option (the Option) to purchase the number of Shares set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the Exercise Price), and subject to the terms and conditions of the Plan and Joint Election, which are incorporated herein by reference. Subject to Section 15(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail SAVE THAT in respect of:
(a) any payment or other matter relating to the Option Tax Liability (as defined in section 10 of this Option Agreement), the terms of this Option Agreement shall prevail; and
(b) any employers NICs (as defined in section 10 of this Option Agreement), the terms of the Joint Election shall prevail.
2. Exercise of Option. This Option shall be exercisable during its term in accordance with the provisions of the Plan as follows:
(a) Right to Exercise.
(i) Subject to subsections 2(a)(ii) and 2(a)(iii) below, this Option shall be exercisable cumulatively according to the vesting schedule set forth in the Notice of Grant. Alternatively, at the election of the Optionee, this Option may be exercised in whole or in part at any time as to Shares which have not yet vested. Vested Shares shall not be subject to the Companys repurchase right (as set forth in the Restricted Stock Purchase Agreement, attached hereto as Exhibit C-1).
(ii) As a condition to exercising this Option for unvested Shares, the Optionee shall execute the Restricted Stock Purchase Agreement and the Section 431 election attached hereto Exhibit C-5 or in such form as HM Revenue and Customs may require from time to time.
(iii) This Option may not be exercised for a fraction of a Share.
(b) Method of Exercise. This Option shall be exercisable by delivery of an exercise notice in the form attached as Exhibit A (the Exercise Notice) which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised, and such other representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares and an executed Section 431 election in such form as attached hereto as Exhibit C-5 or such other form as HM Revenue and Customs may require from time to time. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price and an executed Section 431 election.
- 2 - | Stock Option Agreement - Early Exercise |
No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise complies with Applicable Laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares.
3. Optionees Representations. In the event the Shares have not been registered under the Securities Act of 1933, as amended, at the time this Option is exercised, the Optionee shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B.
4. Market Standoff Agreement. Optionee hereby agrees that Optionee shall not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Common Stock (or other securities) of the Company or enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Common Stock (or other securities) of the Company held by Optionee (other than those included in the registration) for a period specified by the representative of the underwriters of Common Stock (or other securities) of the Company not to exceed one hundred eighty (180) days following the effective date of any registration statement of the Company filed under the Securities Act. Optionee agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, Optionee shall provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Companys securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section 4 shall not apply to a registration relating solely to (i) employee benefit plans or (ii) an SEC Rule 145 transaction. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of said one hundred eighty (180) day period. Optionee agrees that any transferee of the Option or shares acquired pursuant to the Option shall be bound by this Section 4.
5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) cheque;
(c) consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or
(d) surrender of other Shares which, (i) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six (6) months on the date of surrender, and (ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Shares acquired upon exercise of the Option.
-3- | Stock Option Agreement - Early Exercise |
Payment of any liability arising under the terms of the Joint Election will be pursuant to the provisions of the Joint Election.
6. Restrictions on Exercise. This Option may not be exercised until such time as the Plan has been approved by the Board of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any Applicable Law.
7. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of the Plan, this Option Agreement and the Joint Election shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option.
9. Tax Consequences. The Optionee should obtain advice from an appropriate independent professional adviser in relation to the United Kingdom taxation implications of the grant, exercise, assignment, release, cancellation or any other disposal of this Option (the Trigger Event) pursuant to the Plan and on any subsequent sale of the Option Shares. The Optionee should also take advice in respect of the United Kingdom taxation indemnity provisions comprising Sections 10(a) and 10(b) below and the payment of employer NICs under Section 11 below.
10. Optionees Taxation Indemnity
(a) To the extent permitted by law, the Optionee hereby agrees to indemnify and keep indemnified the Company and the Company as trustee for and on behalf of any related corporation, in respect of any liability or obligation of the Company and/or any related corporation to account for income tax (under PAYE) or any other taxation provisions and primary class 1 National Insurance Contributions (NICs) in the United Kingdom to the extent arising from a Trigger Event or arising out of the acquisition, retention and disposal of the Shares acquired pursuant to this Option.
(b) The Company shall not be obliged to allot and issue any Shares or any interest in Shares pursuant to the exercise of an Option unless and until the Optionee has paid to the Company such sum as is, in the opinion of the Company, sufficient to indemnify the Company in full against any liability the Company has to account to HM Revenue and Customs for any amount of, or representing, income tax and/or primary NICs (the Option Tax Liability), or the Optionee has made such other arrangement as in the opinion of the Company will ensure that the full amount of any Option Tax Liability will be recovered from the Optionee within such period as the Company may then determine.
-4- | Stock Option Agreement - Early Exercise |
(c) In the absence of any such other arrangement being made, the Company shall have the right to retain out of the aggregate number of shares to which the Optionee would have otherwise been entitled upon the exercise of an Option, such number of Shares as, in the opinion of the Company, will enable the Company to sell as agent for the Optionee (at the best price which can reasonably expect to be obtained at the time of the sale) and to pay over to the Company sufficient monies out of the net proceeds of sale, after deduction of all fees, commissions and expenses incurred in relation to such sale, to satisfy the Optionees liability under such indemnity.
11. Employers NICs. As a condition to participation in the Plan and the exercise of this Option, Optionee hereby agrees to accept all liability for and pay all secondary Class 1 National Insurance Contributions which would otherwise be payable by the Company (or any successor or any Parent or Subsidiary employing or previously employing Optionee) with respect to the exercise of the Option or any other event giving rise to taxation under the Option (the Employer NIC). Optionee agrees that Optionee will execute, within the time period specified by the Company, a joint election (the Joint Election?) provided by the Company as approved by HM Revenue and Customs and any other consent or elections required to effect the transfer of the Employer NIC. Optionee further agrees to execute such other joint elections as may be required between Optionee and any successor to the Company and/or Optionees employer. Optionee further agrees that the Company and/or Optionees employer may collect the Employer NIC by any of the means set forth in the Joint Election.
12. Data Privacy.
(a) Optionee hereby explicitly and unambiguously consents to the collection, use, disclosure and transfer, in electronic or other form, of Optionees personal data as described in this Agreement by and among, as applicable, Optionees employer, the Company and its Parent and Subsidiaries for the exclusive purpose of implementing, administering and managing Optionees participation in the Plan.
(b) Optionee understands that Optionees employer, the Company and its Parent and Subsidiaries, as applicable, hold certain personal information about Optionee regarding Optionees employment, the nature and amount of Optionees compensation and the fact and conditions of Optionees participation in the Plan, including, but not limited to, Optionees name, home address, telephone number and e-mail address, date of birth, social insurance number or other identification number, salary, nationality, job title, any equity or directorships held in the Company and its Parent and Subsidiaries, details of all options or any other entitlement to equity awarded, canceled, exercised, vested, unvested or outstanding in Optionees favor, for the purpose of implementing, administering and managing the Plan (the Data). Optionee understands that the Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in Optionees country, or elsewhere, and that this country may have different data privacy laws and protections than Optionees country. Optionee understands that Optionee may request a list with the names and addresses of any potential recipients of the Data by contacting Optionees local human resources representative. Optionee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing Optionees participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other
-5- | Stock Option Agreement - Early Exercise |
third party. Optionee understands that the Data will be held only as long as is necessary to implement, administer and manage Optionees participation in the Plan. Optionee understands that Optionee may, at any time, view the Data, request additional information about the storage and processing of the Data, require any necessary amendments to the Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing Optionees local human resources representative. Optionee understands, however, that refusing or withdrawing Optionees consent may affect Optionees ability to participate in the Plan. For more information on the consequences of Optionees refusal to consent or withdrawal of consent, Optionee understands that Optionee may contact Optionees local human resources representative.
13. No Entitlement or Claims for Compensation. In accepting the grant of this Option, Optionee acknowledges the following:
(a) The Plan is established voluntarily by the Company, the grant of options under the Plan is made at the discretion of the Company and the Plan may be modified, amended, suspended or terminated by the Company at any time.
(b) The grant of this Option is voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted repeatedly in the past.
(c) All decisions with respect to future option grants, if any, will be at the sole discretion of the Company.
(d) Optionee is voluntarily participating in the Plan.
(e) This Option and any Shares acquired under the Plan are extraordinary items that do not constitute compensation of any kind for services of any kind rendered to the Company or any Parent or Subsidiary (including, as applicable, Optionees employer) and which are outside the scope of Optionees employment contract, if any.
(f) This Option and any Shares acquired under the Plan are not to be considered part of Optionees normal or expected compensation or salary for any purpose, including, but not limited to, calculating any severance, resignation, termination, payment in lieu of notice, redundancy, dismissal, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments.
(g) This Option and any Shares subject to the Option are not intended to replace any pension rights or compensation.
(h) In the event that Optionees employer is not the Company, the grant of this Option will not be interpreted to form an employment contract or relationship with the Company and, furthermore, the grant of this Option will not be interpreted to form an employment contract with Optionees employer or any Parent or Subsidiary of the Company.
(i) The future value of the underlying Shares is unknown and cannot be predicted with certainty.
-6- | Stock Option Agreement - Early Exercise |
(j) Optionee shall have no rights, claim or entitlement to compensation or damages as a result of Optionees cessation as a Service Provider for any reason whatsoever, whether or not in breach of contract or local labor law, insofar as these rights, claim or entitlement arise or may arise from Optionee ceasing to have rights under or be entitled to exercise this Option as a result of such cessation or loss or diminution in value of the Option or any of the Shares purchased through exercise of the Option as a result of such cessation, and Optionee irrevocably releases Optionees employer, the Company and its Parent and Subsidiaries, as applicable, from any such rights, entitlement or claim that may arise. If, notwithstanding the foregoing, any such right or claim is found by a court of competent jurisdiction to have arisen, then, by signing this Option Agreement, Optionee shall be deemed to have irrevocably waived Optionees entitlement to pursue such rights or claim.
14. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan, this Option Agreement and the Joint Election constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionees interest except by means of a writing signed by the Company and Optionee. This Option Agreement is governed by the internal substantive laws but not the choice of law rules of Delaware.
15. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEES RIGHT OR THE COMPANYS RIGHT TO TERMINATE OPTIONEES RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan, and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Option or the Joint Election. Optionee further agrees to notify the Company upon any change in the residence address indicated below.
-7- | Stock Option Agreement - Early Exercise |
This Agreement has been executed and delivered as a deed on the date written above.
SIGNED AS A DEED by | SIGNED AS A DEED by | |||||
OPTIONEE: | MAVENIR SYSTEMS, INC. | |||||
acting by the undermentioned person acting on the authority of the company in accordance with the laws of the territory of its incorporation. | ||||||
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Signature | ||||||
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Its: | |||||
Print Name | ||||||
Address*: | ||||||
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Facsimile #: |
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In the presence of:
Witness signature:
Name:
Address:
Occupation:
-8- | Stock Option Agreement - Early Exercise |
EXHIBIT A
2005 STOCK PLAN
EXERCISE NOTICE
Mavenir Systems, Inc.
1651 North Glenville
Suite 210
Richardson, TX 75081
Attn: Secretary
1. Exercise of Option. Effective as of today, , , the undersigned (Optionee) hereby elects to exercise Optionees option (the Option) to purchase shares of the Common Stock (the Shares) of Mavenir Systems, Inc. (the Company) under and pursuant to the 2005 Stock Plan (the Plan), the Stock Option Agreement dated , (the Option Agreement) and the Joint Election (the Joint Election).
2. Delivery of Payment. Optionee herewith delivers to the Company the full purchase price of the Shares as set forth in the Option Agreement.
3. Tax Indemnity. Optionee hereby indemnifies the Company in respect of the amount of any Option Tax Liability which may arise as a consequence of or in connection with this exercise of the option (and, for the purposes of this Exercise Notice, the expression Option Tax Liability has the same meaning as it has in the Option Agreement).
4. Representations of Optionee. Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
5. Rights as Stockholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the optioned stock, notwithstanding the exercise of the Option. The Shares shall be issued to the Optionee as soon as practicable after the Option is exercised. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in Section 13 of the Plan.
6. Companys Right of First Refusal. Before any Shares held by Optionee or any transferee (either being sometimes referred to herein as the Holder) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section (the Right of First Refusal).
(a) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the Company a written notice (the Notice) stating: (i) the Holders bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee
(Proposed Transferee); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the Offered Price), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase up to all of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.
(c) Purchase Price. The purchase price (Purchase Price) for the Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by cheque), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within 30 days after receipt of the Notice or in the manner and at the times set forth in the Notice.
(e) Holders Right to Transfer. To the extent that the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within 120 days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary contained in this Section notwithstanding, the transfer of any or all of the Shares during the Optionees lifetime or on the Optionees death by will or intestacy to the Optionees immediate family or a trust for the benefit of the Optionees immediate family shall be exempt from the provisions of this Section. Immediate Family as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section, and there shall be no further transfer of such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First Refusal shall terminate as to any Shares upon the first sale of Common Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended.
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7. Market Standoff Agreement. Optionee hereby agrees that it will not, without the prior written consent of the managing underwriter, during the one hundred eighty (180) day period (or such other period as may be requested in writing by the managing underwriter and agreed to in writing by the Company) commencing on the date of the final prospectus relating to the Companys initial public offering (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired), whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of securities, in cash or otherwise. Optionee agrees to execute an agreement(s) reflecting (i) and (ii) above as may be requested by the managing underwriter at the time of the initial public offering, and further agrees that the Company may impose stop transfer instructions with its transfer agent in order to enforce the covenants in (i) and (ii) above. The underwriters in connection with the Companys initial public offering are intended third party beneficiaries of the covenants in this Section and shall have the right, power and authority to enforce such covenants as though they were a party hereto.
8. Tax Consultation. Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionees purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any appropriate independent professional adviser. Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.
9. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
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THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, INCLUDING A 180-DAY MARKET STANDOFF AGREEMENT, AND A RIGHT OF FIRST REFUSAL HELD BY THE CORPORATION AS SET FORTH IN AN EXERCISE NOTICE BETWEEN THE CORPORATION AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate stop transfer instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
10. Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and the terms and conditions of this Exercise Notice shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, the terms and conditions of this Exercise Notice shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns.
11. Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Optionee or by the Company forthwith to the Administrator which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties.
12. Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be delivered personally by hand or by courier, mailed by first-class mail, postage prepaid, sent by facsimile or sent by electronic mail directed (a) if to the Optionee, at the Optionees address, facsimile number or electronic mail address set forth on the signature page to the Option Agreement, or at such other address, facsimile number or electronic mail address as the Optionee may designate by ten (10) days advance written notice to the Company or (b) if to the Company, to its principal executive office, or at such other address as the Company may designate by ten (10) days advance written notice to the Optionee. All such notices and other communications shall be deemed given upon personal delivery, on the date of mailing, upon confirmation of facsimile transfer or when directed to the electronic mail address set forth on the signature page to the Option Agreement. With respect to any notice given by the Company under any provision of the Delaware General Corporation Law or the Companys charter or bylaws, the Optionee agrees that such notice may given by facsimile or by electronic mail.
13. Governing Law; Severability. This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of Delaware.
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14. Entire Agreement. The Plan, Option Agreement and Joint Election are incorporated herein by reference. This Exercise Notice, the Plan, the Restricted Stock Purchase Agreement, the Joint Election, the Option Agreement and the Investment Representation Statement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionees interest except by means of a writing signed by the Company and Optionee.
This Agreement has been executed and delivered as a deed on the date written below.
Executed as a Deed by: | Mavenir Systems, Inc. | |||||
OPTIONEE: | acting by the Undermentioned person | |||||
acting on the authority of the Company | ||||||
in accordance with the laws of | ||||||
Signature |
the territory of its incorporation. | |||||
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By: |
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Its: |
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In the presence of: | ||||||
Witness signature: |
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Name: | ||||||
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EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE | : | «OPTIONEE» | ||||
COMPANY | : | MAVENIR SYSTEMS, INC. | ||||
SECURITY | : | COMMON STOCK | ||||
AMOUNT | : |
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DATE | : |
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In connection with the purchase of the above-listed Securities, the undersigned Optionee represents to the Company the following:
(a) Optionee is aware of the Companys business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Optionee is acquiring these Securities for investment for Optionees own account only and not with a view to, or for resale in connection with, any distribution thereof within the meaning of the Securities Act of 1933, as amended (the Securities Act).
(b) Optionee acknowledges and understands that the Securities constitute restricted securities under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Optionees investment intent as expressed herein. In this connection, Optionee understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Optionees representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Optionee further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Optionee further acknowledges and understands that the Company is under no obligation to register the Securities. Optionee understands that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company, and with any other legend required under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of restricted securities acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to the Optionee, the exercise will be exempt from registration under
the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited brokers transaction or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than one year after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than two years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph immediately above.
(d) Optionee further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Optionee understands that no assurances can be given that any such other registration exemption will be available in such event.
Signature of Optionee: |
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Date: |
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EXHIBIT C-1
MAVENIR SYSTEMS, INC.
2005 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made between (the Purchaser) and Mavenir Systems, Inc. (the Company) as of , .
Unless otherwise defined herein, the terms defined in the 2005 Stock Plan (the Plan) shall have the same defined meanings in this Agreement.
R E C I T A L S
A. Pursuant to the exercise of the option granted to Purchaser under the Plan and pursuant to the Option Agreement dated by and between the Company and Purchaser with respect to such grant (the Option) and the joint election agreement (the Joint Election), which Plan and Option Agreement are hereby incorporated by reference, Purchaser has elected to purchase of those shares of Common Stock which have not become vested under the vesting schedule set forth in the Option Agreement (Unvested Shares). The Unvested Shares and the shares subject to the Option Agreement which have become vested are sometimes collectively referred to herein as the Shares.
B. As required by the Option Agreement, as a condition to Purchasers election to exercise the option, Purchaser must execute this Agreement, which sets forth the rights and obligations of the parties with respect to Shares acquired upon exercise of the Option.
1. Repurchase Option.
(a) If Purchasers status as a Service Provider is terminated for any reason, including death or Disability, the Company shall have the right and option to purchase from Purchaser, or Purchasers personal representative, as the case may be, up to all of the Purchasers Unvested Shares as of the date of such termination at the price paid by the Purchaser for such Shares (the Repurchase Option).
(b) Upon the occurrence of such termination, the Company may exercise its Repurchase Option by delivering personally or by registered mail, to Purchaser (or his transferee or legal representative, as the case may be), within ninety (90) days of the termination, a notice in writing indicating the Companys intention to exercise the Repurchase Option and setting forth a date for closing not later than thirty (30) days from the mailing of such notice. The closing shall take place at the Companys office. At the closing, the holder of the certificates for the Unvested Shares being transferred shall deliver the stock certificate or certificates evidencing the Unvested Shares, and the Company shall deliver the purchase price therefor. If the Company does not elect to exercise the Repurchase Option conferred above by giving the requisite notice within ninety (90) days following the termination, the Repurchase Option shall terminate.
(c) At its option, the Company may elect to make payment for the Unvested Shares to a bank selected by the Company. The Company shall avail itself of this option by a notice in writing to Purchaser stating the name and address of the bank, date of closing, and waiving the closing at the Companys office.
(d) The Repurchase Option shall lapse in accordance with the vesting schedule contained in Optionees Option Agreement.
2. Transferability of the Shares; Escrow.
(a) Purchaser hereby authorizes and directs the Secretary of the Company, or such other person designated by the Company, to transfer the Unvested Shares as to which the Repurchase Option has been exercised from Purchaser to the Company.
(b) To insure the availability for delivery of Purchasers Unvested Shares upon repurchase by the Company pursuant to the Repurchase Option under Section 1, Purchaser hereby appoints the Secretary, or any other person designated by the Company as escrow agent, as its attorney-in-fact to sell, assign and transfer unto the Company, such Unvested Shares, if any, repurchased by the Company pursuant to the Repurchase Option and shall, upon execution of this Agreement, deliver and deposit with such escrow agent, the share certificates representing the Unvested Shares, together with the stock assignment duly endorsed in blank, attached hereto as Exhibit C-2. The Unvested Shares and stock assignment shall be held in escrow, pursuant to the Joint Escrow Instructions of the Company and Purchaser attached as Exhibit C-3 hereto, until the Company exercises its Repurchase Option, until such Unvested Shares are vested, or until such time as this Agreement no longer is in effect. As a further condition to the Companys obligations under this Agreement, the spouse of the Purchaser, if any, shall execute and deliver to the Company the Consent of Spouse attached hereto as Exhibit C-4. Upon vesting of the Unvested Shares, the escrow agent shall promptly deliver to the Purchaser the certificate or certificates representing such Shares in the escrow agents possession belonging to the Purchaser, and the escrow agent shall be discharged of all further obligations hereunder; provided, however, that the escrow agent shall nevertheless retain such certificate or certificates as escrow agent if so required pursuant to other restrictions imposed pursuant to this Agreement.
(c) The Company, or its designee, shall not be liable for any act it may do or omit to do with respect to holding the Shares in escrow and while acting in good faith and in the exercise of its judgment.
(d) Transfer or sale of the Shares is subject to restrictions on transfer imposed by any applicable state and federal securities laws. Any transferee shall hold such Shares subject to all the provisions hereof and the Exercise Notice executed by the Purchaser with respect to any Unvested Shares purchased by Purchaser and shall acknowledge the same by signing a copy of this Agreement.
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3. Ownership, Voting Rights, Duties. This Agreement shall not affect in any way the ownership, voting rights or other rights or duties of Purchaser, except as specifically provided herein.
4. Legends. The share certificate evidencing the Shares issued hereunder shall be endorsed with the following legend (in addition to any legend required under applicable federal and state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.
5. Adjustment for Stock Split. All references to the number of Shares and the purchase price of the Shares in this Agreement shall be appropriately adjusted to reflect any stock split, stock dividend or other change in the Shares which may be made by the Company pursuant to Section 12 of the Plan after the date of this Agreement.
6. Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be delivered personally by hand or by courier, mailed by first-class mail, postage prepaid, sent by facsimile or sent by electronic mail directed (a) if to the Purchaser, at the Purchasers address, facsimile number or electronic mail address set forth on the signature page to the Option Agreement, or at such other address, facsimile number or electronic mail address as the Purchaser may designate by ten (10) days advance written notice to the Company or (b) if to the Company, to the address of its principal executive office, or at such other address as the Company may designate by ten (10) days advance written notice to the Purchaser. All such notices and other communications shall be deemed given upon personal delivery, on the date of mailing, upon confirmation of facsimile transfer or when directed to the electronic mail address set forth on the signature page to the Option Agreement. With respect to any notice given by the Company under any provision of the Delaware General Corporation Law or the Companys charter or bylaws, the Purchaser agrees that such notice may given by facsimile or by electronic mail.
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7. Survival of Terms. This Agreement shall apply to and bind Purchaser and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors.
8. Section 431 Election. The exercise of an Option for Unvested Shares is subject to the Purchaser entering into a Section 431 election (the Election) within 14 days of the purchase of the exercised Shares, electing pursuant to Section 431 of the Income Tax (Earnings & Pensions) Act 2003 to be taxed currently on any difference between the purchase price of the exercised Shares and their unrestricted Fair Market Value on the date of purchase. In the case of a Nonstatutory Stock Option (UK Unapproved Option), this will result in a recognition of taxable income to the Purchaser on the date of exercise, measured by the excess, if any, of the unrestricted Fair Market Value of the exercised Shares, at the time the Option is exercised over the purchase price for the exercised Shares. Absent such an Election, taxable income will be measured and recognized by Purchaser at the time or times on which the Companys Repurchase Option lapses. A form of Election under Section 431 is attached hereto as Exhibit C-5. Purchaser hereby agrees to complete and return the election to the Company.
9. Representations. Purchaser has reviewed with his own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. Purchaser is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Purchaser understands that he (and not the Company) shall be responsible for his own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.
10. Governing Law. This Agreement shall be governed by the internal substantive laws, but not the choice of law rules, of Delaware.
Purchaser represents that he has read this Agreement and is familiar with its terms and provisions. Purchaser hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under this Agreement.
IN WITNESS WHEREOF, this Agreement is deemed made as of the date first set forth above.
OPTIONEE: | MAVENIR SYSTEMS, INC. | |||
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By: |
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Signature | ||||
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Its: |
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Print Name |
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EXHIBIT C-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, , hereby sell, assign and transfer unto Mavenir Systems, Inc. shares of the Common Stock of Mavenir Systems, Inc. standing in my name of the books of said corporation represented by Certificate No. herewith and do hereby irrevocably constitute and appoint Andrews Kurth LLP to transfer the said stock on the books of the within named corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted Stock Purchase Agreement between Mavenir Systems, Inc. and the undersigned dated , .
Dated: | , | Signature: |
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INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise its repurchase option, as set forth in the Agreement, without requiring additional signatures on the part of the Purchaser.
EXHIBIT C-3
JOINT ESCROW INSTRUCTIONS
,
Andrews Kurth LLP
111 Congress, Suite 1700
Austin, TX 78701
Dear Sir:
As Escrow Agent for both Mavenir Systems, Inc. (the Company), and the undersigned purchaser of stock of the Company (the Purchaser), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Restricted Stock Purchase Agreement (Agreement) between the Company and the undersigned, in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred to collectively for convenience herein as the Company) exercises the Companys repurchase option set forth in the Agreement, the Company shall give to Purchaser and you a written notice specifying the number of shares of stock to be purchased, the purchase price, and the time for a closing hereunder at the principal office of the Company. Purchaser and the Company hereby irrevocably authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver the stock assignments, together with the certificate evidencing the shares of stock to be transferred, to the Company or its assignee, against the simultaneous delivery to you of the purchase price (by cash, a check, or some combination thereof) for the number of shares of stock being purchased pursuant to the exercise of the Companys repurchase option.
3. Purchaser irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you as Purchasers attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated, including but not limited to the filing with any applicable state blue sky authority of any required applications for consent to, or notice of transfer of, the securities. Subject to the provisions of this paragraph 3, Purchaser shall exercise all rights and privileges of a stockholder of the Company while the stock is held by you.
4. Upon written request of the Purchaser, but no more than once per calendar year, unless the Companys repurchase option has been exercised, you will deliver to Purchaser a certificate or certificates representing so many shares of stock as are not then subject to the Companys repurchase option. Within 120 days after cessation of Purchasers continuous employment by or services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate number of shares held or issued pursuant to the Agreement and not purchased by the Company or its assignees pursuant to exercise of the Companys repurchase option.
5. If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to Purchaser, you shall deliver all of the same to Purchaser and shall be discharged of all further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.
10. You shall not be liable for the outlawing of any rights under the Statute of Limitations with respect to these Joint Escrow Instructions or any documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be an officer or agent of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities
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until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at the following addresses or at such other addresses as a party may designate by ten days advance written notice to each of the other parties hereto.
16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by the internal substantive laws, but not the choice of law rules, of Delaware.
PURCHASER: | MAVENIR SYSTEMS, INC. | |||
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Signature | By | |||
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Dated: , |
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EXHIBIT C-4
CONSENT OF SPOUSE
I, , spouse of , have read and approve the foregoing Restricted Stock Purchase Agreement (the Agreement). In consideration of granting of the right to my spouse to purchase shares of Mavenir Systems, Inc. as set forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreement and agree to be bound by the provisions of the Agreement insofar as I may have any rights in said Agreement or any shares issued pursuant thereto under the community property laws or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreement.
Dated: | , | Signature: |
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EXHIBIT C-5
Mavenir Systems, Inc. Joint Election under s431 ITEPA 2003 for full or partial disapplication of
Chapter 2 Income Tax (Earnings and Pensions) Act 2003
One Part Election
1. Between | ||
the Employee | [insert name of employee] | |
whose National Insurance Number is | [insert NINO] | |
and | ||
the Company (who is the Employees employer) | Mavenir Systems, Inc. | |
of Company Registration Number | [insert CRN] |
2. | Purpose of Election |
This joint election is made pursuant to section 431(1) or 431(2) Income Tax (Earnings and Pensions) Act 2003 (ITEPA) and applies where employment-related securities, which are restricted securities by reason of section 423 ITEPA, are acquired.
The effect of an election under section 431(1) is that, for the relevant Income Tax and NIC purposes, the employment-related securities and their market value will be treated as if they were not restricted securities and that sections 425 to 430 ITEPA do not apply. An election under section 431(2) will ignore one or more of the restrictions in computing the charge on acquisition. Additional Income Tax will be payable (with PAYE and NIC where the securities are Readily Convertible Assets).
Should the value of the securities fall following the acquisition, it is possible that Income Tax/NIC that would have arisen because of any future chargeable event (in the absence of an election) would have been less than the Income Tax/NIC due by reason of this election. Should this be the case, there is no Income Tax/NIC relief available under Part 7 of ITEPA 2003; nor is it available if the securities acquired are subsequently transferred, forfeited or revert to the original owner.
3. | Application |
This joint election is made not later than 14 days after the date of acquisition of the securities by the employee and applies to:
Number of securities | [insert number] | |
Description of securities | Common Stock of Mavenir Systems, Inc. . | |
Name of issuer of securities | Mavenir Systems, Inc. |
to be acquired by the Employee after [dd/mm/yyyy] under the terms of the Mavenir Systems, Inc. 2005 Stock Plan.
4. | Extent of Application |
This election disapplies S.431(1) ITEPA: All restrictions attaching to the securities.
5. | Declaration |
This election will become irrevocable upon the later of its signing or the acquisition of employment-related securities to which this election applies.
In signing this joint election, we agree to be bound by its terms as stated above.
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Signature (Employee) | Date | |||
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/ / | |||
Signature (for and on behalf of the Company) | Date | |||
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Position in company |
Exhibit 10.6
MAVENIR SYSTEMS, INC.
2005 STOCK PLAN
STOCK OPTION AGREEMENT
(International Form)
Unless otherwise defined herein, the terms defined in the 2005 Stock Plan will have the same defined meanings in this Stock Option Agreement.
I. | NOTICE OF STOCK OPTION GRANT |
«Optionee»
The undersigned Optionee has been granted an Option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows:
Date of Grant |
: | «Date_of_Grant» | ||||
Vesting Commencement Date |
: | «Vesting_Commencement_Date» | ||||
Exercise Price per Share |
: | «Price» | ||||
Total Number of Shares Granted |
: | «Shares» | ||||
Total Exercise Price |
: | «ExercisePrice» | ||||
Term/Expiration Date |
: | Tenth Anniversary of Date of Grant |
Standar Vesting Schedule: One fourth ( 1/4th) of the Shares subject to the Option shall vest and become exercisable on the first anniversary of the Vesting Commencement Date and an additional one forty-eighth (1/48th) of the Shares subject to the Option shall vest and become exercisable on the corresponding day of each month thereafter, or to the extent such a month does not have the corresponding day, on the last day of any such month, until all the Shares are vested and exercisable, subject to Optionees continuing to be a Service Provider on such dates.
Escrow Provisions: This Option will be held by the Company under the Escrow Provisions attached hereto as Exhibit C.
Termination Period: This Option shall be exercisable for three (3) months after Optionee ceases to be a Service Provider. Upon Optionees death or Disability, this Option may be exercised for twelve (12) months after Optionee ceases to be a Service Provider. In no event may Optionee exercise this Option after the Term/Expiration Date as provided above.
This Notice of Stock Option Grant does not represent a stock interest in the Company, which will occur only upon the exercise of this Option pursuant to its terms.
By executing the signature page hereto, Optionee hereby acknowledges that Optionee understands and accepts this Notice of Stock Option Grant, the Plan, the Option Agreement and the Exercise Notice (Exhibit A to the Option Agreement), the Investment Representation Statement (Exhibit B to the Option Agreement) and the Escrow Provisions (Exhibit C to the Option Agreement).
II. | AGREEMENT |
1. Grant of Option. The Administrator hereby grants to the Optionee named in the Notice of Stock Option Grant (the Optionee), an option (the Option) to purchase the number of Shares set forth in the Notice of Stock Option Grant, at the exercise price per Share set forth in the Notice of Grant (the Exercise Price), and subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 15(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan will prevail.
2. Escrow. The Option, and any Shares or cash acquired pursuant thereto, will be held by the Company pursuant to the Escrow Provisions attached hereto as Exhibit C.
3. Exercise of Option.
(a) Right to Exercise. This Option will be exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option will be exercisable by delivery of an exercise notice in the form attached as Exhibit A (the Exercise Notice) or in a manner and pursuant to such procedures as the Administrator may determine, which will state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised, and such other representations and agreements as may be required by the Company. The Exercise Notice will be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option will be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless such issuance and such exercise comply with Applicable Laws. Assuming such compliance, for income tax purposes the Shares will be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares unless any Applicable Law otherwise provides.
4. Optionees Representations. In the event the Shares have not been registered under the Securities Act of 1933, as amended, at the time this Option is exercised, the Optionee will, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B.
5. Lock-Up Period. Optionee hereby agrees that Optionee will not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant
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any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Common Stock (or other securities) of the Company or enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Common Stock (or other securities) of the Company held by Optionee (other than those included in the registration) for a period specified by the representative of the underwriters of Common Stock (or other securities) of the Company not to exceed one hundred eighty (180) days following the effective date of a registration statement of the Company filed under the Securities Act (the Lock-Up Period).
Optionee agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, Optionee will provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Companys securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section will not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Commission Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of said one hundred eighty (180) day period. Optionee agrees that any transferee of any Option will be bound by this Section.
6. Method of Payment. Payment of the aggregate Exercise Price will be by any of the following, or a combination thereof, at the election of the Optionee:
(a) if permitted by Applicable Laws, by cash, check or cash equivalent; or
(b) at the discretion of the Administrator and to the extent permitted by Applicable Law, consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or
(c) such other method or manner of payment as the Administrator may approve.
7. Restrictions on Exercise. This Option may not be exercised until such time as the Plan has been approved by the shareholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any Applicable Laws. The Company will not be liable if the exercise of this Option by Optionee is forbidden by Applicable Laws.
8. Non-Transferability of Option. The Option and the rights and privileges conferred hereby will not be sold, pledged or otherwise transferred (whether by operation of law or otherwise) in any manner otherwise than by will or by the laws of descent or distribution, will not be subject to sale under execution, attachment, levy or similar process and may be exercised during the lifetime of the Optionee only by the Optionee. The terms of the Plan and the Option Agreement will be binding upon the executors, administrators, heirs, successors and assigns of the Participant.
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9. Term of Option. This Option may be exercised only within the term set out in the Notice of Stock Option Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option.
10. Withholding Obligations. Optionee agrees to make appropriate arrangements with the Company (or the Parent or Subsidiary employing or retaining Optionee) for the satisfaction of all Federal, state, local and foreign income and employment tax withholding requirements as well as social security charges applicable to the Option exercise or the disposition of any Shares acquired upon exercise. In this regard, Optionee authorizes the Company (and/or the Parent or Subsidiary employing or retaining Optionee) to withhold all applicable taxes legally payable by Optionee from the Optionees wages or other cash compensation paid to Optionee by the Company (and/or the Parent or Subsidiary employing or retaining Optionee) or from proceeds from the sale of Shares acquired upon exercise of the Option in an amount sufficient to cover such tax obligations. Optionee acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.
11. Acknowledgements.
(a) Optionee acknowledges receipt of a copy of the Plan (including any applicable appendices or sub-plans thereunder) and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan (including any applicable appendices or sub-plans thereunder) and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated below.
(b) The Company (which may or may not be Optionees employer) is granting the Option. The Company will administer the Plan from outside Optionees country of residence, and United States law will govern all Options granted under the Plan.
(c) Optionee acknowledges that benefits and rights provided under the Plan are wholly discretionary and, although provided by the Company, do not constitute regular or periodic payments. Unless otherwise required by Applicable Law, the benefits and rights provided under the Plan are not to be considered part of Optionees salary or compensation for purposes of calculating any severance, resignation, redundancy or other end of service payments, vacation, bonuses, long-term service awards, indemnification, pension or retirement benefits, or any other payments, benefits or rights of any kind. Optionee waives any and all rights to compensation or damages as a result of the termination of employment with the Company for any reason whatsoever insofar as those rights result or may result from:
(i) the loss or diminution in value of such rights under the Plan, or
(ii) Optionee ceasing to have any rights under, or ceasing to be entitled to any rights under the Plan as a result of such termination.
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(d) The grant of the Option, and any future grant of Options under the Plan is entirely voluntary, and at the complete discretion of the Company. Neither the grant of the Option nor any future grant of an Option by the Company will be deemed to create any obligation to grant any further Options, whether or not such a reservation is explicitly stated at the time of such a grant. The Company has the right, at any time, to amend, suspend or terminate the Plan.
(e) The Plan will not be deemed to constitute, and will not be construed by Optionee to constitute, part of the terms and conditions of employment, and the Company will not incur any liability of any kind to Optionee as a result of any change or amendment, or any cancellation, of the Plan at any time.
(f) Participation in the Plan will not be deemed to constitute, and will not be deemed by Optionee to constitute, an employment or labor relationship of any kind with the Company.
(g) By entering into this Option Agreement, and as a condition of the grant of the Option, Optionee consents to the collection, use, and transfer of personal data as described in this subsection to the full extent permitted by and in full compliance with Applicable Law.
(i) Optionee understands that the Company, its Parent or any Subsidiary may hold certain personal information about Optionee, including, but not limited to, name, home address and telephone number, date of birth, social insurance number, salary, nationality, job title, any Shares or directorships held in the Company, details of all Options or other entitlement to Shares awarded, canceled, exercised, vested, unvested, or outstanding in Optionees favor, for the purpose of managing and administering the Plan (Data).
(ii) Optionee further understands that the Company and/or its Subsidiaries will transfer Data among themselves as necessary for the purposes of implementation, administration, and management of Optionees participation in the Plan, and that the Company and/or its Subsidiaries may each further transfer Data to any third parties assisting the Company in the implementation, administration, and management of the Plan (Data Recipients ).
(iii) Optionee understands that these Data Recipients may be located in Optionees country of residence or elsewhere, such as the United States. Optionee authorizes the Data Recipients to receive, possess, use, retain, and transfer Data in electronic or other form, for the purposes of implementing, administering, and managing Optionees participation in the Plan, including any transfer of such Data, as may be required for the administration of the Plan and/or the subsequent holding of Shares on Optionees behalf, to a broker or third party with whom the Shares acquired on exercise may be deposited.
(iv) Optionee understands that Optionee may, at any time, review the Data, request that any necessary amendments be made to it, or withdraw Optionees consent herein in writing by contacting the Company. Optionee further understands that withdrawing consent may affect Optionees ability to participate in the Plan.
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(h) Optionee has received the terms and conditions of this Option Agreement and any other related communications, and Optionee consents to having received these documents in English.
12. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement, including the Notice of Stock Option Grant, the Exercise Notice (Exhibit A), the Investment Representation Statement (Exhibit B) and the Escrow Provisions (Exhibit C), constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionees interest except by means of a writing signed by the Company and Optionee. This Agreement is governed by the internal substantive laws but not the choice of law rules of Texas.
13. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE PARENT OR SUBSIDIARY TO WHOM THE OPTIONEE IS PROVIDING SERVICES) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER. OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS OPTIONEE AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEES RIGHT OR THE RIGHT OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OPTIONEE) TO TERMINATE OPTIONEES RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
Remainder of Page Intentionally Left Blank
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OPTIONEE: |
MAVENIR SYSTEMS, INC. | |||||
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Signature |
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Its: |
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Print Name |
Address*: | ||
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Facsimile #: |
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Email: |
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* | Please include address for notice purposes. |
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EXHIBIT A
2005 STOCK PLAN
EXERCISE NOTICE
Mavenir Systems, Inc.
1651 Glenville Road, Suite 201
Richardson, TX 75081
Attention: Stock Plan Administrator
1. Exercise of Option. Effective as of today, , , the undersigned (Optionee) hereby elects to exercise Optionees option (the Option) to purchase shares of the Common Stock (the Shares) of Mavenir Systems, Inc. (the Company) under and pursuant to the 2005 Stock Plan (the Plan) and the Stock Option Agreement dated , 20 (the Option Agreement).
2. Delivery of Payment. Optionee herewith delivers to the Company the full purchase price of the Shares, as set forth in the Option Agreement, and any and all withholding taxes due in connection with the exercise of the Option.
3. Representations of Optionee. Optionee acknowledges that Optionee has received, read, understood and agreed to the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder will exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares will be issued to the Optionee as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment will be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in Section 13 of the Plan.
5. Companys Right of First Refusal. Before any Shares held by Optionee or any transferee (either being sometimes referred to herein as the Holder) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) will have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section (the Right of First Refusal).
(a) Notice of Proposed Transfer. The Holder of the Shares will deliver to the Company a written notice (the Notice) stating: (i) the Holders bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee
(Proposed Transferee); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the Offered Price), and the Holder will offer the Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.
(c) Purchase Price. The purchase price (Purchase Price) for the Shares purchased by the Company or its assignee(s) under this Section will be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration will be determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price will be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of the Notice or in the manner and at the times set forth in the Notice.
(e) Holders Right to Transfer. If all of the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within 120 days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section will continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice will be given to the Company, and the Company and/or its assignees will again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary contained in this Section notwithstanding, the transfer of any or all of the Shares during the Optionees lifetime or on the Optionees death by will or intestacy to the Optionees immediate family or a trust for the benefit of the Optionees immediate family will be exempt from the provisions of this Section. Immediate Family as used herein will mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient will receive and hold the Shares so transferred subject to the provisions of this Section, and there will be no further transfer of such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First Refusal will terminate as to any Shares upon the earlier of (i) first sale of Common Stock of the Company to the general public, or (ii) a Change in Control in which the successor corporation has equity securities that are publicly traded.
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6. Inability to Exercise the Option. Optionee understands that Optionee may not exercise the Option if any Applicable Law forbids the exercise of the Option at the time of such exercise, and will relieve the Company of any liability with respect to the failure of the Company to issue or sell the Shares.
7. Tax Consultation. Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionees purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.
8. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company will cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE ACT) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTION ON TRANSFER FOR A PERIOD OF 180 DAYS FOLLOWING THE EFFECTIVE DATE OF THE COMPANYS INITIAL UNDERWRITTEN PUBLIC OFFERING AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF BY THE HOLDER WITHOUT THE CONSENT OF THE COMPANY OR THE MANAGING UNDERWRITER.
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(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate stop transfer instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company will not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares will have been so transferred.
9. Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Exercise Notice will inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice will be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns.
10. Interpretation. Any dispute regarding the interpretation of this Exercise Notice will be submitted by Optionee or by the Company forthwith to the Administrator which will review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator will be final and binding on all parties.
11. Governing Law; Severability. This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of Texas.
12. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. This Exercise Notice, the Plan, the Option Agreement, the Investment Representation Statement and the Escrow Provisions constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionees interest except by means of a writing signed by the Company and Optionee.
Remainder of Page Intentionally Left Blank
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Submitted by: | Accepted by: | |||||
OPTIONEE: | MAVENIR SYSTEMS, INC. | |||||
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Its: |
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Date Received |
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE |
: | «OPTIONEE» | ||||||
COMPANY |
: | MAVENIR SYSTEMS, INC. | ||||||
SECURITY |
: | COMMON STOCK | ||||||
AMOUNT |
: |
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DATE |
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In connection with the purchase of the above-listed Securities, the undersigned Optionee represents to the Company the following:
(a) Optionee is aware of the Companys business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Optionee is acquiring these Securities for investment for Optionees own account only and not with a view to, or for resale in connection with, any distribution thereof within the meaning of the Securities Act of 1933, as amended (the Securities Act).
(b) Optionee acknowledges and understands that the Securities constitute restricted securities under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Optionees investment intent as expressed herein. In this connection, Optionee understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Optionees representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Optionee further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Optionee further acknowledges and understands that the Company is under no obligation to register the Securities. Optionee understands that the certificate evidencing the Securities will be imprinted with any legend required under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of restricted securities acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to the Optionee, the exercise will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited brokers transaction or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than one year after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than two years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph immediately above.
(d) Optionee further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Optionee understands that no assurances can be given that any such other registration exemption will be available in such event.
Signature of Optionee: |
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Date: , 20 |
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EXHIBIT C
MAVENIR SYSTEMS, INC.
2005 STOCK PLAN
ESCROW PROVISIONS
1. Option. As set forth in the Notice of Stock Option Grant, Optionee has been granted an Option under the Plan. The Option will be held by the Company under these Escrow Provisions in an account in Optionees name.
2. Legal and Equitable Title. Legal and equitable title to the Option and any cash or securities acquired pursuant thereto, will remain with Optionee at all times, notwithstanding that such items may be held by the Company pursuant to these Escrow Instructions.
3. Exercise of Option. Optionee may instruct the Company to exercise the Option on Optionees behalf at such time or times as permitted by the Notice of Stock Option Grant and the Plan.
4. Proceeds of Exercise. Shares acquired upon exercise of the Option will be retained in this Escrow. Optionee may elect to keep any proceeds from the sale of such Shares in Optionees account under these Escrow Provisions or to have them distributed to Optionee in USD, or such foreign currency requested by the Optionee and determined appropriate by the Company, within 10 business days of the sale, pursuant to such channels as the Company reasonably determines appropriate.
5. Powers of Company. The Company may take any and all actions, and is hereby granted such powers and discretion, as may appear necessary or proper to comply with Applicable Laws and to effectuate and carry out the terms and purposes of this Escrow, including, but not limited to, the power to exercise the Option and hold or dispose of the proceeds of such exercise in accordance with the terms of these Escrow Provisions.
6. Limitation of Liability. The Company will not be liable for any damage caused by the exercise of its discretion as authorized by these Escrow Provisions for any reason, except gross negligence or willful misconduct. The Company will not be liable for honest mistakes of judgment or for losses or liabilities due to such honest mistakes of judgment.
7. Costs and Expenses of this Escrow. All costs and expenses of these Escrow Provisions will be borne by the Company.
8. Governing Law. This Escrow will be administered in the State of Texas, and its validity, construction and all rights hereunder, will be governed by the laws of the State of Texas; provided, however, that all matters affecting the title, ownership and transferability of any security, whether created or held hereunder, will be governed by all applicable federal, state, or foreign securities laws.
Exhibit 10.7
MAVENIR SYSTEMS, INC.
2013 EQUITY INCENTIVE PLAN
Adopted January 23, 2013
TABLE OF CONTENTS
Article I INTRODUCTION |
1 | |||||
1.1 |
Purpose |
1 | ||||
1.2 |
Definitions |
1 | ||||
1.3 |
Shares Subject to the Plan |
6 | ||||
1.4 |
Administration of the Plan |
8 | ||||
1.5 |
Granting of Awards to Participants |
10 | ||||
1.6 |
Term of Plan |
10 | ||||
1.7 |
Amendment and Discontinuance of the Plan |
10 | ||||
Article II OPTIONS |
10 | |||||
2.1 |
Authority |
10 | ||||
2.2 |
Exercise Price |
10 | ||||
2.3 |
Option Term and Conditions and Limitations on Exercise |
10 | ||||
2.4 |
Manner of Exercise |
11 | ||||
2.5 |
Effect of Termination Service |
11 | ||||
2.6 |
Repurchase Rights |
12 | ||||
2.7 |
Incentive Stock Options |
13 | ||||
Article III STOCK APPRECIATION RIGHTS |
13 | |||||
3.1 |
Authority |
13 | ||||
3.2 |
Types |
13 | ||||
3.3 |
Tandem Rights |
13 | ||||
3.4 |
Stand-Alone Rights |
14 | ||||
3.5 |
Post-Service Exercise |
15 | ||||
Article IV STOCK AWARDS |
15 | |||||
4.1 |
Authority |
15 | ||||
4.2 |
Issue Price/Consideration |
15 | ||||
4.3 |
Vesting Provisions |
15 | ||||
4.4 |
Stockholder Rights |
16 | ||||
Article V RESTRICTED STOCK UNITS |
16 | |||||
5.1 |
Authority |
16 | ||||
5.2 |
Terms |
16 | ||||
5.3 |
Vesting Provisions |
17 | ||||
5.4 |
Payment |
17 | ||||
5.5 |
Dividend Rights |
17 | ||||
Article VI PERFORMANCE UNITS |
17 | |||||
6.1 |
Authority |
17 | ||||
6.2 |
Terms |
17 | ||||
6.3 |
Payment |
18 | ||||
Article VII DIVIDEND EQUIVALENT RIGHTS |
18 | |||||
7.1 |
Authority |
18 |
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7.2 |
Terms |
18 | ||||
7.3 |
Entitlement |
18 | ||||
7.4 |
Timing of Payment |
18 | ||||
7.5 |
Form of Payment |
18 | ||||
Article VIII AUTOMATIC DIRECTOR AWARD PROGRAM |
19 | |||||
8.1 |
Terms and Conditions of Non-Employee Director Awards |
19 | ||||
8.2 |
Grant of Awards |
19 | ||||
8.3 |
Vesting of Awards |
20 | ||||
8.4 |
Terms of Awards |
20 | ||||
8.5 |
Change of Control |
21 | ||||
8.6 |
Remaining Terms |
22 | ||||
Article IX CERTAIN PROVISIONS APPLICABLE TO ALL AWARDS |
22 | |||||
9.1 |
Deferred Compensation |
22 | ||||
9.2 |
Securities Requirements |
22 | ||||
9.3 |
Transferability |
23 | ||||
9.4 |
No Rights as a Stockholder |
23 | ||||
9.5 |
Listing and Registration of Shares of Common Stock |
23 | ||||
9.6 |
Change of Control |
24 | ||||
9.7 |
Lock-Up Agreement |
25 | ||||
9.8 |
Stockholder Agreements/Investment Representations |
26 | ||||
9.9 |
Exemptions from Section 16(b) Liability |
26 | ||||
9.10 |
Repricing |
26 | ||||
9.11 |
Excess Shares |
26 | ||||
9.12 |
Section 409A |
27 | ||||
Article X WITHHOLDING FOR TAXES |
27 | |||||
Article XI MISCELLANEOUS |
27 | |||||
11.1 |
No Rights to Awards or Uniformity Among Awards |
27 | ||||
11.2 |
Rights as Employee, Director or Consultant |
27 | ||||
11.3 |
Governing Law |
28 | ||||
11.4 |
Gender, Tense and Headings |
28 | ||||
11.5 |
Severability |
28 | ||||
11.6 |
Other Laws |
28 | ||||
11.7 |
Unfunded Obligations and Use of Proceeds |
28 | ||||
11.8 |
No Guarantee of Tax Consequences |
28 |
[End of Table of Contents]
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MAVENIR SYSTEMS, INC.
2013 EQUITY INCENTIVE PLAN
ARTICLE I
INTRODUCTION
1.1 Purpose. The Mavenir Systems, Inc. 2013 Equity Incentive Plan (the Plan) is intended to promote the interests of Mavenir Systems, Inc., a Delaware corporation (the Company), and its stockholders by encouraging Employees, Directors and Consultants of the Company or its Affiliates (as defined below) to acquire or increase their equity interests in the Company, thereby giving them an added incentive to work toward the continued growth and success of the Company. The Board of Directors of the Company (the Board) also contemplates that through the Plan, the Company and its Affiliates will be better able to compete for the services of the individuals needed for the continued growth and success of the Company. The Plan provides for payment of various forms of incentive compensation, and accordingly, is not intended to be a plan that is subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA), and shall be administered accordingly.
The Plan shall serve as the successor to the Companys 2005 Amended and Restated Stock Plan (the Existing Plan), and no further awards shall be granted under the Existing Plan after the Effective Date. All awards outstanding under the Existing Plan on the Effective Date shall continue to be governed solely by the terms of the documents evidencing such awards, and no provision of the Plan shall be deemed to affect or otherwise modify the rights or obligations of the holders of such awards with respect to their acquisition of shares of Common Stock thereunder.
1.2 Definitions. As used in the Plan, the following terms shall have the meanings set forth below:
Affiliate means any parent corporation (as defined in Section 424(e) of the Code) of the Company or any subsidiary corporation (as defined in Section 424(f) of the Code) of the Company.
Applicable Laws means the requirements relating to the administration of equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.
Award means any of the following awards authorized under the Plan: Options, Stock Appreciation Rights, Stock Awards, Restricted Stock Units, Performance Units and Dividend Equivalent Rights.
Award Agreement means any agreement between the Company and the Participant evidencing a particular Award made to that individual under the Plan, as such agreement may be in effect from time to time.
Cause shall, with respect to each Award made under the Plan, be defined in accordance with the following:
(a) Cause shall have the meaning assigned to such term in the Award Agreement for the particular Award or in any other agreement incorporated by reference into the Award Agreement for purposes of defining such term.
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(b) In the absence of any other Cause definition in the Award Agreement for a particular Award (or in any other agreement incorporated by reference into the Award Agreement), an individuals termination of Service shall be deemed to be for Cause if such termination occurs by reason his or her commission of any act of fraud, embezzlement or dishonesty, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Company (or any Affiliate of the Company), or any other intentional misconduct by such person adversely affecting the business or affairs of the Company (or any Affiliate of the Company) in a material manner.
Change of Control shall, with respect to each Award made under the Plan, be defined in accordance with the following provisions:
(a) Change of Control shall have the meaning assigned to such term in the Award Agreement for the particular Award or in any other agreement incorporated by reference into the Award Agreement for purposes of defining such term.
(b) In the absence of any other Change of Control definition in the Award Agreement (or in any other agreement incorporated by reference into the Award Agreement), Change of Control shall mean a change in ownership or control of the Company effected through any of the following transactions:
(i) the closing of a merger, consolidation or other reorganization approved by the Companys stockholders in which a change in ownership or control of the Company is effected through the acquisition by any person or group of persons comprising a group within the meaning of Rule 13d-5(b)(1) of the Exchange Act (other than the Company or a person that, prior to such transaction, directly or indirectly controls, is controlled by or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Companys outstanding securities (as measured in terms of the power to vote with respect to the election of Board members);
(ii) the closing of a sale, transfer or other disposition of all or substantially all of the Companys assets;
(iii) the closing of any transaction or series of related transactions pursuant to which any person or any group of persons comprising a group within the meaning of Rule 13d-5(b)(1) of the Exchange Act (other than the Company or a person that, prior to such transaction or series of related transactions, directly or indirectly controls, is controlled by or is under common control with, the Company) acquires directly or indirectly (whether as a result of a single acquisition or by reason of one or more acquisitions within the twelve (12)-month period ending with the most recent acquisition) beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Companys securities (as measured in terms of the power to vote with respect to the election of Board members) outstanding immediately after the consummation
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of such transaction or series of related transactions, whether such transaction involves a direct issuance from the Company or the acquisition of outstanding securities held by one or more of the Companys existing stockholders; or
(iv) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases by reason of one or more contested elections for Board membership to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination.
Notwithstanding the foregoing, in no event will the issuance of shares in connection with an IPO be deemed to be a Change of Control.
Code means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations thereunder.
Committee means a committee of Directors or of other individuals satisfying Applicable Laws appointed by the Board, or a duly authorized committee of the Board, in accordance with Section 1.4 hereof.
Common Stock means the common stock, par value $0.001 per share, of the Company.
Company means the corporation described in Section 1.1 or any successor thereto which assumes and continues the Plan.
Consultant means any consultant or other independent advisor, who renders services to the Company or an Affiliate of the Company.
Director means a member of the Board or the board of directors of an Affiliate of the Company.
Effective Date means, with respect to the Plan, the date that the Plan is adopted by the Board subject to approval by the stockholders of the Company prior to the Underwriting Date.
Employee means any employee of the Company or an Affiliate of the Company, including any such employee who is an officer or director of the Company or an Affiliate of the Company.
Employment includes any period in which a Participant is an Employee of the Company or an Affiliate of the Company.
Exchange Act means the Securities Exchange Act of 1934, as amended.
Fair Market Value or FMV Per Share on any relevant date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time listed on any Stock Exchange or a national market system, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as such price is quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal (or other reporting service approved by the Plan Administrator). If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.
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(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value shall be the mean between the high bid and low asked prices for the Common Stock on the day of determination (or, if no bids and asks were reported on that date, as applicable, on the last trading date such bids and asks were reported), as reported in The Wall Street Journal (or other reporting service approved by the Plan Administrator). If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.
(iii) With respect to any Awards granted on or as of or priced on or as of the Underwriting Date (including, but not limited to, the IPO Awards (as defined in Section 8.2(a) below)), the Fair Market Value will be deemed to be equal to the established IPO price per share.
(iv) If there is no established market for the Common Stock, then the Fair Market Value shall be determined in good faith by the Plan Administrator.
Family Member means, with respect to a particular Participant, any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law.
Good Reason shall, with respect to each Award made under the Plan, be defined in accordance with the following provisions:
(a) Good Reason shall have the meaning assigned to such term in the Award Agreement for the particular Award or in any other agreement incorporated by reference into the Award Agreement for purposes of defining such term.
(b) In the absence of any other Good Reason definition in the Award Agreement (or in any other agreement incorporated by reference into the Award Agreement), Good Reason shall mean an individuals voluntary resignation following
(i) a material reduction in the scope of the duties, responsibilities and authority of his or her position with the Company (or any Affiliate of the Company), it being understood that a change in such individuals title shall not, in and of itself, be deemed a material reduction;
(ii) a materially adverse change in his or her reporting requirements so that such individual is required to report to a person whose duties, responsibilities and authority are materially less than the person to whom he or she previously reported;
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(iii) a material reduction in such individuals base salary or the aggregate of his or her base salary and target bonus under any corporate-performance based bonus or incentive programs, with a reduction of fifteen percent (15%) or more to his or her base salary or aggregate base salary and target bonus to be deemed a material reduction; or
(iv) a relocation of such individuals place of employment by more than fifty (50) miles;
provided and only if such change, reduction or relocation is effected by the Company (or any Affiliate of the Company) without the individuals consent.
Incentive Stock Option means any Option that satisfies the requirements of Code Section 422.
Involuntary Termination means the termination of the Service of any individual which occurs by reason of:
(a) such individuals involuntary dismissal or discharge by the Company (or any Affiliate of the Company) for reasons other than for Cause; or
(b) such individuals voluntary resignation for Good Reason.
IPO means a bona fide initial public offering of the Companys Common Stock registered under the Securities Act of 1933, as amended.
Non-Employee Director means a person who is a non-employee member of the Board.
Non-Qualified Option means an Option not intended to satisfy the requirements of Code Section 422.
Option means an option to acquire Common Stock granted pursuant to Article II of the Plan, and refers to either an Incentive Stock Option or a Non-Qualified Option, or both, as applicable.
Participant means any Employee, Director or Consultant granted an Award under the Plan.
Permanent Disability means the inability of the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more.
Plan Administrator means the particular entity, whether one or more Committees or the Board, which is authorized to administer the Plan with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under the Plan with respect to the persons under its jurisdiction.
Restricted Stock Unit means the right to receive a share of Common Stock or cash granted pursuant to Article V of the Plan.
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Section 16 Insider means an officer or director of the Company subject to the short-swing profit liabilities of Section 16 of the Exchange Act.
Service means the performance of services for the Company or an Affiliate of the Company by a person in the capacity of an Employee, a Director or a Consultant, except to the extent otherwise specifically provided in the Award Agreement. For purposes of the Plan, a Participant shall be deemed to cease Service immediately upon the occurrence of either of the following events: (i) the Participant no longer performs services in any of the foregoing capacities for the Company or any Affiliate of the Company or (ii) the entity for which the Participant is performing such services ceases to remain an Affiliate of the Company, even though the Participant may subsequently continue to perform services for that entity. Service shall not be deemed to cease during a period of military leave, sick leave or other personal leave approved by the Company; provided, however, that should such leave of absence exceed three (3) months, then for purposes of determining the period within which an Incentive Stock Option may be exercised as such under the federal tax laws, the Participants Service shall be deemed to cease on the first day immediately following the expiration of such three (3)-month period, unless the Participant is provided with the right to return to Service following such leave either by statute or by written contract. Except to the extent otherwise required by law or expressly authorized by the Plan Administrator or by the Companys written policy on leaves of absence, no Service credit shall be given for vesting purposes for any period the Participant is on a leave of absence.
Stock Exchange means the Nasdaq Global Market, the Nasdaq Global Select Market, the Nasdaq Capital Market, the New York Stock Exchange or the NYSE MKT.
Underwriting Agreement means the agreement between the Company and the underwriter or underwriters managing the IPO.
Underwriting Date means the date on which the Underwriting Agreement is executed and priced in connection with IPO.
Withholding Taxes means the applicable federal, state and foreign income and employment withholding taxes and other payments to which the holder of an Award under the Plan may become subject in connection with the issuance, exercise, vesting or settlement of that Award.
1.3 Shares Subject to the Plan.
(a) Authorized Shares. The stock issuable under the Plan shall be shares of authorized, but unissued, or reacquired Common Stock, including shares repurchased by the Company on the open market. The maximum number of shares of Common Stock that may initially be issued under the Plan shall be 13,200,000 shares, subject to adjustment under Section 1.3(f) below. Such share reserve consists of (1) any shares of Common Stock that, as of the Effective Date, have been reserved but not issued pursuant to any awards granted under the Existing Plan and are not subject to any awards granted thereunder, plus (ii) an additional increase of 11,478,184 shares. To the extent that any stock options outstanding under the Existing Plan on the Effective Date expire or otherwise terminate without having been exercised in full or should shares of Common Stock pursuant to awards granted under the Existing Plan be
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forfeited to or repurchased by the Company, the number of shares of Common Stock subject to those expired or terminated options at the time of expiration or termination and the number of shares of Common Stock forfeited or repurchased shall be added to the share reserve under this Plan and shall accordingly be available for issuance hereunder, up to a maximum of an additional 18,912,429 shares.
(b) Annual Increase. The number of shares available for issuance under the Plan shall automatically increase on January 1st of each calendar year during the term of the Plan, commencing on January 1, 2014, by (i) an amount (the Annual Increase Amount) equal to the lesser of (A) four and one-half percent (4.5%) of the total number of shares of Common Stock outstanding on the last trading day in December of the immediately preceding calendar year and (B) 20,000,000 shares (subject to adjustment under Section 1.3(f) below); or (ii) such other amount that is lower than the lesser of the amount determined by the preceding clauses (A)(i) and (ii) that the Board, in its sole discretion (but without any obligation), may determine shall be the Annual Increase Amount with respect to any applicable annual period.
(c) Limitation on Incentive Stock Options. Notwithstanding any provision of the Plan to the contrary, and subject to Section 1.3(f) below, the maximum number of shares of Common Stock that may be issued under the Plan pursuant to the exercise of Incentive Stock Options is 32,112,429. Such share limitation shall automatically be increased on January 1st of each calendar year, beginning on January 1, 2014, by the number of shares of Common Stock added to the share reserve on that day pursuant to the provisions of Section 1.3(b).
(d) Limitation on Number of Shares Subject to Awards. The maximum aggregate number of shares of Common Stock with respect to one or more Options and Stock Appreciation Rights that may be granted to any one Participant during any calendar year shall be 8,000,000 shares. The maximum aggregate number of shares of Common Stock with respect to which one or more other Awards that may be granted to any one Participant during any calendar year shall be 8,000,000 shares.
(e) Shares Returned. Shares of Common Stock subject to outstanding Awards under the Plan shall be available for subsequent award and issuance under the Plan to the extent those Awards expire, are forfeited or cancelled or terminate for any reason prior to the issuance of the shares of Common Stock subject to those Awards. Unvested shares issued under the Plan and subsequently forfeited or repurchased by the Company, at a price per share not greater than the original issue price paid per share, pursuant to the Companys repurchase rights under the Plan shall be added back to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for subsequent reissuance. Should the exercise price of an Option under the Plan be paid with shares of Common Stock (whether through the withholding of a portion of the otherwise issuable shares or through the tender of actual outstanding shares), then the authorized reserve of Common Stock under the Plan shall be reduced by the net number of shares issued under the exercised Option and not the gross number of shares for which that Option is exercised. Upon the exercise of any Stock Appreciation Right under the Plan, the share reserve shall be reduced by net number of shares actually issued by the Company upon such exercise and not the gross number of shares as to which such right is exercised. If shares of Common Stock otherwise issuable under the Plan are withheld by the Company in satisfaction of the Withholding Taxes incurred in connection with the issuance, vesting or settlement of an Award, then the number of shares of Common Stock available for issuance under the Plan shall be reduced on the basis of the net number of shares issued, vested or settled under the Award, calculated in each instance after any such share withholding.
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(f) Share Adjustments. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction or other change affecting the outstanding Common Stock as a class without the Companys receipt of consideration, or should the value of outstanding shares of Common Stock be substantially reduced as a result of a spin-off transaction or an extraordinary dividend or distribution, or should there occur any merger, consolidation or other reorganization (including, without limitation, a Change of Control transaction), then equitable adjustments shall be made by the Plan Administrator to (i) the maximum number and/or class of securities issuable under the Plan; (ii) the maximum number and class of securities by which the share reserve is to increase automatically each calendar year pursuant to the provisions of Section 1.3(b); (iii) the maximum number and/or class of securities that may be issued under the Plan pursuant to Incentive Stock Options and the maximum number and/or class of securities by which that limitation will automatically increase each calendar year; (iv) the maximum number and/or class of securities for which any one person may be granted Options and Stock Appreciation Rights or other Awards denominated in shares of Common Stock per calendar year; (v) the number and/or class of securities and the base price or purchase price per share (if any) in effect under each outstanding Award; and (vi) the number and/or class of securities subject to the Companys outstanding repurchase rights under the Plan and the repurchase price payable per share. The adjustments shall be made in such manner as the Plan Administrator deems appropriate and such adjustments shall be final, binding and conclusive.
1.4 Administration of the Plan. To the extent that the Plan Administrator determines it to be desirable to qualify Awards granted hereunder as performance-based compensation within the meaning of Section 162(m) of the Code, the Plan will be administered by a Committee of two (2) or more outside directors within the meaning of Code Section 162(m). To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3 under the Exchange Act, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3. Different Committees may administer the Plan with respect to different groups of Participants. Other than as provided above, administration of the Plan may, at the Boards discretion, be vested in one or more Committees or the Board may retain the power to administer the Plan. In addition to any other powers set forth in the Plan and subject to the provisions of the Plan and the authorities delegated by the Board, the Plan Administrator shall have the full and final power and authority within the scope of its administrative functions under the Plan, in its discretion:
(a) to interpret the Plan and all Awards under the Plan;
(b) to make, amend and rescind such rules as it deems necessary for the proper administration of the Plan;
(c) to make all other determinations necessary or advisable for the administration of the Plan;
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(d) to correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Award under the Plan in the manner and to the extent that the Plan Administrator deems desirable to effectuate the Plan;
(e) to determine the persons to whom, and the time or times at which, Awards shall be granted and the number of shares of Common Stock to be subject to each Award;
(f) to determine the type of Award granted and to designate Options as Incentive Stock Options or Non-Qualified Options;
(g) to determine the Fair Market Value of shares of Common Stock or other property;
(h) to determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and any shares acquired pursuant thereto, including, without limitation, (i) the exercise or purchase price of shares purchased pursuant to any Award; (ii) the method of payment for shares purchased pursuant to any Award; (iii) the method for satisfaction of any Withholding Tax obligation arising in connection with Award, including by the withholding or delivery of shares of Common Stock; (iv) the timing, terms and conditions of the exercisability or vesting of any Award or any shares acquired pursuant thereto; (v) the time of the expiration of any Award; (vi) the effect of the Participants termination of Service on any of the foregoing; and (vii) all other terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto not inconsistent with the terms of the Plan;
(i) to determine whether an Award will be settled in shares of stock, cash, or in any combination thereof;
(j) to approve one or more forms of Award Agreements;
(k) to amend, modify, extend, cancel or renew any Award or to waive any restrictions or conditions applicable to any Award or any shares acquired pursuant thereto;
(l) to accelerate, continue, extend or defer the exercisability or vesting of any Award or any shares acquired pursuant thereto, including with respect to the period following a Participants termination of Service; and
(m) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt sub-plans, addenda or supplements to the Plan, as the Plan Administrator deems necessary or desirable to comply with the laws and regulations of or to accommodate the laws, regulations, tax or accounting effectiveness, accounting principles or custom of, or to obtain favorable tax treatment in foreign jurisdictions whose residents may be granted Awards.
The Board may also at any time terminate the functions of any Committee with respect to the Plan and reassume all powers and authority with respect to the Plan previously delegated to such Committee. Any action taken or determination made by the Plan Administrator pursuant to this and the other sections of the Plan shall be final, binding and conclusive on all affected persons, including, without limitation, the Company, any of its Affiliates, any grantee, holder or beneficiary of an Award, any stockholder and any Employee, Director or Consultant.
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1.5 Granting of Awards to Participants. The Plan Administrator shall have the authority to grant, prior to the expiration date of the Plan, Awards to such Employees, Directors and Consultants as may be selected by it, subject to the terms and conditions set forth in the Plan. In selecting the persons to receive Awards, including the type and size of the Award, the Plan Administrator may consider the contribution the recipient has made and/or may make to the growth of the Company or its Affiliates and any other factors that it may deem relevant. In no event shall any Employee, Director or Consultant, nor his, her or its legal representatives, heirs, legatees, distributees or successors have any right to participate in the Plan, except to such extent, if any, as permitted under the Plan and as the Plan Administrator may determine.
1.6 Term of Plan. If not sooner terminated under the provisions of Section 1.7, the Plan shall terminate upon, and no further Awards shall be made, after ten (10) years following the Effective Date.
1.7 Amendment and Discontinuance of the Plan. The Board may amend, suspend or terminate the Plan at any time without prior notice to or consent of any person; provided, however, that subject to Article IX, no amendment, suspension or termination of the Plan may without the consent of the holder of an Award, terminate such Award or adversely affect such persons rights with respect to such Award in any material respect unless or to the extent specified in the Award itself; and provided further that, no amendment shall be effective prior to its approval by the stockholders of the Company, to the extent such approval is required by Applicable Laws. Notwithstanding the foregoing, the Board may amend the Plan or any Award in such manner as it deems necessary in order to permit Awards to meet the requirements of Applicable Laws, or to prevent adverse tax consequences to the Participants.
ARTICLE II
OPTIONS
2.1 Authority. The Plan Administrator may grant Options to purchase shares of Common Stock to any Employee, Director and Consultant according to the terms set forth below. Options shall be in such form as the Plan Administrator may from time to time approve, shall be subject to the following terms and conditions and may contain such additional terms and conditions, not inconsistent with this Article II, as the Plan Administrator shall deem desirable. Each Option granted under the Plan shall be evidenced by a written agreement between the Company and the individual to whom such Option was granted in such form as the Plan Administrator shall provide.
2.2 Exercise Price. The exercise price to be paid for each share of Common Stock deliverable upon exercise of each Option granted under this Article II shall not be less than one hundred percent (100%) of the FMV Per Share on the date of grant of such Option.
2.3 Option Term and Conditions and Limitations on Exercise. Each Option shall be exercisable at such time or times, during such period and for such number of shares as shall be determined by the Plan Administrator and set forth in the documents evidencing the Option. However, no Option shall have a term in excess of ten (10) years measured from the Option grant date. The Plan Administrator shall also have the discretionary authority to structure one or more Options so that those Options shall vest and become exercisable only after the achievement of pre-established corporate performance objectives based on one or more performance goals and measured over the performance period specified by the Plan Administrator at the time of grant of the Option.
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2.4 Manner of Exercise. In order to exercise an Option, the person or persons entitled to exercise such Option shall deliver to the Company payment in full for (i) the shares being purchased; and (ii) unless other arrangements have been made with the Plan Administrator, any required Withholding Taxes. The payment of the exercise price for each Option shall, subject to the terms of the Award Agreement, be made in one or more of the forms specified below:
(a) in cash or by certified check payable and acceptable to the Company;
(b) with a promissory note, to the extent permitted by Applicable Laws;
(c) in shares of Common Stock (whether delivered in the form of actual stock certificates or through attestation of ownership) held for the requisite period (if any) necessary to avoid any resulting charge to the Companys earnings for financial reporting purposes and valued at Fair Market Value on the date of exercise;
(d) to the extent the option is exercised for vested shares following the IPO, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide instructions to (i) a brokerage firm (reasonably satisfactory to the Company for purposes of administering such procedure in compliance with the Companys pre-clearance/pre-notification policies) to effect the immediate sale of the purchased shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable Withholding Taxes; and (ii) the Company to deliver the certificates for the purchased shares directly to such brokerage firm on such settlement date in order to complete the sale;
(e) subject to such conditions and requirements as the Plan Administrator may specify, by the Companys withholding from shares otherwise deliverable pursuant to the exercise of the Option shares of Common Stock with such withheld shares valued at Fair Market Value as of the date of exercise; or
(f) with such other consideration and method of payment for the issuance of Common Stock to the extent permitted by Applicable Laws.
2.5 Effect of Termination Service
(a) The following provisions shall govern the exercise of any Options that are outstanding at the time of the Participants cessation of Service or death:
(i) Any Option outstanding at the time of the Participants cessation of Service for any reason shall remain exercisable for such period of time thereafter as shall be determined by the Plan Administrator and set forth in the Award Agreement, but no such Option shall be exercisable after the expiration of the option term.
(ii) Any Option held by the Participant at the time of the Participants death and exercisable in whole or in part at that time may be subsequently exercised by the
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personal representative of the Participants estate or by the person or persons to whom the Option is transferred pursuant to the Participants will or the laws of inheritance or by the Participants designated beneficiary or beneficiaries of that Option.
(iii) Should the Participants Service be terminated for Cause or should the Participant otherwise engage in conduct constituting grounds for a termination for Cause while holding one or more outstanding Options, then all of those Options shall terminate immediately and cease to be outstanding.
(iv) During the applicable post-Service exercise period, the Option may not be exercised in the aggregate for more than the number of vested shares for which the Option is at the time exercisable; provided, however, that one or more Options may be structured so that those Options will continue to vest in whole or part during the applicable post-Service exercise period. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the Option term, the Option shall terminate and cease to be outstanding for any shares for which the Option has not been exercised.
(b) Nothwithstanding the foregoing, the Plan Administrator shall have complete discretion, exercisable either at the time an Option is granted or at any time while the Option remains outstanding, to:
(i) extend the period of time for which the Option is to remain exercisable following the Optionees cessation of Service from the limited exercise period otherwise in effect for that Option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the Option term,
(ii) include an automatic extension provision whereby the specified post-Service exercise period in effect for any Option granted shall automatically be extended by an additional period of time equal in duration to any interval within the specified post-Service exercise period during which the exercise of that Option or the immediate sale of the shares acquired under such option could not be effected in compliance with the applicable registration requirements of federal and state securities laws, but in no event shall such an extension result in the continuation of such Option beyond the expiration date of the term of that option, and/or
(iii) permit the Option to be exercised, during the applicable post-Service exercise period, not only with respect to the number of vested shares of Common Stock for which such Option is exercisable at the time of the Participants cessation of Service but also with respect to one or more additional installments in which the Participant would have vested had the Participant continued in Service.
2.6 Repurchase Rights. The Plan Administrator shall have the discretion to grant Options which are exercisable for unvested shares of Common Stock. Should the Participant cease Service while such shares are unvested, the Company shall have the right to repurchase any or all of those unvested shares at a price per share equal to the lower of (i) the exercise price paid per share; or (ii) the Fair Market Value per share of Common Stock at the time of repurchase. The terms upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right.
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2.7 Incentive Stock Options. The terms specified in this Section 2.7 shall be applicable to all Incentive Stock Options. Except as modified by the provisions of this Section 2.7, all the provisions of Article II shall be applicable to Incentive Stock Options. Options which are specifically designated as Non-Qualified Options shall not be subject to the terms of this Section 2.7.
(a) Incentive Stock Options may only be granted to Employees of the Company or its Affiliates.
(b) The aggregate Fair Market Value (determined as of the respective date or dates of grant) of shares of Common Stock for which one or more Options granted to any Employee under the Plan (or any other option plan of the Company or any Affiliate of the Company) may for the first time become exercisable as Incentive Stock Options during any one (1) calendar year shall not exceed the sum of $100,000. To the extent the Employee holds two (2) or more such Options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such Options as Incentive Stock Options shall be applied on the basis of the order in which such Options are granted.
(c) If any Employee to whom an Incentive Stock Option is granted owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Affiliate of the Company, then the exercise price per share under such Incentive Stock Option shall not be less than one hundred ten percent (110%) of the FMV Per Share on the date of grant, and the Option term shall not exceed five (5) years measured from the date of grant. For purposes of the immediately preceding sentence, the attribution rules under Section 424(d) of the Code shall apply for purposes of determining an Employees ownership.
ARTICLE III
STOCK APPRECIATION RIGHTS
3.1 Authority. The Plan Administrator shall have full power and authority, exercisable in its sole discretion, to grant Stock Appreciation Rights evidenced by one or more Award Agreements in the form approved by the Plan Administrator; provided, however, that each such agreement shall comply with the terms specified below.
3.2 Types. Two types of Stock Appreciation Rights shall be authorized for issuance under this Article III: (i) tandem stock appreciation rights (Tandem Rights) and (ii) stand-alone stock appreciation rights (Stand-alone Rights).
3.3 Tandem Rights. The following terms and conditions shall govern the grant and exercise of Tandem Rights.
(a) One or more individuals may be granted a Tandem Right, exercisable upon such terms and conditions as the Plan Administrator may establish, to elect between the exercise of the underlying Option for shares of Common Stock or the surrender of that Option in exchange for a distribution from the Company in an amount equal to the excess of (i) the Fair
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Market Value (on the Option surrender date) of the number of shares in which the Participant is at the time vested under the surrendered option (or surrendered portion thereof) over (ii) the aggregate exercise price payable for such vested shares.
(b) Any distribution to which the Participant becomes entitled upon the exercise of a Tandem Right may be made in (i) shares of Common Stock valued at Fair Market Value on the Option surrender date; (ii) cash; or (iii) a combination of cash and shares of Common Stock, as specified in the applicable Award Agreement.
3.4 Stand-Alone Rights. The following terms and conditions shall govern the grant and exercise of Stand-alone Rights:
(a) One or more individuals may be granted a Stand-alone Right not tied to any underlying Option. The Stand-alone Right shall relate to a specified number of shares of Common Stock and shall be exercisable upon such terms and conditions as the Plan Administrator may establish. In no event, however, may the Stand-alone Right have a maximum term in excess of ten (10) years measured from the grant date.
(b) Upon exercise of the Stand-alone Right, the holder shall be entitled to receive a distribution from the Company in an amount equal to the excess of (i) the aggregate Fair Market Value (on the exercise date) of the shares of Common Stock underlying the exercised right over (ii) the aggregate base price in effect for those shares.
(c) The number of shares of Common Stock underlying each Stand-alone Right and the base price in effect for those shares shall be determined by the Plan Administrator in its sole discretion at the time the Stand-alone Right is granted. In no event, however, may the base price per share be less than the Fair Market Value per underlying share of Common Stock on the grant date.
(d) Stand-alone Rights shall be subject to the same transferability restrictions applicable to Non-Qualified Options and may not be transferred during the holders lifetime, except for a gratuitous transfer to one or more Family Members of the holder or to a trust established for the holder and/or one or more such Family Members or a transfer to one or more such Family Members pursuant to a domestic relations order covering the Stand-alone Right as marital property. In addition, one or more beneficiaries may be designated for an outstanding Stand-alone Right in accordance with substantially the same terms and provisions as set forth in Section 9.3(c).
(e) The distribution with respect to an exercised Stand-alone Right may be made in (i) shares of Common Stock valued at Fair Market Value on the exercise date; (ii) cash; or (iii) a combination of cash and shares of Common Stock, as specified in the applicable Award Agreement.
(f) The holder of a Stand-alone Right shall have no stockholder rights with respect to the shares subject to the Stand-alone Right unless and until such person shall have exercised the Stand-alone Right and become a holder of record of the shares of Common Stock issued upon the exercise of such Stand-alone Right.
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3.5 Post-Service Exercise. The provisions governing the exercise of Tandem and Stand-alone Rights following the cessation of the Participants Service shall be substantially the same as those set forth in Section 2.5 for the Options granted under the Plan, and the Plan Administrators discretionary authority under Section 2.5 shall also extend to any outstanding Tandem or Stand-alone Appreciation Rights.
ARTICLE IV
STOCK AWARDS
4.1 Authority. The Plan Administrator shall have full power and authority, exercisable in its sole discretion, to grant Stock Awards either as vested or unvested shares of Common Stock, through direct and immediate issuances. Each Stock Award shall be evidenced by one or more Award Agreements in the form approved by the Plan Administrator; provided, however, that each such agreement shall comply with the terms specified below.
4.2 Issue Price/Consideration.
(a) Shares of Common Stock may be issued under a Stock Award for a price per share fixed by the Plan Administrator at the time of the Award, but in no event shall such issue price be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the Award date.
(b) Shares of Common Stock may be issued under a Stock Award for any of the following items of consideration which the Plan Administrator may deem appropriate in each individual instance:
(i) cash or check made payable to the Company;
(ii) past services rendered or to be rendered the Company (or any Affiliate of the Company); or
(iii) any other valid consideration under the State in which the Company is at the time incorporated.
4.3 Vesting Provisions.
(a) Stock Awards may, in the discretion of the Plan Administrator, be fully and immediately vested upon issuance as a bonus for Service rendered or may vest in one or more installments over the Participants period of Service and/or upon the attainment of specified performance objectives. The elements of the vesting schedule applicable to any stock award shall be determined by the Plan Administrator and incorporated into the Award Agreement.
(b) Should the Participant cease to remain in Service while holding one or more unvested shares of Common Stock issued under a Stock Award or should the performance objectives not be attained with respect to one or more such unvested shares of Common Stock, then those shares shall be immediately surrendered to the Company for cancellation, and the Participant shall have no further stockholder rights with respect to those shares. To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash or
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cash equivalent, the Company shall repay to the Participant the lower of (i) the cash consideration paid for the surrendered shares; or (ii) the Fair Market Value of those shares at the time of cancellation.
(c) The Plan Administrator may in its discretion waive the surrender and cancellation of one or more unvested shares of Common Stock which would otherwise occur upon the cessation of the Participants Service or the non-attainment of the performance objectives applicable to those shares. Any such waiver shall result in the immediate vesting of the Participants interest in the shares of Common Stock as to which the waiver applies. Such waiver may be effected at any time, whether before or after the Participants cessation of Service or the attainment or non-attainment of the applicable performance objectives.
(d) Any new, substituted or additional securities or other property (including money paid other than as a regular cash dividend) which the Participant may have the right to receive with respect to the Participants unvested shares of Common Stock by reason of any stock dividend, stock split, recapitalization, combination of shares, exchange of shares, spin-off transaction, extraordinary dividend or distribution or other change affecting the outstanding Common Stock as a class without the Companys receipt of consideration shall be issued subject to (i) the same vesting requirements applicable to the Participants unvested shares of Common Stock; and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate, unless and to the extent the Plan Administrator determines at the time to vest and distribute such securities or other property. Equitable adjustments to reflect each such transaction shall also be made by the Plan Administrator to the repurchase price payable per share by the Company for any unvested securities subject to its existing repurchase rights under the Plan; provided the aggregate repurchase price shall in each instance remain the same.
4.4 Stockholder Rights. The Participant shall have full stockholder rights with respect to any shares of Common Stock issued to the Participant under a Stock Award, whether or not the Participants interest in those shares is vested. Accordingly, the Participant shall have the right to vote such shares and to receive any dividends paid on such shares, subject to any applicable vesting requirements.
ARTICLE V
RESTRICTED STOCK UNITS
5.1 Authority. The Plan Administrator shall have the full power and authority, exercisable in its sole discretion, to grant Restricted Stock Units evidenced by one or more Award Agreements in the form approved by the Plan Administrator; provided, however, that each such agreement shall comply with the terms specified below.
5.2 Terms. Each Restricted Stock Unit award shall entitle the Participant to receive the shares underlying that Award (or an amount based on the value of the shares) upon vesting or upon the expiration of a designated time period following the vesting of those Awards. Restricted Stock Units subject to performance vesting may also be structured so that the underlying shares are convertible into shares of Common Stock (or a payment based on the value of the shares), but the rate at which each share is to so convert shall be based on the attained level of performance for each applicable performance objective.
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5.3 Vesting Provisions. Restricted Stock Units may, in the discretion of the Plan Administrator, vest in one or more installments over the Participants period of Service or upon the attainment of specified performance objectives. Outstanding Restricted Stock Units shall automatically terminate without any payment if the performance goals or Service requirements established for those Awards are not attained or satisfied. The Plan Administrator, however, shall have the discretionary authority to make a payment under one or more outstanding Awards of Restricted Stock Units as to which the designated performance goals or Service requirements have not been attained or satisfied.
5.4 Payment. Restricted Stock Units that vest may be settled in (i) cash; (ii) shares of Common stock valued at Fair Market Value on the payment date; or (iii) a combination of cash and shares of Common Stock, as determined by the Plan Administrator in its sole discretion.
5.5 Dividend Rights. The Participant shall not have any stockholder rights with respect to the shares of Common Stock subject to a Restricted Stock Unit award until that award vests and the shares of Common Stock are actually issued thereunder. However, dividend-equivalent units may be paid or credited, either in cash or in actual or phantom shares of Common Stock, on outstanding Restricted Stock Unit awards, subject to such terms and conditions as the Plan Administrator may deem appropriate.
ARTICLE VI
PERFORMANCE UNITS
6.1 Authority. The Plan Administrator shall have the full power and authority, exercisable in its sole discretion, to grant Performance Units evidenced by one or more Award Agreements in the form approved by the Plan Administrator; provided, however, that each such agreement shall comply with the terms specified below.
6.2 Terms.
(a) A performance unit shall represent either (i) a unit with a dollar value tied to the level at which pre-established corporate performance objectives based on one or more performance goals are attained; or (ii) a participating interest in a special bonus pool tied to the attainment of pre-established corporate performance objectives based on one or more performance goals. The amount of the bonus pool may vary with the level at which the applicable performance objectives are attained, and the value of each performance unit which becomes due and payable upon the attained level of performance shall be determined by dividing the amount of the resulting bonus pool (if any) by the total number of performance units issued and outstanding at the completion of the applicable performance period.
(b) Performance Units may also be structured to include a Service requirement which the Participant must satisfy following the completion of the performance period in order to vest in the Performance Units awarded with respect to that performance period.
(c) Outstanding Performance Units shall automatically terminate, and no payment shall actually be made in satisfaction of those Awards, if the performance goals or Service requirements established for those Awards are not attained or satisfied. The Plan Administrator, however, shall have the discretionary authority to make a payment under one or more outstanding Awards of performance units as to which the designated performance goals or any applicable Service requirements have not been attained or satisfied.
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6.3 Payment. Performance Units which become due and payable following the attainment of the applicable performance objectives and the satisfaction of any applicable Service requirement may be paid in (i) cash; (ii) shares of Common Stock valued at Fair Market Value on the payment date; or (iii) a combination of cash and shares of Common Stock, as determined by the Plan Administrator.
ARTICLE VII
DIVIDEND EQUIVALENT RIGHTS
7.1 Authority. The Plan Administrator shall have full power and authority to grant Dividend Equivalent Rights evidenced by one or more Award Agreements in the form approved by the Plan Administrator; provided however, that each such agreement shall comply with the terms specified below.
7.2 Terms. The Dividend Equivalent Rights may be granted as stand-alone awards or in tandem with other Awards made under the Plan. The term of each Dividend Equivalent Right award shall be established by the Plan Administrator at the time of grant, but no such Award shall have a term in excess of ten (10) years.
7.3 Entitlement. Each Dividend Equivalent Right shall represent the right to receive the economic equivalent of each dividend or distribution, whether in cash, securities or other property (other than shares of Common Stock), which is made per issued and outstanding share of Common Stock during the term the Dividend Equivalent Right remains outstanding. A special account on the books of the Company shall be maintained for each Participant to whom a Dividend Equivalent Right is granted, and that account shall be credited per Dividend Equivalent right with each such dividend or distribution made per issued and outstanding share of Common Stock during the term of that Dividend Equivalent Right remains outstanding.
7.4 Timing of Payment. Payment of the amounts credited to such book account may be made to the Participant either concurrently with the actual dividend or distribution made per issued and outstanding share of Common Stock or may be deferred for a period specified by the Plan Administrator at the time the Dividend Equivalent right is initially granted or (to the extent permitted by the Plan Administrator) designated by the Participant pursuant to a timely deferral election made in accordance with the requirements of Code Section 409A.
7.5 Form of Payment. Payment of the amounts due with respect to Dividend Equivalent Rights may be made in (i) cash; (ii) shares of Common Stock; or (iii) a combination of cash and shares of Common Stock, as determined by the Plan Administrator in its sole discretion and set forth in the Award Agreement. If payment is to be made in the form of Common Stock, the number of shares of Common Stock into which the cash dividend or distribution amounts are to be converted for purposes of the Participants book account may be based on the Fair Market Value per share of Common Stock on the date of conversion, a prior date or an average of the Fair Market Value per share of Common Stock over a designated period, as determined by the Plan Administrator in its sole discretion.
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ARTICLE VIII
AUTOMATIC DIRECTOR AWARD PROGRAM
8.1 Terms and Conditions of Non-Employee Director Awards. Non-Employee Directors shall receive automatic grants under the terms set forth below. In addition, Non-Employee Directors shall be eligible to receive additional discretionary Awards under the Plan.
8.2 Grant of Awards. Awards shall be granted automatically and without further action of the Plan Administrator, as follows:
(a) Initial Grants.
(i) Each Non-Employee Director who is a member of the Board on the Underwriting Date shall be granted on that date an Award (an IPO Award) in the form of an Option and/or Restricted Stock Units with respect to a number of shares of Common Stock equal to the Initial Option Equivalent Amount; provided, however, that a Non-Employee Director granted an Award within a period of eighteen months (18) months prior to the Underwriting Date shall not be granted an IPO Award.
(ii) Each individual who is first elected or appointed a Non-Employee Director other than at a regular annual stockholders meeting at any time after the Underwriting Date, shall automatically be granted, on the date of such initial election or appointment, as applicable (the Initial Grant Date), an Award in the form of an Option and/or Restricted Stock Units with respect to a number of shares equal to the Initial Option Equivalent Amount (the Initial Grant).
(b) Annual Award. On the date of each annual meeting of the stockholders of the Company which occurs on or after the Effective Date, each Non-Employee Director that continues to serve on the Board following such meeting shall be granted an Award in the form of an Option and/or Restricted Stock Units with respect to a number of shares of Common Stock equal to the Annual Option Equivalent Amount for that year (the Annual Grant); provided, however, that a Non-Employee Director granted an IPO Award or an Initial Grant on, or within a period of six (6) months prior to, the date of an annual meeting shall not be granted an Annual Award pursuant to this Section 8.2(b) with respect to the same annual meeting.
(c) Grant Type and Amounts. The Plan Administrator shall have the sole discretion to determine the amount and type of Awards within the limitations set forth in this Article VIII. The Initial Option Equivalent Amount shall be a number of Option equivalent shares determined by the Plan Administrator prior to the Start Date, but shall not exceed five hundred thousand (500,000) Option equivalent shares. The Annual Option Equivalent Amount shall be a number of Option equivalent shares determined by the Plan Administrator prior to the Start Date, but shall not exceed two hundred fifty thousand (250,000) Option equivalent shares. Unless otherwise determined by the Plan Administrator, in the event that the Plan Administrator proposes to grant Restricted Stock Units under this Article VIII in lieu of all or part of an Option, such Restricted Stock Units shall have an aggregate value equal to the aggregate value of the Option that would otherwise be granted under this Article VIII, determined on the following basis (i) the value of an Option share shall be equal to the fair value of an Option share as estimated on the date of grant under a valuation model approved by the Financial Accounting
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Standards Board (FASB) for purposes of the Companys financial statements under FAS 123R (or any successor provision); and (ii) the value of a Restricted Stock Unit shall be equal to the Fair Market Value per share of Common Stock.
(d) Right to Decline Non-Employee Director Award. Notwithstanding the foregoing, any person may elect not to receive an Non-Employee Director Award by delivering written notice of such election to the Board no later than the day prior to the date such Award would otherwise be granted. A person so declining an Non-Employee Director Award shall receive no payment or other consideration in lieu of such declined Non-Employee Director Award.
8.3 Vesting of Awards.
(a) The date a Non-Employee Director receives an IPO Award, Initial Grant or an Annual Grant is referred to in this Plan as the Start Date for such Awards.
(b) The shares subject to each IPO Award and each Initial Grant shall vest so that (i) one-third (1/3rd) of the shares of Common Stock subject to the IPO Award or Initial Grant, as applicable, shall become vested on the first anniversary of the Start Date and (ii) an additional one thirty-sixth (1/36th) of the shares of Common Stock subject to the IPO Award or Initial Grant, as applicable, shall become vested on the corresponding day of each calendar month thereafter or, to the extent such calendar month does not have the corresponding day, on the last day of such calendar month, until all such shares are vested, provided that the Non-Employee Director continues to provide Service as a Non-Employee Director on such dates.
(c) The shares subject to each Annual Grant shall vest so that all of the shares of Common Stock subject to the Annual Grant shall become vested on the earlier of: (i) the first anniversary of the Start Date or (ii) the date that is one day prior to the date of the next regular annual meeting of the stockholders of the Company following the Start Date, provided that the Non-Employee Director continues to provide Service as a Non-Employee Director on such date.
8.4 Terms of Awards.
(a) Any Options granted under this Article VIII shall be subject to the following terms and conditions:
(i) The exercise price per share shall be equal to one hundred percent (100%) of the Fair Market Value per Common Share on the Option grant date.
(ii) The exercise price shall be payable in one or more of the alternative forms authorized under Section 2.4.
(iii) Each such Option shall have a maximum term of ten (10) years measured from the Option grant date, subject to earlier termination following the Non-Employee Directors cessation of Board service.
(iv) The Participant (or in the event of the Participants death while holding the Option, the personal representative of the Participants estate or the person or persons to whom the option is transferred pursuant to the Participants will or the laws of
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inheritance or the designated beneficiary or beneficiaries of such Option) shall have a twelve (12)-month period following the date of cessation of Board service in which to exercise any outstanding Option. During the twelve (12)-month exercise period, the Option may not be exercised in the aggregate for more than the number of shares of vested Common Stock for which the option is exercisable at the time of the Participants cessation of Board service. Upon the expiration of the twelve (12)-month exercise period or (if earlier) upon the expiration of the Option term, the Option shall terminate and cease to be outstanding for any shares for which the Option has not been exercised.
(b) Any Restricted Stock Units granted under this Article VIII shall be subject to the following terms and conditions:
(i) The shares of Common Stock underlying Restricted Stock Units which vest in accordance with the applicable vesting provisions shall be issued as they vest; provided, however, that the Plan Administrator may structure one or more grants so that the issuance of the shares of Common Stock which vest under those awards is deferred, in accordance with the applicable requirements of Code Section 409A and the regulations thereunder, beyond the vesting date to a designated date or the occurrence of any earlier event such as cessation of Board service or a Change of Control.
(ii) Each Restricted Stock Unit shall include a dividend equivalent right pursuant to which a book account shall be established for the Non-Employee Director and credited from time to time with each dividend or distribution, whether in cash, securities or other property (other than shares of Common Stock) which is made per issued and outstanding share of Common Stock during the period the share of Common Stock underlying that Restricted Stock Unit remains unissued. The amount credited to the book account with respect to such Restricted Stock Unit shall be paid to the Non-Employee Director member concurrently with the issuance of the share of Common Stock underlying that unit.
8.5 Change of Control.
(a) In the event of any Change of Control, each outstanding Award granted under this Article VIII but not otherwise vested shall, immediately prior to the effective date of that Change of Control transaction, automatically vest in full.
(b) Any Option so accelerated shall become exercisable for all of the option shares as fully vested Common Stock and may be exercised for any or all of those vested shares. Immediately following the consummation of the Change of Control, each such Option shall terminate and cease to be outstanding, except and to the extent assumed by the successor corporation (or parent thereof) or otherwise continued in effect pursuant to the terms of the Change of Control transaction.
(c) The shares subject to any Restricted Stock Units so accelerated shall be issued to the Participant as soon as practicable following the effective date of the Change of Control but in no event more than fifteen (15) business days after such effective date, except to the extent such issuance is subject to a deferred distribution date under Code Section 409A, or shall otherwise be converted into the right to receive the same consideration per share of Common Stock payable to the other stockholders in the Change of Control and distributed at the same time as such stockholder payments, subject to any applicable deferred distribution date under Code Section 409A.
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8.6 Remaining Terms. The remaining terms of each Award granted under the Automatic Director Award Program shall be as set forth in the Award Agreement approved by the Plan Administrator to evidence the awards made under this Article VIII.
ARTICLE IX
CERTAIN PROVISIONS APPLICABLE TO ALL AWARDS
9.1 Deferred Compensation.
(a) The Plan Administrator may, in its sole discretion, structure one or more Awards (other than Options and Stock Appreciation Rights) so that the Participants may be provided with an election to defer the compensation associated with those Awards for federal income tax purposes. Any such deferral opportunity shall comply with all applicable requirements of Code Section 409A.
(b) The Plan Administrator may implement a Non-Employee Director retainer fee deferral program under the Plan so as to allow the Non-Employee Directors the opportunity to elect, prior to the start of each calendar year, to convert the Board and Board committee retainer fees to be earned for such year into Restricted Stock Units under the Plan that will defer the issuance of the shares of Common Stock that vest under those Restricted Stock Units until a permissible date or event under Code Section 409A. If such program is implemented, the Plan Administrator shall have the authority to establish such rules and procedures as it deems appropriate for the filing of such deferral elections and the designation of the permissible distribution events under Code Section 409A.
(c) To the extent the Company maintains one or more separate non-qualified deferred compensation arrangements which allow the participants the opportunity to make notional investments of their deferred account balances in shares of Common Stock, the Plan Administrator may authorize the share reserve under the Plan to serve as the source of any shares of Common Stock that become payable under those deferred compensation arrangements. In such event, the share reserve under the Plan shall be reduced on a one share-for-one share basis for each share of Common Stock issued under the Plan in settlement of the deferred compensation owed under those separate arrangements
9.2 Securities Requirements. No shares of Common Stock will be issued or transferred pursuant to an Award, unless and until all then-applicable requirements imposed by federal and state securities and other laws, rules and regulations and by any regulatory agencies having jurisdiction and by any stock market or exchange upon which the Common Stock may be listed, have been fully met. As a condition precedent to the issuance of shares pursuant to the grant, exercise, vesting or settlement of an Award, the Company may require the grantee to take any reasonable action to meet such requirements. The Company shall not be obligated to take any affirmative action in order to cause the issuance or transfer of shares pursuant to an Award to comply with any law or regulation described in the second preceding sentence.
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9.3 Transferability.
(a) Non-Transferable Awards. Except as otherwise specifically provided in the Plan or the appropriate Award Agreement, no Award and no right under the Plan, contingent or otherwise, will be (i) assignable, saleable or otherwise transferable by a Participant except by will or by the laws of descent and distribution; or (ii) subject to any encumbrance, pledge or charge of any nature. No transfer by will or by the laws of descent and distribution shall be effective to bind the Company unless the Board or the applicable Committee shall have been furnished with a copy of the deceased Participants will or such other evidence as the Board or the applicable Committee may deem necessary to establish the validity of the transfer. Any attempted transfer in violation of this Section 9.3 shall be void and ineffective for all purposes.
(b) Non-Qualified Options. Non-Qualified Options shall be subject to the same limitation on transfer as set forth above, except that the Plan Administrator may structure one or more Non-Qualified Options so that the Option may be transferred gratuitously in whole or in part during the Participants lifetime to one or more Family Members of the Participant or to a trust established exclusively for the Participant and/or such Family Members or may be transferred to one or more Family Member pursuant to a domestic relations order. The transferred portion may only be exercised by the person or persons who acquire a proprietary interest in the Option pursuant to the transfer. The terms applicable to the transferred portion shall be the same as those in effect for the Option immediately prior to such transfer.
(c) Beneficiary Designations. Notwithstanding the foregoing, the Participant may designate one or more persons as the beneficiary or beneficiaries of his or her outstanding Awards, and those Awards shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Participants death while holding those Award. Such beneficiary or beneficiaries shall take the transferred Awards subject to all the terms and conditions of the applicable agreement evidencing each such transferred Award.
(d) Ability to Exercise Rights. Except as otherwise specifically provided under the Plan, only the Participant, or in the event of his death, his legal representative or beneficiary, may exercise Options and Stock Appreciation Rights, receive cash payments and deliveries of shares or otherwise exercise rights under the Plan.
9.4 No Rights as a Stockholder. A Participant who has received a grant of an Award or a transferee of such Participant shall have no rights as a stockholder with respect to any shares of Common Stock until such person becomes the holder of record. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued.
9.5 Listing and Registration of Shares of Common Stock. The Company, in its discretion, may postpone the issuance and/or delivery of shares of Common Stock under the Plan until completion of such stock exchange listing, registration or other qualification of such shares under any state, federal or foreign law, rule or regulation as the Company may consider appropriate, and may require any Participant to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of the shares in compliance with applicable laws, rules and regulations.
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9.6 Change of Control.
(a) In the event of a Change of Control transaction, each Award (other than an Award granted under Article VIII) outstanding at that time under the Plan but not otherwise fully vested shall automatically accelerate, immediately prior to the effective date of that Change of Control, as to all the shares of Common Stock at the time subject to such Award, unless (i) such Award is to be assumed or substituted with an equivalent award by the successor corporation (or parent thereof) or is otherwise to continue in full force and effect pursuant to the terms of the Change of Control transaction; (ii) such Award is replaced with a cash retention program of the successor corporation that preserves the spread existing at the time of the Change of Control on the shares of Common Stock as to which the Award is not otherwise at that time vested and exercisable and provides for the subsequent vesting and payout of that spread in accordance with the same exercise/vesting schedule applicable to those shares, but only if such replacement cash program would not result in the treatment of the Award as an item of deferred compensation subject to Code Section 409A; or (iii) the acceleration of such Award is subject to other limitations imposed by the Plan Administrator.
(b) All outstanding repurchase rights shall automatically terminate, and the shares of Common Stock subject to those terminated rights shall vest in full, immediately prior to the effective date of an actual Change of Control transaction, except to the extent (i) those repurchase rights are to be assigned to the successor corporation (or parent thereof) or are otherwise to continue in full force and effect pursuant to the terms of the Change of Control transaction; or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator.
(c) Immediately following the consummation of the Change of Control, all Awards, shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change of Control transaction.
(d) Each Award which is assumed in connection with a Change of Control or otherwise continued in effect shall be appropriately adjusted, immediately after such Change of Control, to apply to the number and class of securities into which the shares of Common Stock subject to that Award would have been converted in consummation of such Change of Control had those shares actually been outstanding at that time. Appropriate adjustments to reflect such Change of Control shall also be made to (i) the exercise or base price or cash consideration payable per share in effect under each outstanding Award, provided the aggregate exercise or base price or cash consideration in effect for such securities shall remain the same; (ii) the maximum number and/or class of securities available for issuance over the remaining term of the Plan; (iii) the maximum number and/or class of securities by which the shares reserve is to increase each year; (iv) the maximum number and/or class of securities for which Incentive Stock Options may be granted under the Plan; (v) the maximum number and/or class of securities for which any one person may be granted Options and Stock Appreciation Rights and other Awards under the Plan per calendar year; and (vi) the number and/or class of securities subject to the Companys outstanding repurchase rights under the Plan and the repurchase price payable per share. To the extent the actual holders of the Companys outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change of Control, the successor corporation may, in connection with the assumption or continuation of the
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outstanding Awards under the Plan and subject to the Plan Administrators approval, substitute, for the securities underlying those assumed Awards, one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change of Control transaction, provided such common stock is readily traded on an established U.S. securities exchange or market.
(e) The Plan Administrator shall have the discretionary authority to structure one or more outstanding Awards so that those Awards shall, immediately prior to the effective date of a Change of Control transaction, vest as to all the shares of Common Stock at the time subject to those Awards, whether or not those Awards are to be assumed in the Change of Control transaction or otherwise continued in effect. In addition, the Plan Administrator shall have the discretionary authority to structure one or more of the Companys repurchase rights so that those rights shall terminate immediately prior to the effective date of a Change of Control transaction, and the shares subject to those terminated rights shall thereupon vest in full.
(f) The Plan Administrator shall have full power and authority to structure one or more outstanding Awards so that those Awards shall vest as to all the shares of Common Stock at the time subject to those Awards in the event the Participants Service is subsequently terminated by reason of an Involuntary Termination within a designated period following the effective date of any Change of Control transaction in which those Awards do not otherwise vest on an accelerated basis. In addition, the Plan Administrator may structure one or more of the Companys repurchase rights so that those rights shall immediately terminate with respect to any shares held by the Participant at the time of such Involuntary Termination, and the shares subject to those terminated repurchase rights shall accordingly vest in full at that time.
(g) The portion of any Incentive Stock Option accelerated in connection with a Change of Control shall remain exercisable as an Incentive Option only to the extent the applicable One Hundred Thousand Dollar ($100,000) limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a Non-Qualified Option under the Federal tax laws.
9.7 Lock-Up Agreement. In the event of any underwritten public offering of the Companys securities made by the Company pursuant to an effective registration statement filed under the Securities Act, the Plan Administrator shall have the right to impose market stand-off restrictions on each Award recipient whereby such Participant shall not offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any shares of stock of the Company or any rights to acquire stock of the Company for such period of time from and after the effective date of such registration statement as may be established by the underwriter for such public offering; provided, however, that such period of time shall not exceed the greater of: (i) one hundred eighty (180) days from the effective date of the registration statement to be filed in connection with such public offering; or (ii) if required by such underwriter, such longer period of time as is necessary to enable the underwriter to issue a research report, analyst recommendation or opinion in accordance with the then-applicable rules and regulations of the Financial Regulatory Authority, Inc. and the applicable stock exchange, but in no event in excess of two hundred ten (210) days following the effective date of the registration statement relating to such offering. The foregoing limitation shall not apply to shares registered in the public offering under the Securities Act.
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9.8 Stockholder Agreements/Investment Representations. The Plan Administrator may, from time to time, condition the grant, exercise or payment of any Award upon such Participant entering into such agreements in a form or forms as approved from time to time by the Plan Administrator, including but not limited to, a stockholders agreement, voting agreement, repurchase agreement or lockup or market standoff agreement. In addition, the Plan Administrator may require the Participant to represent and warrant at the time of any such exercise or issuance that the shares are being purchased only for investment and without any present intention to sell or distribute such shares, if, in the opinion of counsel for the Company, such a representation is required by any relevant provisions of law.
9.9 Exemptions from Section 16(b) Liability. It is the intent of the Company that the grant of any Awards to or other transaction by a Participant who is subject to Section 16 of the Exchange Act shall be exempt from Section 16(b) of the Exchange Act pursuant to an applicable exemption (except for transactions acknowledged by the Participant in writing to be non-exempt). Accordingly, if any provision of this Plan or any Award agreement does not comply with the requirements of Rule 16b-3 under the Exchange Act as then applicable to any such transaction, such provision shall be construed or deemed amended to the extent necessary to conform to the applicable requirements of Rule 16b-3 so that such Participant shall avoid liability under Section 16(b).
9.10 Repricing. The Board shall have the authority to effect, at any time and from time to time, with the consent of the affected holders, the cancellation of any or all outstanding Options or Stock Appreciation Rights under the Plan and to grant in exchange one or more of the following: (i) new Options or Stock Appreciation Rights covering the same or a different number of shares of Common Stock but with an exercise or base price per share based on the Fair Market Value per share of Common Stock on the new grant date; or (ii) cash or shares of Common Stock or any other Award, whether vested or unvested.
The Board shall also have the authority, exercisable at any time and from time to time, with the consent of the affected holders, to reduce the exercise or base price of one or more outstanding Options or Stock Appreciation Rights or issue new Options or Stock Appreciation Rights with a lower exercise or base price in immediate cancellation of outstanding Options or Stock Appreciation Rights with a higher exercise or base price.
The Plan Administrator shall not (i) implement any cancellation/regrant program pursuant to which outstanding Options or Stock Appreciation Rights under the Plan are cancelled and new Options or Stock Appreciation Rights are granted in replacement with a lower exercise price per share, (ii) cancel outstanding Options or Stock Appreciation Rights under the Plan with exercise or base prices per share in excess of the then current Fair Market Value per share of Common Stock for consideration payable in cash, equity securities of the Corporation or in the form of any other Award under the Plan, except in connection with a Change of Control transaction, or (iii) otherwise directly reduce the exercise price in effect for outstanding Options or Stock Appreciation Rights under the Plan, without in each such instance obtaining stockholder approval.
9.11 Excess Shares. Awards may be made under the Plan that involve shares of Common Stock in excess of the number of shares then available for issuance under the Plan, provided no shares shall actually be issued pursuant to those Awards until the number of shares
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of Common Stock available for issuance under the Plan is sufficiently increased by stockholder approval of an amendment of the Plan authorizing such increase. If such stockholder approval is not obtained within twelve (12) months after the date the first excess Award is made, then all Awards granted on the basis of such excess shares shall terminate and cease to be outstanding.
9.12 Section 409A. The provisions of the Plan and the outstanding Awards under the Plan shall, in the event of any ambiguity, be construed, applied and interpreted in a manner so as to ensure that all Awards and Award Agreements provided to Participants who are subject to U.S. income taxation either qualify for an exemption from the requirements of Section 409A of the Code or comply with those requirements; provided, however, that the Company shall not make any representations that any Awards made under the Plan will in fact be exempt from the requirements of Section 409A of the Code or otherwise comply with those requirements, and each Participant shall accordingly be solely responsible for any taxes, penalties or other amounts that may become payable with respect to his or her Awards by reason of Section 409A of the Code.
ARTICLE X
WITHHOLDING FOR TAXES
Any issuance of Common Stock pursuant to the exercise, issuance, vesting or settlement of an Award under the Plan shall not be made until appropriate arrangements satisfactory to the Company have been made for the payment of any Withholding Taxes that may be required to be withheld, collected or accounted for by the Company with respect thereto. Such arrangements may, at the discretion of the Plan Administrator, include allowing the person to tender to the Company shares of Common Stock owned by the person, or to request the Company to withhold shares of Common Stock being acquired pursuant to the Award, whether through the exercise of an Option or as a distribution pursuant to the Award, which have an aggregate FMV Per Share as of the date of such withholding that is not greater than the sum of all tax amounts to be withheld with respect thereto, together with payment of any remaining portion of such tax amounts in cash or by certified check payable and acceptable to the Company.
ARTICLE XI
MISCELLANEOUS
11.1 No Rights to Awards or Uniformity Among Awards. No Participant or other person shall have any claim to be granted any Award; there is no obligation for uniformity of treatment of Participants, or holders or beneficiaries of Awards; and the terms and conditions of Awards need not be the same with respect to each recipient.
11.2 Rights as Employee, Director or Consultant. No person, even though eligible under this Plan, shall have a right to be selected as a Participant (except in the case of the Automatic Director Award Program for Non-Employee Directors under Article VIII), or, having been so selected, to be selected again as a Participant (except in the case of the Automatic Director Award Program for Non-Employee Directors under Article VIII). Nothing in the Plan or any Award granted under the Plan shall confer on any Participant a right to remain an Employee, Director or Consultant, or interfere with or limit in any way any right of the Company or its Affiliates to terminate the Participants Service at any time. To the extent that an Employee of an Affiliate receives an Award under the Plan, the Award can in no event be understood or interpreted to mean that the Company is the Employees employer or that the Employee has an employment relationship with the Company.
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11.3 Governing Law. The validity and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with applicable federal law and the laws of the State of Delaware, without regard to any principles of conflicts of law.
11.4 Gender, Tense and Headings. Whenever the context requires such, words of the masculine gender used herein shall include the feminine and neuter, and words used in the singular shall include the plural. Section headings as used herein are inserted solely for convenience and reference and constitute no part of the Plan.
11.5 Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as to any Participant or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Plan Administrator, such provision shall be construed or deemed amended as necessary to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Plan Administrator, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Participant or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.
11.6 Other Laws. The Plan Administrator may refuse to issue or transfer any shares or other consideration under an Award if, acting in its sole discretion, it determines that the issuance or transfer of such shares or such other consideration might violate any applicable law.
11.7 Unfunded Obligations and Use of Proceeds. Any amounts payable o Participants pursuant to the Plan shall be unfunded and unsecured obligations for all purposes. Any cash proceeds received by the Company from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes.
11.8 No Guarantee of Tax Consequences. The Participant shall be solely responsible for and liable for any tax consequences (including but not limited to any interest or penalties) as a result of participation in the Plan. Neither the Plan Administrator, nor the Company makes any commitment or guarantee that any federal, state or local tax treatment will apply or be available to any person participating or eligible to participate hereunder and assumes no liability whatsoever for the tax consequences to the Participants.
* * * * * *
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Exhibit 10.8
EARLY EXERCISE
MAVENIR SYSTEMS, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the Option) to purchase shares (the Option Shares) of the Common Stock of Mavenir Systems, Inc., a Delaware corporation (the Company):
Optionee:
Grant Date:
Vesting Commencement Date:
Exercise Price: $ per share
Number of Option Shares: shares of Common Stock
Expiration Date:
Type of Option: Incentive Stock Option
Non-Qualified Stock Option
Date Exercisable: Immediately Exercisable for exempt employees. The Option shall become exercisable for all the Option Shares upon the Optionees completion of six (6) months of Service measured from the Grant Date for non-exempt employees.
Vesting Schedule: This Option shall become vested and exercisable with respect to (i) one fourth (1/4th) of the Option Shares on the first anniversary of the Vesting Commencement Date and (ii) an additional one forty-eighth (1/48th) of the Option Shares on the corresponding day of each calendar month thereafter or, if such calendar month does not have the corresponding day, on the last day of such calendar month. In no event shall this Option vest or become exercisable for any additional Option Shares following Optionees cessation of Service, except to the extent (if any) specifically authorized by the Plan Administrator in its sole discretion pursuant to a written agreement with Optionee.
Optionee understands and agrees that the Option is granted subject to and in accordance with the terms of the Mavenir Systems, Inc. 2013 Equity Incentive Plan (the Plan). Optionee further agrees to be bound by the terms of the Plan and the terms of the Option as set forth in the Stock Option Agreement attached hereto as Exhibit A. Optionee hereby acknowledges receipt of a copy of the Plan in the form attached hereto as Exhibit B.
TRANSFER RESTRICTIONS. OPTIONEE HEREBY AGREES THAT ALL UNVESTED OPTION SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN REPURCHASE RIGHTS EXERCISABLE BY THE COMPANY AND ITS ASSIGNS. THE TERMS OF SUCH RIGHTS ARE SPECIFIED IN THE STOCK PURCHASE AGREEMENT ATTACHED HERETO AS EXHIBIT C.
At Will Employment. Nothing in this Notice or in the attached Stock Option Agreement or Plan shall confer upon Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Affiliate employing or retaining Optionee) or of Optionee, which rights are hereby expressly reserved by each, to terminate Optionees Service at any time for any reason, with or without cause.
Definitions. All capitalized terms in this Notice shall have the meaning assigned to them in this Notice, in the attached Stock Option Agreement or in the Plan.
MAVENIR SYSTEMS, INC. | OPTIONEE | |||||||
By: | Signature: | |||||||
Name: | Print Name: | |||||||
Title: | Address: | |||||||
Attachments:
Exhibit A Stock Option Agreement
Exhibit B 2013 Equity Incentive Plan
Exhibit C Stock Purchase Agreement
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EXHIBIT A
STOCK OPTION AGREEMENT
MAVENIR SYSTEMS, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the 2013 Equity Incentive Plan (the Plan) for the purpose of retaining the services of selected Employees, Directors and Consultants in the service of the Company (or any Affiliate).
B. Optionee is to render valuable services to the Company (or an Affiliate), and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Companys grant of an option to Optionee.
C. All capitalized terms in this Agreement not defined herein shall have the meaning assigned to them in the Grant Notice (as defined below) or in the Plan.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Company hereby grants to Optionee, as of the Grant Date as specified in the Notice of Grant of Stock Option accompanying this Agreement, pursuant to which Optionee has been informed of the basic terms of the option evidenced hereby (the Grant Notice), an option to purchase up to the number of Option Shares specified in the Grant Notice. The Option Shares shall be purchasable from time to time during the option term specified in Section 2 at the Exercise Price.
2. Option Term. This Option shall have a term of ten (10) years measured from the Grant Date and shall accordingly expire at the close of business on the date on which the option expires as specified in the Grant Notice (the Expiration Date), unless sooner terminated in accordance with Sections 5 or 6.
3. Limited Transferability.
(a) This Option shall be neither transferable nor assignable by Optionee other than by will or the laws of inheritance following Optionees death and may be exercised, during Optionees lifetime, only by Optionee. However, Optionee may designate one or more persons as the beneficiary or beneficiaries of this Option, and this Option shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon Optionees death while holding this Option. Such beneficiary or beneficiaries shall take the transferred option subject to all the terms and conditions of this Agreement, including (without limitation) the limited time period during which this Option may, pursuant to Section 5, be exercised following Optionees death.
(b) If this Option is designated a Non-Qualified Stock Option in the Grant Notice, then this Option may be assigned in whole or in part during Optionees lifetime to one or more of Optionees Family Members or to a trust established for the exclusive benefit of Optionee and/or one or more such Family Members, to the extent such assignment is in
Exhibit A to Notice of Grant of Stock Option (Early Exercise)
Page 1
connection with the Optionees estate plan or pursuant to a domestic relations order. The assigned portion shall be exercisable only by the person or persons who acquire a proprietary interest in the option pursuant to such assignment. The terms applicable to the assigned portion shall be the same as those in effect for this Option immediately prior to such assignment.
4. Dates of Exercise. This Option shall vest for the Option Shares in one or more installments as specified in the Grant Notice. As the Option becomes unvested for such installments, those installments shall accumulate, and the Option shall remain exercisable for the accumulated installments until the Expiration Date or sooner termination of the Option term under Sections 5 or 6.
5. Cessation of Service. The option term specified in Section 2 shall terminate (and this Option shall cease to be outstanding) prior to the Expiration Date should any of the following provisions become applicable:
(a) Should Optionee cease to remain in Service for any reason (other than death, Permanent Disability or Cause) while this Option is outstanding, then Optionee (or any person or persons to whom this Option is transferred pursuant to a permitted transfer under Section 3) shall have a period of three (3) months (commencing with the date of such cessation of Service) during which to exercise this Option, but in no event shall this Option be exercisable at any time after the Expiration Date.
(b) Should Optionee die while this Option is outstanding, then the personal representative of Optionees estate or the person or persons to whom the option is transferred pursuant to Optionees will or the laws of inheritance following Optionees death or, if applicable, the person to whom the option is transferred during Optionees lifetime pursuant to a permitted transfer under Section 3 shall have the right to exercise this Option. However, if Optionee dies while holding this Option and has an effective beneficiary designation in effect for this Option at the time of his or her death, then the designated beneficiary or beneficiaries shall have the exclusive right to exercise this Option following Optionees death. Any such right to exercise this Option shall lapse, and this Option shall cease to be outstanding, upon the earlier of (i) the expiration of the twelve (12)-month period measured from the date of Optionees death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Permanent Disability while this Option is outstanding, then Optionee (or any person or persons to whom this Option is transferred pursuant to a permitted transfer under Section 3) shall have a period of twelve (12) months (commencing with the date of such cessation of Service) during which to exercise this Option. In no event shall this Option be exercisable at any time after the Expiration Date.
(d) During the limited period of post-Service exercisability, this Option may not be exercised in the aggregate for more than the number of Option Shares in which Optionee is, at the time of Optionees cessation of Service, vested pursuant to the Vesting Schedule specified in the Grant Notice or the special vesting acceleration provisions of Section 6. No additional Option Shares shall vest, whether pursuant to the normal Vesting Schedule specified in the Grant Notice or the special vesting acceleration provisions of Section 6, following
Exhibit A to Notice of Grant of Stock Option (Early Exercise)
Page 2
Optionees cessation of Service, except to the extent (if any) specifically authorized by the Plan Administrator pursuant to an express written agreement with Optionee. Upon the expiration of such limited exercise period or (if earlier) upon the Expiration Date, this Option shall terminate and cease to be outstanding for any vested Option Shares for which the option has not been exercised.
(e) Should Optionees Service be terminated for Cause or should Optionee otherwise engage in conduct constituting grounds for a termination for Cause while this Option is outstanding, then this Option shall terminate immediately and cease to remain outstanding.
6. Change of Control.
(a) Should a Change of Control occur during Optionees period of Service, then the Option Shares at the time subject to this Option but not otherwise vested shall automatically vest in full so that this Option shall, immediately prior to the effective date of the Change of Control, become exercisable for all of the Option Shares as fully vested shares and may be exercised for any or all of those Option Shares as vested shares. However, the Option Shares shall not vest on such an accelerated basis if and to the extent: (i) this Option is assumed or substituted with an equivalent award by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change of Control transaction and the Companys repurchase rights with respect to the unvested Option Shares purchasable under this Option are assigned to such successor corporation (or parent thereof) or otherwise continued in effect or (ii) this Option is to be replaced with a cash retention program of the successor corporation which preserves the spread existing on the unvested Option Shares at the time of the Change of Control (the excess of the Fair Market Value of those Option Shares over the Exercise Price payable for such shares) and provides for subsequent payout of that spread in accordance with the same Vesting Schedule applicable to those unvested Option Shares as set forth in the Grant Notice or (iii) such accelerated vesting is otherwise precluded pursuant to the provisions of Paragraph 5(d) above. Notwithstanding the foregoing, no such cash retention program shall be established for this Option (or any other option granted to Optionee under the Plan) to the extent such program would otherwise be deemed to constitute a deferred compensation arrangement subject to the requirements of Code Section 409A and the Treasury Regulations thereunder.
(b) Immediately following the Change of Control, this Option shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change of Control transaction.
(c) If this Option is assumed in connection with a Change of Control or otherwise continued in effect, then this option shall be appropriately adjusted, immediately after such Change of Control, to apply to the number and class of securities which would have been issuable to Optionee in consummation of such Change of Control had the Option been exercised immediately prior to such Change of Control, and appropriate adjustments shall also be made to the Exercise Price, provided the aggregate Exercise Price shall remain the same. To the extent that the actual holders of the Companys outstanding Common Stock receive cash consideration
Exhibit A to Notice of Grant of Stock Option (Early Exercise)
Page 3
for their Common Stock in consummation of the Change of Control, the successor corporation may, in connection with the assumption or continuation of this option, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change of Control provided such common stock is readily traded on an established U.S. securities exchange or market.
(d) This Agreement shall not in any way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
7. Adjustment in Option Shares. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction or other change affecting the outstanding Common Stock as a class without the Companys receipt of consideration or should the value of the outstanding shares of Common Stock be substantially reduced as a result of a spin-off transaction or extraordinary dividend or distribution, then equitable adjustments shall be made to (i) the total number and/or class of securities subject to this Option and (ii) the Exercise Price. The adjustments shall be made by the Plan Administrator in such manner as the Plan Administrator deems appropriate in order to reflect such change, and those adjustments shall be final, binding and conclusive.
8. Stockholder Rights. The holder of this Option shall not have any stockholder rights with respect to the Option Shares until such person shall have exercised the Option, paid the Exercise Price and become the record holder of the purchased shares.
9. Manner of Exercising Option.
(a) In order to exercise this Option with respect to all or any part of the Option Shares for which this Option is at the time exercisable, Optionee (or any other person or persons exercising this Option) must take the following actions:
(i) Execute and deliver to the Company a stock purchase agreement substantially in the form of Exhibit C to the Grant Notice (the Purchase Agreement) for the Option Shares for which the option is exercised or comply with such other procedures as the Company may establish for notifying the Company of the exercise of this Option.
(ii) Pay the aggregate Exercise Price for the purchased shares in one or more of the following forms:
(A) cash or certified check made payable to the Company; or
(B) at the discretion of the Plan Administrator and to the extent permitted by Applicable Law, in shares of Common Stock valued at Fair Market Value on the date on which this Option shall have been exercised in accordance with this Section 9 (the Exercise Date) and held by Optionee (or any other person or persons exercising the Option) for the requisite period (if any) necessary to avoid a charge to the Companys earnings for financial reporting purposes; or
Exhibit A to Notice of Grant of Stock Option (Early Exercise)
Page 4
(C) to the extent the option is exercised for vested Option Shares following the IPO, through a special sale and remittance procedure established by the Company pursuant to which Optionee (or any other person or persons exercising the option) shall concurrently provide irrevocable instructions (1) to a brokerage firm (reasonably satisfactory to the Company for purposes of administering such procedure in compliance with any applicable pre-clearance or pre-notification requirements) to effect the immediate sale of the purchased shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Exercise Price payable for the purchased shares plus all applicable income and employment taxes required to be withheld by the Company by reason of such exercise and (2) to the Company to deliver the certificates for the purchased shares directly to such brokerage firm on such settlement date in order to complete the sale; or
(D) such other method of payment as the Plan Administrator may approve.
(iii) Furnish to the Company appropriate documentation that the person or persons exercising the option (if other than Optionee) have the right to exercise this Option.
(iv) Execute and deliver to the Company such written representations as may be requested by the Company in order for it to comply with the applicable requirements of applicable securities laws.
(v) Make appropriate arrangements with the Company (or Affiliate employing or retaining Optionee) for the satisfaction of all applicable income and employment tax withholding requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the Company shall issue to or on behalf of Optionee (or any other person or persons exercising this Option) a certificate for the purchased Option Shares, with the appropriate legends affixed thereto.
(c) In no event may this Option be exercised for any fractional shares.
10. REPURCHASE RIGHTS. ALL UNVESTED OPTION SHARES ACQUIRED UPON THE EXERCISE OF THIS OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE COMPANY AND ITS ASSIGNS TO REPURCHASE THOSE SHARES IN ACCORDANCE WITH THE TERMS SPECIFIED IN THE PURCHASE AGREEMENT.
Exhibit A to Notice of Grant of Stock Option (Early Exercise)
Page 5
11. Compliance with Laws and Regulations.
(a) The exercise of this Option and the issuance of the Option Shares upon such exercise shall be subject to compliance by the Company and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange on which the Common Stock may be listed for trading at the time of such exercise and issuance.
(b) The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of any Common Stock pursuant to this Option shall relieve the Company of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. The Company, however, shall use its best efforts to obtain all such approvals.
12. Successors and Assigns. Except to the extent otherwise provided in Sections 3 and 5, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and Optionee, Optionees assigns and the legal representatives, heirs and legatees of Optionees estate.
13. Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated below Optionees signature line on the Grant Notice. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.
Optionee generally consents to the delivery of any notice pursuant to the Delaware General Corporation Law (the DGCL), as amended or superseded from time to time, by electronic transmission pursuant to Section 232 of the DGCL (Electronic Notice) at the electronic mail address or the facsimile number as set forth in the books of the Company. To the extent that any notice given via electronic transmission is returned or undeliverable for any reason, the foregoing consent shall be deemed to have been revoked until a new or corrected electronic mail address has been provided, and such attempted Electronic Notice shall be ineffective and deemed to not have been given. Optionee agrees to promptly notify the Company of any change in Optionees electronic mail address, but failure to do so shall not affect the foregoing.
14. Construction; Administrator Discretions. This Agreement and the Option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in this Option.
15. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to options awarded under the Plan or future options that may be awarded under the Plan by electronic means or request Optionees consent to participate in the Plan by electronic means. Optionee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or another third party designated by the Company.
Exhibit A to Notice of Grant of Stock Option (Early Exercise)
Page 6
16. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Texas without resort to that states conflict-of-laws rules.
17. Stockholder Approval. If the Option Shares covered by this Agreement exceed, as of the Grant Date, the number of shares of Common Stock which may be issued under the Plan as last approved by the Companys stockholders, then this Option shall be void with respect to such excess shares, unless stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan.
18. Code Section 409A. Under Section 409A of the Code, an option that is granted with an exercise price per share of Common Stock that is determined by the Internal Revenue Service (the IRS) to be less than the Fair Market Value of a share of Common Stock on the Grant Date (a Discount Option) may be considered deferred compensation. A Discount Option may result in (i) income recognition by Optionee prior to the exercise of the option, (ii) an additional twenty percent (20%) federal income tax, and (iii) potential penalty and interest charges. The Discount Option may also result in additional state income, penalty and interest tax to the Optionee. Optionee acknowledges that the Company cannot and has not guaranteed that the IRS will agree that the exercise price per share of Common Stock of this Option equals or exceeds the Fair Market Value of a share of Common Stock on the Grant Date in a later examination. Optionee agrees that if the IRS determines that this Option was granted with an exercise price per share of Common Stock that was less than the Fair Market Value of a share of Common Stock on the Grant Date, Optionee will be solely responsible for Optionees costs related to such a determination.
19. Modifications to the Agreement. This Agreement and the Plan constitutes the entire understanding of the parties on the subjects covered. Optionee expressly warrants that he or she is not accepting this Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to the option, this Agreement or the Plan can be made only in an express written contract executed by a duly authorized officer of the Company. Notwithstanding anything to the contrary in the Plan or this Agreement, the Company reserves the right to revise this Agreement as it deems necessary or advisable, in its sole discretion and without the consent of Optionee, to comply with Section 409A of the Code or to otherwise avoid imposition of any additional tax or income recognition under Section 409A of the Code in connection to this Option.
20. Additional Terms Applicable to an Incentive Stock Option. In the event this Option is designated an Incentive Option in the Grant Notice, the following terms and conditions shall also apply to the grant:
(a) This Option shall cease to qualify for favorable tax treatment as an Incentive Stock Option if (and to the extent) this Option is exercised for one or more Option Shares (i) more than three (3) months after the date Optionee ceases to be an Employee for any reason other than death or Permanent Disability laws; or (ii) more than twelve (12) months after the date Optionee ceases to be an Employee by reason of Permanent Disability.
Exhibit A to Notice of Grant of Stock Option (Early Exercise)
Page 7
(b) This Option shall not become exercisable in the calendar year in which granted if (and to the extent) the aggregate Fair Market Value (determined at the Grant Date) of the Common Stock for which this Option would otherwise first become exercisable in such calendar year would, when added to the aggregate value (determined as of the respective date or dates of grant) of the Common Stock and any other securities for which one or more other Incentive Options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Company or any Affiliate) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. To the extent the exercisability of this Option is deferred by reason of the foregoing limitation, the deferred portion shall become exercisable in the first calendar year or years thereafter in which the One Hundred Thousand Dollar ($100,000) limitation of this Section 20(a) would not be contravened, but such deferral shall in all events end immediately prior to the effective date of a Change of Control in which this Option is not to be assumed or otherwise continued in effect, whereupon the option shall become immediately exercisable as a Non-Qualified Stock Option for the deferred portion of the Option Shares.
(c) Should Optionee hold, in addition to this Option, one or more other options to purchase Common Stock which become exercisable for the first time in the same calendar year as this Option, then for purposes of the foregoing limitations on the exercisability of such options as Incentive Stock Options, this Option and each of those other options shall be deemed to become first exercisable in that calendar year on the basis of the chronological order in which they were granted, except to the extent otherwise provided under applicable law or regulation.
21. Market Standoff Agreement. Optionee hereby agrees that, if requested by the managing underwriter, it will not, without the prior written consent of the Company, during the period commencing on the date of the final prospectus relating to the Companys initial public offering or any secondary public offering, as applicable, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) calendar days in the case of an initial public offering and, solely in the case of a holder of shares of the Companys Common Stock, ninety (90) calendar days in the case of any secondary public offering (or such other period as may be requested by the Company or managing underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto)) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any securities of the Company,
Exhibit A to Notice of Grant of Stock Option (Early Exercise)
Page 8
including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired), whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of securities, in cash or otherwise. Optionee agrees that any transferee of the Option or shares acquired pursuant to the Option shall be bound by this Section 21.
Exhibit A to Notice of Grant of Stock Option (Early Exercise)
Page 9
EXHIBIT B
2013 EQUITY INCENTIVE PLAN
EXHIBIT C
STOCK PURCHASE AGREEMENT
EARLY EXERCISE
MAVENIR SYSTEMS, INC.
STOCK PURCHASE AGREEMENT
AGREEMENT made this _____ day of ___________________, 20___ by and between Mavenir Systems, Inc., a Delaware corporation, and ________________________, Optionee under the Companys 2013 Equity Incentive Plan.
All capitalized terms in this Agreement shall have the meaning assigned to them in this Agreement, in the Notice of Grant of Stock Option to which this Agreement relates or in the Plan attached as Exhibit B to the Notice of Grant to which this Agreement relates.
A. Exercise of Option
1. Exercise. Optionee hereby purchases _______ shares of Common Stock (the Purchased Shares) pursuant to that certain option (the Option) granted Optionee on ____________________, _____ (the Grant Date) to purchase up to _________ shares of Common Stock (the Option Shares) under the Plan at the exercise price of $ ___________ per share (the Exercise Price).
2. Payment. Concurrently with the delivery of this Agreement to the Company, Optionee shall pay the Exercise Price for the Purchased Shares in accordance with the provisions of all agreements and other documents evidencing the Option (the Option Agreement) and shall deliver whatever additional documents may be required by the Option Agreement as a condition for exercise, together with a duly-executed blank Assignment Separate from Certificate (in the form attached hereto as Exhibit I) with respect to the Purchased Shares.
3. Stockholder Rights. Until such time as the Company exercises the Repurchase Right, Optionee (or any successor in interest) shall have all the rights of a stockholder (including voting, dividend and liquidation rights) with respect to the Purchased Shares, subject, however, to the transfer restrictions of Articles B and C.
4. Information. Optionee believes Optionee has received all the information Optionee considers necessary or appropriate for deciding whether to purchase the Purchased Shares. Optionee further represents that Optionee has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Purchased Shares and the business, properties, prospects and financial condition of the Company.
B. Transfer Restrictions
1. Restriction on Transfer. Except for any Permitted Transfer, Optionee shall not transfer, assign, encumber or otherwise dispose of any of the Purchased Shares which are subject to the Repurchase Right. In addition, Purchased Shares which are released from the Repurchase Right shall not be transferred, assigned, encumbered or otherwise disposed of in contravention of the Right of First Refusal under Article D (the First Refusal Right).
Exhibit C to Notice of Grant of Stock Option (Early Exercise)
Page 1
2. Transferee Obligations. Each person (other than the Company) to whom the Purchased Shares are transferred by means of a Permitted Transfer must, as a condition precedent to the validity of such transfer, acknowledge in writing to the Company that such person is bound by the provisions of this Agreement and that the transferred shares are subject to (i) the Repurchase Right, and (ii) the First Refusal Right, to the same extent such shares would be so subject if retained by Optionee.
3. Restrictive Legends.
(a) Legends. Optionee understands and agrees that the Company may cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS, IN THE OPINION OF COUNSEL (WHICH MAY BE COUNSEL TO THE COMPANY) SATISFACTORY TO THE COMPANY, SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, INCLUDING A 180-DAY MARKET STANDOFF AGREEMENT, REPURCHASE RIGHTS AND RIGHTS OF FIRST REFUSAL GRANTED TO THE COMPANY AND ACCORDINGLY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED, OR IN ANY MANNER DISPOSED OF EXCEPT IN CONFORMITY WITH THE TERMS OF A STOCK PURCHASE AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES). A COPY OF SUCH AGREEMENT IS MAINTAINED AT THE COMPANYS PRINCIPAL CORPORATE OFFICES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate stop transfer instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
Exhibit C to Notice of Grant of Stock Option (Early Exercise)
Page 2
C. Repurchase Right
1. Grant. The Company is hereby granted the right (the Repurchase Right), exercisable at any time during the ninety (90)-day period following the date Optionee ceases for any reason to remain in Service or (if later) during the ninety (90)-day period following the execution date of this Agreement, to repurchase at the lower of (i) the Exercise Price or (ii) the Fair Market Value per share of Common Stock on the date of Optionees cessation of Service (the Repurchase Price) any or all of the Purchased Shares in which Optionee is not, at the time of his or her cessation of Service, vested in accordance with the Vesting Schedule applicable to those shares as specified in the Grant Notice or the special vesting acceleration provisions of Paragraph B.3.6 of this Agreement (such shares to be hereinafter referred to as the Unvested Shares).
2. Exercise of the Repurchase Right. The Repurchase Right shall be exercisable by written notice delivered to each Owner of the Unvested Shares prior to the expiration of the ninety (90)-day exercise period. The notice shall indicate the number of Unvested Shares to be repurchased, the Repurchase Price to be paid per share and the date on which the repurchase is to be effected, such date to be not more than thirty (30) days after the date of such notice. The certificates representing the Unvested Shares to be repurchased shall be delivered to the Company on the closing date specified for the repurchase. Concurrently with the receipt of such stock certificates, the Company shall pay to Owner, in cash or cash equivalents (including the cancellation of any purchase-money indebtedness), an amount equal to the Repurchase Price for the Unvested Shares which are to be repurchased from Owner.
3. Termination of the Repurchase Right. The Repurchase Right shall terminate with respect to any Unvested Shares for which it is not timely exercised under Section B.3.2. In addition, the Repurchase Right shall terminate and cease to be exercisable with respect to any and all Purchased Shares in which Optionee vests in accordance with the Vesting Schedule. All Purchased Shares as to which the Repurchase Right lapses shall, however, remain subject to the First Refusal Right.
4. Aggregate Vesting Limitation. If the Option is exercised in more than one increment so that Optionee is a party to one or more other Stock Purchase Agreements (the Prior Purchase Agreements) which are executed prior to the date of this Agreement, then the total number of Purchased Shares as to which Optionee shall be deemed to have a fully-vested interest under this Agreement and all Prior Purchase Agreements shall not exceed in the aggregate the number of Purchased Shares in which Optionee would otherwise at the time be vested, in accordance with the Vesting Schedule, had all the Purchased Shares (including those acquired under the Prior Purchase Agreements) been acquired exclusively under this Agreement.
5. Recapitalization. Any new, substituted or additional securities or other property (including cash paid other than as a regular cash dividend) which is by reason of any Recapitalization distributed with respect to the Purchased Shares shall be immediately subject to the Repurchase Right and any escrow requirements hereunder, but only to the extent the Purchased Shares are at the time covered by such right or escrow requirements. Appropriate adjustments to reflect such distribution shall be made to the number and/or class of Purchased Shares subject to this Agreement and to the Repurchase Price per share to be paid upon the exercise of the Repurchase Right in order to reflect the effect of any such Recapitalization upon the Companys capital structure; provided, however, that the aggregate Repurchase Price shall remain the same.
Exhibit C to Notice of Grant of Stock Option (Early Exercise)
Page 3
6. Change of Control.
(a) The Repurchase Right shall automatically terminate in its entirety, and all the Purchased Shares shall vest in full, immediately prior to the consummation of any Change of Control, except to the extent the Repurchase Right is to be assigned to the successor entity in such Change of Control or otherwise continued in full force and effect pursuant to the terms of the Change of Control transaction.
(b) To the extent the Repurchase Right remains in effect following a Change of Control, such right shall apply to any new securities or other property (including any cash payments) received in exchange for the Purchased Shares in consummation of the Change of Control, but only to the extent the Purchased Shares are at the time covered by such right. Appropriate adjustments shall be made to the Repurchase Price per share payable upon exercise of the Repurchase Right to reflect the effect (if any) of the Change of Control; provided, however, that the aggregate Repurchase Price shall remain the same. The new securities or other property (including any cash payments) issued or distributed with respect to the Purchased Shares in consummation of the Change of Control shall be immediately deposited in escrow with the Company (or the successor entity) and shall not be released from escrow until Optionee vests in such securities or other property in accordance with the same Vesting Schedule in effect for the Purchased Shares.
D. Companys Right of First Refusal. Before any Shares held by Optionee or any transferee (either being sometimes referred to herein as the Holder) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section (the Right of First Refusal).
1. Notice of Proposed Transfer. The Holder of the Shares shall deliver to the Company a written notice (the Notice) stating: (i) the Holders bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (Proposed Transferee); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the Offered Price), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).
2. Exercise of Right of First Refusal. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase up to all of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.
3. Purchase Price. The purchase price (Purchase Price) for the Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.
Exhibit C to Notice of Grant of Stock Option (Early Exercise)
Page 4
4. Payment. Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within 30 days after receipt of the Notice or in the manner and at the times set forth in the Notice.
5. Holders Right to Transfer. To the extent that the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within 120 days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.
6. Exception for Certain Family Transfers. Anything to the contrary contained in this Section notwithstanding, the transfer of any or all of the Shares during the Optionees lifetime or on the Optionees death by will or intestacy to the Optionees immediate family or a trust for the benefit of the Optionees immediate family shall be exempt from the provisions of this Section. Immediate Family as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section, and there shall be no further transfer of such Shares except in accordance with the terms of this Section.
7. Termination of Right of First Refusal. The Right of First Refusal shall terminate as to any Shares upon the earlier to occur of (i) the consummation of a Change of Control or (ii) the first sale of Common Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act.
E. Special Tax Election
The acquisition of the Purchased Shares may result in adverse tax consequences which may be avoided or mitigated by filing an election under Code Section 83(b). Such election must be filed within thirty (30) days after the date of this Agreement. A description of the tax consequences applicable to the acquisition of the Purchased Shares and the form for making the Code Section 83(b) election are set forth in Exhibit II. OPTIONEE SHOULD CONSULT WITH HIS OR HER TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF ACQUIRING THE PURCHASED SHARES AND THE ADVANTAGES AND DISADVANTAGES OF FILING THE CODE SECTION 83(b) ELECTION. OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEES SOLE RESPONSIBILITY, AND NOT THE COMPANYS, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
Exhibit C to Notice of Grant of Stock Option (Early Exercise)
Page 5
F. General Provisions
1. Assignment. The Company may assign the Repurchase Right to any person or entity selected by the Board, including (without limitation) one or more stockholders of the Company.
2. At Will Employment. Nothing in this Agreement or in the Plan shall confer upon Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Affiliate employing or retaining Optionee) or of Optionee, which rights are hereby expressly reserved by each, to terminate Optionees Service at any time for any reason, with or without cause.
3. Notices. Any notice required to be given under this Agreement shall be in writing and shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party entitled to such notice at the address indicated below such partys signature line on this Agreement or at such other address as such party may designate by ten (10) days advance written notice under this paragraph to all other parties to this Agreement.
Optionee generally consents to the delivery of any notice pursuant to the Delaware General Corporation Law (the DGCL), as amended or superseded from time to time, by electronic transmission pursuant to Section 232 of the DGCL (Electronic Notice) at the electronic mail address or the facsimile number as set forth in the books of the Company. To the extent that any notice given via electronic transmission is returned or undeliverable for any reason, the foregoing consent shall be deemed to have been revoked until a new or corrected electronic mail address has been provided, and such attempted Electronic Notice shall be ineffective and deemed to not have been given. Optionee agrees to promptly notify the Company of any change in Optionees electronic mail address, but failure to do so shall not affect the foregoing.
4. No Waiver. The failure of the Company in any instance to exercise the Repurchase Right shall not constitute a waiver of any other repurchase rights that may subsequently arise under the provisions of this Agreement or any other agreement between the Company and Optionee. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature.
5. Cancellation of Shares. If the Company shall make available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Purchased Shares to be repurchased in accordance with the provisions of this Agreement, then from and after such time, the person from whom such shares are to be repurchased shall no longer have any rights as a holder of such shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such shares shall be deemed purchased in accordance with the applicable provisions hereof, and the Company shall be deemed the owner and holder of such shares, whether or not the certificates therefor have been delivered as required by this Agreement.
Exhibit C to Notice of Grant of Stock Option (Early Exercise)
Page 6
G. Miscellaneous Provisions
1. Optionee Undertaking. Optionee hereby agrees to take whatever additional action and execute whatever additional documents the Company may deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions imposed on either Optionee or the Purchased Shares pursuant to the provisions of this Agreement.
2. Agreement is Entire Contract. This Agreement constitutes the entire contract between the parties hereto with regard to the subject matter hereof. This Agreement is made pursuant to the provisions of the Plan and shall in all respects be construed in conformity with the terms of the Plan.
3. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas without resort to that states conflict-of-laws rules.
4. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.
5. Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon Optionee, Optionees permitted assigns and the legal representatives, heirs and legatees of Optionees estate, whether or not any such person shall have become a party to this Agreement and have agreed in writing to join herein and be bound by the terms hereof.
Exhibit C to Notice of Grant of Stock Option (Early Exercise)
Page 7
IN WITNESS WHEREOF, the parties have executed this Stock Purchase Agreement on the day and year first indicated above.
MAVENIR SYSTEMS, INC. | ||
By: |
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Name: |
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Title: |
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OPTIONEE | ||
Signature: |
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Print Name: |
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Address: |
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Exhibit C to Notice of Grant of Stock Option (Early Exercise)
Page 8
SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of Optionee has read and hereby approves the foregoing Stock Purchase Agreement. In consideration of the Companys granting Optionee the right to acquire the Purchased Shares in accordance with the terms of such Agreement, the undersigned hereby agrees to be irrevocably bound by all the terms of such Agreement, including (without limitation) the right of the Company (or its assigns) to purchase any Purchased Shares in which Optionee is not vested at time of his or her cessation of Service.
OPTIONEES SPOUSE | ||
Address: |
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EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED _________________________ hereby sell(s), assign(s) and transfer(s) unto Mavenir Systems, Inc. (the Company), _______________ ( ) shares of the Common Stock of the Company standing in his or her name on the books of the Company represented by Certificate No. _________ herewith and do(es) hereby irrevocably constitute and appoint _____________________, Attorney to transfer the said stock on the books of the Company with full power of substitution in the premises.
Dated: |
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Signature: |
Instruction: Please do not fill in any blanks other than the signature line. Please sign exactly as you would like your name to appear on the issued stock certificate. The purpose of this assignment is to enable the Company to exercise the Repurchase Right without requiring additional signatures on the part of Optionee.
Exhibit C-I to Notice of Grant of Stock Option (Early Exercise)
Page 1
EXHIBIT II
FEDERAL INCOME TAX CONSEQUENCES AND
SECTION 83(b) TAX ELECTION
FEDERAL INCOME TAX CONSEQUENCES AND
SECTION 83(b) TAX ELECTION
H. Federal Income Tax Consequences and Section 83(b) Election For Exercise of Non-Qualified Option. If the Purchased Shares are acquired pursuant to the exercise of a Non-Qualified Stock Option, as specified in the Grant Notice, then under Code Section 83, the excess of the Fair Market Value of the Purchased Shares on the date any forfeiture restrictions applicable to such shares lapse over the Exercise Price paid for those shares will be reportable as ordinary income on the lapse date. For this purpose, the term forfeiture restrictions includes the right of the Company to repurchase the Purchased Shares pursuant to the Repurchase Right. However, Optionee may elect under Code Section 83(b) to be taxed at the time the Purchased Shares are acquired, rather than when and as such Purchased Shares cease to be subject to such forfeiture restrictions. Such election must be filed with the Internal Revenue Service within thirty (30) days after the date of the Agreement. Even if the Fair Market Value of the Purchased Shares on the date of the Agreement equals the Exercise Price paid (and thus no tax is payable), the election must be made to avoid adverse tax consequences in the future. The form for making this election is attached as part of this exhibit. FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME BY OPTIONEE AS THE FORFEITURE RESTRICTIONS LAPSE.
I. Federal Income Tax Consequences and Conditional Section 83(b) Election For Exercise of Incentive Stock Option. If the Purchased Shares are acquired pursuant to the exercise of an Incentive Stock Option, as specified in the Grant Notice, then the following tax principles shall be applicable to the Purchased Shares:
1. For regular tax purposes, no taxable income will be recognized at the time the Option is exercised.
2. The excess of (a) the Fair Market Value of the Purchased Shares on the date the Option is exercised or (if later) on the date any forfeiture restrictions applicable to the Purchased Shares lapse over (b) the Exercise Price paid for the Purchased Shares will be includible in Optionees taxable income for alternative minimum tax purposes.
3. If Optionee makes a disqualifying disposition of the Purchased Shares, then Optionee will recognize ordinary income in the year of such disposition equal in amount to the excess of (a) the Fair Market Value of the Purchased Shares on the date the Option is exercised or (if later) on the date any forfeiture restrictions applicable to the Purchased Shares lapse over (b) the Exercise Price paid for the Purchased Shares. Any additional gain recognized upon the disqualifying disposition will be either short-term or long-term capital gain depending upon the period for which the Purchased Shares are held prior to the disposition.
4. For purposes of the foregoing, the term forfeiture restrictions will include the right of the Company to repurchase the Purchased Shares pursuant to the Repurchase Right. The term disqualifying disposition means any sale or other disposition1 of the Purchased Shares within two (2) years after the Grant Date or within one (1) year after the exercise date of the Option.
1 | Generally, a disposition of shares purchased under an Incentive Stock Option includes any transfer of legal title, including a transfer by sale, exchange or gift, but does not include a transfer to the Optionees spouse, a transfer into joint ownership with right of survivorship if Optionee remains one of the joint owners, a pledge, a transfer by bequest or inheritance or certain tax-free exchanges permitted under the Code. |
Exhibit C-II to Notice of Grant of Stock Option (Early Exercise)
Page 1
5. The Code Section 83(b) election will be effective in limiting Optionees alternative minimum taxable income to the excess of the Fair Market Value of the Purchased Shares at the time the Option is exercised over the Exercise Price paid for those shares.
Page 2 of the attached form for making the election should be filed with any election made in connection with the exercise of an Incentive Stock Option.
Exhibit C-II to Notice of Grant of Stock Option (Early Exercise)
Page 2
SECTION 83(b) ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code, pursuant to Treas. Reg. Section 1.83-2.
(1) | The taxpayer who performed the services is: | |||
Name: Address: Taxpayer Ident. No.: | ||||
(2) | The property with respect to which the election is being made is _____________ shares of the Common Stock of Mavenir Systems, Inc. | |||
(3) | The property was issued on ______________, _____. | |||
(4) | The taxable year in which the election is being made is the calendar year _____. | |||
(5) | The property is subject to a repurchase right pursuant to which the issuer has the right to acquire the property at the lower of the purchase price paid per share or the fair market value per share, if for any reason taxpayers service with the issuer terminates. The issuers repurchase right will lapse in a series of annual installments over a four (4)-year period ending on ___________, 20__. | |||
(6) | The fair market value at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) is $ __________ per share. | |||
(7) | The amount paid for such property is $___________ per share. | |||
(8) | A copy of this statement was furnished to Mavenir Systems, Inc. for whom taxpayer rendered the services underlying the transfer of property. | |||
(9) | This statement is executed on _________________, 20___. |
Spouse (if any) | Taxpayer | |||||
This election must be filed with the Internal Revenue Service Center with which taxpayer files his or her Federal income tax returns and must be made within thirty (30) days after the execution date of the Stock Issuance Agreement. This filing should be made by registered or certified mail, return receipt requested. Participant must retain two (2) copies of the completed form for filing with his or her Federal and state tax returns for the current tax year and an additional copy for his or her records. |
THIS PAGE 2 IS TO BE ATTACHED TO ANY SECTION 83(b) ELECTION FILED IN CONNECTION WITH THE EXERCISE OF AN INCENTIVE STOCK OPTION UNDER THE FEDERAL TAX LAWS.
The property described in the above Section 83(b) election is comprised of shares of common stock acquired pursuant to the exercise of an incentive stock option under Section 422 of the Internal Revenue Code (the Code). Accordingly, the purpose of this election is to have the alternative minimum taxable income attributable to the purchased shares measured by the amount by which the fair market value of such shares at the time of their transfer to the Taxpayer exceeds the purchase price paid for the shares. In the absence of this election, such alternative minimum taxable income would be measured by the spread between the fair market value of the purchased shares and the purchase price which exists on the various lapse dates in effect for the forfeiture restrictions applicable to such shares.
Exhibit 10.9
STANDARD
MAVENIR SYSTEMS, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the Option) to purchase shares (the Option Shares) of the Common Stock of Mavenir Systems, Inc., a Delaware corporation (the Company):
Optionee:
Grant Date:
Vesting Commencement Date:
Exercise Price: $ per share
Number of Option Shares: shares of Common Stock
Expiration Date:
Type of Option: Incentive Stock Option
Non-Qualified Stock Option
Date Exercisable: This Option shall become vested and exercisable with respect to (i) one fourth (1/4th) of the Option Shares on the first anniversary of the Vesting Commencement Date and (ii) an additional one forty-eighth (1/48th) of the Option Shares on the corresponding day of each calendar month thereafter or, if such calendar month does not have the corresponding day, on the last day of such calendar month. In no event shall this Option vest or become exercisable for any additional Option Shares following Optionees cessation of Service, except to the extent (if any) specifically authorized by the Plan Administrator in its sole discretion pursuant to a written agreement with Optionee.
Optionee understands and agrees that the Option is granted subject to and in accordance with the terms of the Mavenir Systems, Inc. 2013 Equity Incentive Plan (the Plan). Optionee further agrees to be bound by the terms of the Plan and the terms of the Option as set forth in the Stock Option Agreement attached hereto as Exhibit A. Optionee hereby acknowledges receipt of a copy of the Plan in the form attached hereto as Exhibit B.
At Will Employment. Nothing in this Notice or in the attached Stock Option Agreement or Plan shall confer upon Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Affiliate employing or retaining Optionee) or of Optionee, which rights are hereby expressly reserved by each, to terminate Optionees Service at any time for any reason, with or without cause.
Definitions. All capitalized terms in this Notice shall have the meaning assigned to them in this Notice, in the attached Stock Option Agreement or in the Plan.
MAVENIR SYSTEMS, INC. | ||
By: | ||
Name: | ||
Title: | ||
OPTIONEE | ||
Signature: | ||
Print Name: | ||
Address: | ||
Attachments:
Exhibit A Stock Option Agreement
Exhibit B 2013 Equity Incentive Plan
Notice of Grant of Stock Option
Page 2
EXHIBIT A
STOCK OPTION AGREEMENT
STANDARD
MAVENIR SYSTEMS, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the 2013 Equity Incentive Plan (the Plan) for the purpose of retaining the services of selected Employees, Directors and Consultants in the service of the Company (or any Affiliate).
B. Optionee is to render valuable services to the Company (or an Affiliate), and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Companys grant of an option to Optionee.
C. All capitalized terms in this Agreement not defined herein shall have the meaning assigned to them in the Grant Notice (as defined below) or in the Plan.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Company hereby grants to Optionee, as of the Grant Date as specified in the Notice of Grant of Stock Option accompanying this Agreement, pursuant to which Optionee has been informed of the basic terms of the option evidenced hereby (the Grant Notice), an option to purchase up to the number of Option Shares specified in the Grant Notice. The Option Shares shall be purchasable from time to time during the option term specified in Section 2 at the Exercise Price.
2. Option Term. This Option shall have a term of ten (10) years measured from the Grant Date and shall accordingly expire at the close of business on the date on which the option expires as specified in the Grant Notice (the Expiration Date), unless sooner terminated in accordance with Sections 5 or 6.
3. Limited Transferability.
(a) This Option shall be neither transferable nor assignable by Optionee other than by will or the laws of inheritance following Optionees death and may be exercised, during Optionees lifetime, only by Optionee. However, Optionee may designate one or more persons as the beneficiary or beneficiaries of this Option, and this Option shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon Optionees death while holding this Option. Such beneficiary or beneficiaries shall take the transferred option subject to all the terms and conditions of this Agreement, including (without limitation) the limited time period during which this Option may, pursuant to Section 5, be exercised following Optionees death.
(b) If this Option is designated a Non-Qualified Stock Option in the Grant Notice, then this Option may be assigned in whole or in part during Optionees lifetime to one or more of Optionees Family Members or to a trust established for the exclusive benefit of Optionee and/or one or more such Family Members, to the extent such assignment is in connection with the Optionees estate plan or pursuant to a domestic relations order. The assigned portion shall be exercisable only by the person or persons who acquire a proprietary interest in the option pursuant to such assignment. The terms applicable to the assigned portion shall be the same as those in effect for this Option immediately prior to such assignment.
Exhibit A to Notice of Grant of Stock Option
Page 1
4. Dates of Exercise. This Option shall vest and become exercisable for the Option Shares in one or more installments as specified in the Grant Notice (the Exercise Schedule). As the Option becomes exercisable for such installments, those installments shall accumulate, and the Option shall remain exercisable for the accumulated installments until the Expiration Date or sooner termination of the Option term under Sections 5 or 6.
5. Cessation of Service. The option term specified in Section 2 shall terminate (and this Option shall cease to be outstanding) prior to the Expiration Date should any of the following provisions become applicable:
(a) Should Optionee cease to remain in Service for any reason (other than death, Permanent Disability or Cause) while this Option is outstanding, then Optionee (or any person or persons to whom this Option is transferred pursuant to a permitted transfer under Section 3) shall have a period of three (3) months (commencing with the date of such cessation of Service) during which to exercise this Option, but in no event shall this Option be exercisable at any time after the Expiration Date.
(b) Should Optionee die while this Option is outstanding, then the personal representative of Optionees estate or the person or persons to whom the option is transferred pursuant to Optionees will or the laws of inheritance following Optionees death or, if applicable, the person to whom the option is transferred during Optionees lifetime pursuant to a permitted transfer under Section 3 shall have the right to exercise this Option. However, if Optionee dies while holding this Option and has an effective beneficiary designation in effect for this Option at the time of his or her death, then the designated beneficiary or beneficiaries shall have the exclusive right to exercise this Option following Optionees death. Any such right to exercise this Option shall lapse, and this Option shall cease to be outstanding, upon the earlier of (i) the expiration of the twelve (12)-month period measured from the date of Optionees death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Permanent Disability while this Option is outstanding, then Optionee (or any person or persons to whom this Option is transferred pursuant to a permitted transfer under Section 3) shall have a period of twelve (12) months (commencing with the date of such cessation of Service) during which to exercise this Option. In no event shall this Option be exercisable at any time after the Expiration Date.
(d) During the limited period of post-Service exercisability, this Option may not be exercised in the aggregate for more than the number of Option Shares for which this Option is, at the time of Optionees cessation of Service, exercisable pursuant to the Exercise Schedule specified in the Grant Notice or the special vesting acceleration provisions of Section 6. No additional Option Shares shall vest, whether pursuant to the normal Exercise Schedule specified in the Grant Notice or the special vesting acceleration provisions of Section 6, following Optionees cessation of Service, except to the extent (if any) specifically authorized by the Plan Administrator pursuant to an express written agreement with Optionee. Upon the expiration of such limited exercise period or (if earlier) upon the Expiration Date, this Option shall terminate and cease to be outstanding for any vested Option Shares for which the option has not been exercised.
Exhibit A to Notice of Grant of Stock Option
Page 2
(e) Should Optionees Service be terminated for Cause or should Optionee otherwise engage in conduct constituting grounds for a termination for Cause while this Option is outstanding, then this Option shall terminate immediately and cease to remain outstanding.
6. Change of Control.
(a) Should a Change of Control occur during Optionees period of Service, then this Option, to the extent outstanding at the time but not otherwise exercisable in full, shall automatically vest in full so that this Option shall, immediately prior to the effective date of the Change of Control, become exercisable for all of the Option Shares as fully vested shares and may be exercised for any or all of those Option Shares as vested shares. However, the Option Shares shall not vest on such an accelerated basis if and to the extent: (i) this Option is assumed or substituted with an equivalent award by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change of Control transaction or (ii) this Option is replaced with a cash retention program of the successor corporation which preserves the spread existing on the Option Shares for which this Option is not exercisable at the time of the Change of Control (the excess of the Fair Market Value of those Option Shares over the Exercise Price payable for such shares) and provides for subsequent payout of that spread in accordance with the same Exercise Schedule applicable to those unvested Option Shares as set forth in the Grant Notice or (iii) such accelerated vesting is otherwise precluded pursuant to the provisions of Paragraph 5(d) above. Notwithstanding the foregoing, no such cash retention program shall be established for this Option (or any other option granted to Optionee under the Plan) to the extent such program would otherwise be deemed to constitute a deferred compensation arrangement subject to the requirements of Code Section 409A and the Treasury Regulations thereunder.
(b) Immediately following the Change of Control, this Option shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change of Control transaction.
(c) If this Option is assumed in connection with a Change of Control or otherwise continued in effect, then this Option shall be appropriately adjusted, immediately after such Change of Control, to apply to the number and class of securities which would have been issuable to Optionee in consummation of such Change of Control had the Option been exercised immediately prior to such Change of Control, and appropriate adjustments shall also be made to the Exercise Price, provided the aggregate Exercise Price shall remain the same. To the extent that the actual holders of the Companys outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change of Control, the successor corporation may, in connection with the assumption or continuation of this Option, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change of Control provided such common stock is readily traded on an established U.S. securities exchange or market.
Exhibit A to Notice of Grant of Stock Option
Page 3
7. Adjustment in Option Shares. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction or other change affecting the outstanding Common Stock as a class without the Companys receipt of consideration or should the value of the outstanding shares of Common Stock be substantially reduced as a result of a spin-off transaction or an extraordinary dividend or distribution, then equitable adjustments shall be made to (i) the total number and/or class of securities subject to this Option and (ii) the Exercise Price. The adjustments shall be made by the Plan Administrator in such manner as the Plan Administrator deems appropriate in order to reflect such change, and those adjustments shall be final, binding and conclusive.
8. Stockholder Rights. The holder of this Option shall not have any stockholder rights with respect to the Option Shares until such person shall have exercised the Option, paid the Exercise Price and become the record holder of the purchased shares.
9. Manner of Exercising Option.
(a) In order to exercise this Option with respect to all or any part of the Option Shares for which this Option is at the time exercisable, Optionee (or any other person or persons exercising this Option) must take the following actions:
(i) Complete and submit to the Secretary of the Company or a person designated by the Secretary of the Company the Notice of Exercise attached as Exhibit I attached hereto or comply with such other procedures as the Company may establish for notifying the Company of the exercise of this Option.
(ii) Pay the aggregate Exercise Price for the purchased shares in one or more of the following forms:
(A) cash or certified check made payable to the Company; or
(B) at the discretion of the Plan Administrator and to the extent permitted by Applicable Law, in shares of Common Stock valued at Fair Market Value on the date on which this Option shall have been exercised in accordance with this Section 9 (the Exercise Date) and held by Optionee (or any other person or persons exercising the Option) for the requisite period (if any) necessary to avoid a charge to the Companys earnings for financial reporting purposes; or
(C) to the extent the option is exercised for vested Option Shares following the IPO, through a special sale and remittance procedure established by the Company pursuant to which Optionee (or any other person or persons exercising the option) shall concurrently provide irrevocable instructions (1) to a brokerage firm (reasonably satisfactory to the Company for purposes of administering such procedure in compliance with any applicable pre-clearance or pre-notification requirements) to effect the immediate sale of the purchased shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Exercise Price payable for the purchased shares plus all applicable income and employment taxes required to be withheld by the Company by reason of such exercise and (2) to the Company to deliver the certificates for the purchased shares directly to such brokerage firm on such settlement date in order to complete the sale; or
Exhibit A to Notice of Grant of Stock Option
Page 4
(D) such other method of payment as the Plan Administrator may approve.
(iii) Furnish to the Company appropriate documentation that the person or persons exercising the option (if other than Optionee) have the right to exercise this Option.
(iv) Execute and deliver to the Company such written representations as may be requested by the Company in order for it to comply with the applicable requirements of applicable securities laws.
(v) Make appropriate arrangements with the Company (or Affiliate employing or retaining Optionee) for the satisfaction of all applicable income and employment tax withholding requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the Company shall issue to or on behalf of Optionee (or any other person or persons exercising this Option) a certificate for the purchased Option Shares, with the appropriate legends affixed thereto.
(c) In no event may this Option be exercised for any fractional shares.
10. Compliance with Laws and Regulations.
(a) The exercise of this Option and the issuance of the Option Shares upon such exercise shall be subject to compliance by the Company and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange on which the Common Stock may be listed for trading at the time of such exercise and issuance.
(b) The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of any Common Stock pursuant to this Option shall relieve the Company of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. The Company, however, shall use its best efforts to obtain all such approvals.
11. Successors and Assigns. Except to the extent otherwise provided in Sections 3 and 5, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and Optionee, Optionees assigns and the legal representatives, heirs and legatees of Optionees estate.
12. Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated below Optionees signature line on the Grant Notice. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.
Exhibit A to Notice of Grant of Stock Option
Page 5
Optionee generally consents to the delivery of any notice pursuant to the Delaware General Corporation Law (the DGCL), as amended or superseded from time to time, by electronic transmission pursuant to Section 232 of the DGCL (Electronic Notice) at the electronic mail address or the facsimile number as set forth in the books of the Company. To the extent that any notice given via electronic transmission is returned or undeliverable for any reason, the foregoing consent shall be deemed to have been revoked until a new or corrected electronic mail address has been provided, and such attempted Electronic Notice shall be ineffective and deemed to not have been given. Optionee agrees to promptly notify the Company of any change in Optionees electronic mail address, but failure to do so shall not affect the foregoing.
13. Construction; Administrator Discretions. This Agreement and the Option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in this Option.
14. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to options awarded under the Plan or future options that may be awarded under the Plan by electronic means or request Optionees consent to participate in the Plan by electronic means. Optionee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or another third party designated by the Company.
15. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Texas without resort to that states conflict-of-laws rules.
16. Stockholder Approval. If the Option Shares covered by this Agreement exceed, as of the Grant Date, the number of shares of Common Stock which may be issued under the Plan as last approved by the Companys stockholders, then this Option shall be void with respect to such excess shares, unless stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan.
17. Code Section 409A. Under Section 409A of the Code, an option that is granted with an exercise price per share of Common Stock that is determined by the Internal Revenue Service (the IRS) to be less than the Fair Market Value of a share of Common Stock on the Grant Date (a Discount Option) may be considered deferred compensation. A Discount Option may result in (i) income recognition by Optionee prior to the exercise of the option, (ii) an additional twenty percent (20%) federal income tax, and (iii) potential penalty and interest charges. The Discount Option may also result in additional state income, penalty and interest tax to Optionee. Optionee acknowledges that the Company cannot and has not guaranteed that the IRS will agree that the exercise price per share of Common Stock of this Option equals or exceeds the Fair Market Value of a share of Common Stock on the Grant Date in a later examination. Optionee agrees that if the IRS determines that this Option was granted with an exercise price per share of Common Stock that was less than the Fair Market Value of a share of Common Stock on the Grant Date, Optionee will be solely responsible for Optionees costs related to such a determination.
Exhibit A to Notice of Grant of Stock Option
Page 6
18. Modifications to the Agreement. This Agreement and the Plan constitutes the entire understanding of the parties on the subjects covered. Optionee expressly warrants that he or she is not accepting this Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to the Option, this Agreement or the Plan can be made only in an express written contract executed by a duly authorized officer of the Company. Notwithstanding anything to the contrary in the Plan or this Agreement, the Company reserves the right to revise this Agreement as it deems necessary or advisable, in its sole discretion and without the consent of Optionee, to comply with Section 409A of the Code or to otherwise avoid imposition of any additional tax or income recognition under Section 409A of the Code in connection to this Option.
19. Additional Terms Applicable to an Incentive Stock Option. In the event this Option is designated an Incentive Stock Option in the Grant Notice, the following terms and conditions shall also apply to the grant:
(a) This Option shall cease to qualify for favorable tax treatment as an Incentive Stock Option if (and to the extent) this Option is exercised for one or more Option Shares (i) more than three (3) months after the date Optionee ceases to be an Employee for any reason other than death or Permanent Disability; or (ii) more than twelve (12) months after the date Optionee ceases to be an Employee by reason of Permanent Disability.
(b) No installment under this Option shall qualify for favorable tax treatment as an Incentive Stock Option if (and to the extent) the aggregate Fair Market Value (determined at the Grant Date) of the Common Stock for which such installment first becomes exercisable hereunder would, when added to the aggregate value (determined as of the respective date or dates of grant) of any earlier installments of the Common Stock and any other securities for which this Option or any other Incentive Stock Options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Company or any Affiliate) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should such One Hundred Thousand Dollar ($100,000) limitation be exceeded in any calendar year, this Option shall nevertheless become exercisable for the excess shares in such calendar year as a Non-Qualified Option.
(c) Should Optionee hold, in addition to this Option, one or more other options to purchase Common Stock which become exercisable for the first time in the same calendar year as this Option, then for purposes of the foregoing limitations on the exercisability of such options as Incentive Stock Options, this Option and each of those other options shall be deemed to become first exercisable in that calendar year on the basis of the chronological order in which they were granted, except to the extent otherwise provided under applicable law or regulation.
Exhibit A to Notice of Grant of Stock Option
Page 7
20. Market Standoff Agreement. Optionee hereby agrees that, if requested by the managing underwriter, it will not, without the prior written consent of the Company, during the period commencing on the date of the final prospectus relating to the Companys initial public offering or any secondary public offering, as applicable, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) calendar days in the case of an initial public offering and, solely in the case of a holder of shares of the Companys Common Stock, ninety (90) calendar days in the case of any secondary public offering (or such other period as may be requested by the Company or managing underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto)) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired), whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of securities, in cash or otherwise. Optionee agrees that any transferee of the Option or shares acquired pursuant to the Option shall be bound by this Section 20.
* * * * * *
Exhibit A to Notice of Grant of Stock Option
Page 8
STANDARD
EXHIBIT I
NOTICE OF EXERCISE
Mavenir Systems, Inc.
1700 International Parkway, Suite 200
Richardson, TX 75081
Attn: Secretary
1. Exercise of Option. Effective as of today, , , the undersigned (Optionee) hereby elects to exercise Optionees option (the Option) to purchase shares of the Common Stock (the Shares) of Mavenir Systems, Inc. (the Company) under and pursuant to the 2013 Equity Incentive Plan (the Plan) and the Notice of Grant of Stock Option (and Stock Option Agreement) dated , (the Option Agreement).
2. Delivery of Payment. Optionee herewith delivers to the Company the full purchase price of the Shares as set forth in the Option Agreement, and any and all withholding taxes due in connection with the exercise of the Option.
3. Representations of Optionee. Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares shall be issued to the Optionee as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in the Plan.
5. Companys Right of First Refusal. Before any Shares held by Optionee or any transferee (either being sometimes referred to herein as the Holder) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section (the Right of First Refusal).
(a) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the Company a written notice (the Notice) stating: (i) the Holders bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (Proposed Transferee); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the Offered Price), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase up to all of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.
Exhibit I to Stock Option Agreement
Page 1
(c) Purchase Price. The purchase price (Purchase Price) for the Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within 30 days after receipt of the Notice or in the manner and at the times set forth in the Notice.
(e) Holders Right to Transfer. To the extent that the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within 120 days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary contained in this Section notwithstanding, the transfer of any or all of the Shares during the Optionees lifetime or on the Optionees death by will or intestacy to the Optionees immediate family or a trust for the benefit of the Optionees immediate family shall be exempt from the provisions of this Section. Immediate Family as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section, and there shall be no further transfer of such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First Refusal shall terminate as to any Shares upon the earlier to occur of (i) the consummation of a Change of Control or (ii) first sale of Common Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act.
6. Tax Consultation. Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionees purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.
Exhibit I to Stock Option Agreement
Page 2
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company may cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS, IN THE OPINION OF COUNSEL (WHICH MAY BE COUNSEL TO THE COMPANY) SATISFACTORY TO THE COMPANY, SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, INCLUDING A 180-DAY MARKET STANDOFF AGREEMENT, AND A RIGHT OF FIRST REFUSAL HELD BY THE COMPANY AS SET FORTH IN AN EXERCISE NOTICE BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate stop transfer instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
8. Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Exercise Notice shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns.
Exhibit I to Stock Option Agreement
Page 3
9. Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Optionee or by the Company forthwith to the Plan Administrator which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Plan Administrator shall be final and binding on all parties.
10. Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated below Optionees signature line on this Exercise Notice. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.
Optionee generally consents to the delivery of any notice pursuant to the Delaware General Corporation Law (the DGCL), as amended or superseded from time to time, by electronic transmission pursuant to Section 232 of the DGCL (Electronic Notice) at the electronic mail address or the facsimile number as set forth in the books of the Company. To the extent that any notice given via electronic transmission is returned or undeliverable for any reason, the foregoing consent shall be deemed to have been revoked until a new or corrected electronic mail address has been provided, and such attempted Electronic Notice shall be ineffective and deemed to not have been given. Optionee agrees to promptly notify the Company of any change in Optionees electronic mail address, but failure to do so shall not affect the foregoing.
11. Governing Law; Severability. This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of Texas. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, the remaining provisions hereof will continue in full force and effect.
Exhibit I to Stock Option Agreement
Page 4
12. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. This Exercise Notice, the Plan and the Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionees interest except by means of a writing signed by the Company and Optionee.
Submitted by: | Accepted by: | |||||
OPTIONEE: | MAVENIR SYSTEMS, INC. | |||||
By: | ||||||
Signature
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Its: | |||||
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Exhibit I to Stock Option Agreement
Page 5
EXHIBIT B
2013 EQUITY INCENTIVE PLAN
Exhibit 10.10
NON-EMPLOYEE DIRECTOR
MAVENIR SYSTEMS, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the Option) to purchase shares (the Option Shares) of the Common Stock of Mavenir Systems, Inc., a Delaware corporation (the Company):
Optionee:
Grant Date:
Vesting Commencement Date:
Exercise Price: $ per share
Number of Option Shares: shares of Common Stock
Expiration Date:
Type of Option: Incentive Stock Option
ü Non-Qualified Stock Option
Date Exercisable This Option shall become vested and exercisable with respect to 100% of the Option Shares on the earlier of: (i) the first anniversary of the Grant Date or (ii) the date that is one day prior to the date of the next regular annual meeting of the stockholders of the Company following the Grant Date. In no event shall the Option vest or become exercisable for any additional Option Shares following Optionees cessation of Service, except to the extent (if any) specifically authorized by the Plan Administrator in its sole discretion pursuant to a written agreement with Optionee. Notwithstanding the foregoing, in the event of a Change of Control, all then-unvested Option Shares shall become vested and exercisable immediately prior to, but subject to the consummation of, such Change of Control.
Optionee understands and agrees that the Option is granted subject to and in accordance with the terms of the Mavenir Systems, Inc. 2013 Equity Incentive Plan (the Plan). Optionee further agrees to be bound by the terms of the Plan and the terms of the Option as set forth in the Stock Option Agreement attached hereto as Exhibit A. Optionee hereby acknowledges receipt of a copy of the Plan in the form attached hereto as Exhibit B.
At Will Employment. Nothing in this Notice or in the attached Stock Option Agreement or Plan shall confer upon Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Affiliate employing or retaining Optionee) or of Optionee, which rights are hereby expressly reserved by each, to terminate Optionees Service at any time for any reason, with or without cause.
Definitions. All capitalized terms in this Notice shall have the meaning assigned to them in this Notice, in the attached Stock Option Agreement or in the Plan.
MAVENIR SYSTEMS, INC. | ||
By: | ||
Name: | ||
Title: | ||
OPTIONEE | ||
Signature: | ||
Print Name: | ||
Address: | ||
Attachments:
Exhibit A Stock Option Agreement
Exhibit B 2013 Equity Incentive Plan
Notice of Grant of Stock Option
Page 2
EXHIBIT A
STOCK OPTION AGREEMENT
NON-EMPLOYEE DIRECTOR
MAVENIR SYSTEMS, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the 2013 Equity Incentive Plan (the Plan) for the purpose of retaining the services of selected Employees, Directors and Consultants in the service of the Company (or any Affiliate).
B. Optionee is to render valuable services to the Company (or an Affiliate), and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Companys grant of an option to Optionee.
C. All capitalized terms in this Agreement not defined herein shall have the meaning assigned to them in the Grant Notice (as defined below) or in the Plan.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Company hereby grants to Optionee, as of the Grant Date as specified in the Notice of Grant of Stock Option accompanying this Agreement, pursuant to which Optionee has been informed of the basic terms of the option evidenced hereby (the Grant Notice), an option to purchase up to the number of Option Shares specified in the Grant Notice. The Option Shares shall be purchasable from time to time during the option term specified in Section 2 at the Exercise Price.
2. Option Term. This Option shall have a term of ten (10) years measured from the Grant Date and shall accordingly expire at the close of business on the date on which the option expires as specified in the Grant Notice (the Expiration Date), unless sooner terminated in accordance with Sections 5 or 6.
3. Limited Transferability.
(a) This Option shall be neither transferable nor assignable by Optionee other than by will or the laws of inheritance following Optionees death and may be exercised, during Optionees lifetime, only by Optionee. However, Optionee may designate one or more persons as the beneficiary or beneficiaries of this Option, and this Option shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon Optionees death while holding this Option. Such beneficiary or beneficiaries shall take the transferred option subject to all the terms and conditions of this Agreement, including (without limitation) the limited time period during which this Option may, pursuant to Section 5, be exercised following Optionees death.
(b) Then this Option may be assigned in whole or in part during Optionees lifetime to one or more of Optionees Family Members or to a trust established for the exclusive benefit of Optionee and/or one or more such Family Members, to the extent such assignment is in connection with the Optionees estate plan or pursuant to a domestic relations order. The assigned portion shall be exercisable only by the person or persons who acquire a proprietary interest in the option pursuant to such assignment. The terms applicable to the assigned portion shall be the same as those in effect for this Option immediately prior to such assignment.
Exhibit A to Notice of Grant of Stock Option
Page 1
4. Dates of Exercise. This Option shall vest and become exercisable for the Option Shares in one or more installments as specified in the Grant Notice (the Exercise Schedule). As the Option becomes exercisable for such installments, those installments shall accumulate, and the Option shall remain exercisable for the accumulated installments until the Expiration Date or sooner termination of the Option term under Sections 5 or 6.
5. Cessation of Service. The option term specified in Section 2 shall terminate (and this Option shall cease to be outstanding) prior to the Expiration Date should any of the following provisions become applicable:
(a) Should Optionee cease to remain in Service for any reason (other than death, Permanent Disability or Cause) while this Option is outstanding, then Optionee (or any person or persons to whom this Option is transferred pursuant to a permitted transfer under Section 3) shall have a period of twelve (12) months (commencing with the date of such cessation of Service) during which to exercise this Option, but in no event shall this Option be exercisable at any time after the Expiration Date.
(b) Should Optionee die while this Option is outstanding, then the personal representative of Optionees estate or the person or persons to whom the option is transferred pursuant to Optionees will or the laws of inheritance following Optionees death or, if applicable, the person to whom the option is transferred during Optionees lifetime pursuant to a permitted transfer under Section 3 shall have the right to exercise this Option. However, if Optionee dies while holding this Option and has an effective beneficiary designation in effect for this Option at the time of his or her death, then the designated beneficiary or beneficiaries shall have the exclusive right to exercise this Option following Optionees death. Any such right to exercise this Option shall lapse, and this Option shall cease to be outstanding, upon the earlier of (i) the expiration of the twelve (12)-month period measured from the date of Optionees death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Permanent Disability while this Option is outstanding, then Optionee (or any person or persons to whom this Option is transferred pursuant to a permitted transfer under Section 3) shall have a period of twelve (12) months (commencing with the date of such cessation of Service) during which to exercise this Option. In no event shall this Option be exercisable at any time after the Expiration Date.
(d) During the limited period of post-Service exercisability, this Option may not be exercised in the aggregate for more than the number of Option Shares for which this Option is, at the time of Optionees cessation of Service, exercisable pursuant to the Exercise Schedule specified in the Grant Notice or the special vesting acceleration provisions of Section 6. No additional Option Shares shall vest, whether pursuant to the normal Exercise Schedule specified in the Grant Notice or the special vesting acceleration provisions of Section 6, following Optionees cessation of Service, except to the extent (if any) specifically authorized by the Plan Administrator pursuant to an express written agreement with Optionee. Upon the expiration of such limited exercise period or (if earlier) upon the Expiration Date, this Option shall terminate and cease to be outstanding for any vested Option Shares for which the option has not been exercised.
Exhibit A to Notice of Grant of Stock Option
Page 2
(e) Should Optionees Service be terminated for Cause or should Optionee otherwise engage in conduct constituting grounds for a termination for Cause while this Option is outstanding, then this Option shall terminate immediately and cease to remain outstanding.
6. Change of Control.
(a) Should a Change of Control occur during Optionees period of Service, then this Option, to the extent outstanding at the time but not otherwise exercisable in full, shall automatically vest in full so that this Option shall, immediately prior to the effective date of the Change of Control, become exercisable for all of the Option Shares as fully vested shares and may be exercised for any or all of those Option Shares as vested shares.
(b) Immediately following the Change of Control, this Option shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change of Control transaction.
(c) If this Option is assumed in connection with a Change of Control or otherwise continued in effect, then this Option shall be appropriately adjusted, immediately after such Change of Control, to apply to the number and class of securities which would have been issuable to Optionee in consummation of such Change of Control had the Option been exercised immediately prior to such Change of Control, and appropriate adjustments shall also be made to the Exercise Price, provided the aggregate Exercise Price shall remain the same. To the extent that the actual holders of the Companys outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change of Control, the successor corporation may, in connection with the assumption or continuation of this Option, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change of Control provided such common stock is readily traded on an established U.S. securities exchange or market.
7. Adjustment in Option Shares. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction or other change affecting the outstanding Common Stock as a class without the Companys receipt of consideration or should the value of the outstanding shares of Common Stock be substantially reduced as a result of a spin-off transaction or an extraordinary dividend or distribution, then equitable adjustments shall be made to (i) the total number and/or class of securities subject to this Option and (ii) the Exercise Price. The adjustments shall be made by the Plan Administrator in such manner as the Plan Administrator deems appropriate in order to reflect such change, and those adjustments shall be final, binding and conclusive.
8. Stockholder Rights. The holder of this Option shall not have any stockholder rights with respect to the Option Shares until such person shall have exercised the Option, paid the Exercise Price and become the record holder of the purchased shares.
Exhibit A to Notice of Grant of Stock Option
Page 3
9. Manner of Exercising Option.
(a) In order to exercise this Option with respect to all or any part of the Option Shares for which this Option is at the time exercisable, Optionee (or any other person or persons exercising this Option) must take the following actions:
(i) Complete and submit to the Secretary of the Company or a person designated by the Secretary of the Company the Notice of Exercise attached as Exhibit I attached hereto or comply with such other procedures as the Company may establish for notifying the Company of the exercise of this Option.
(ii) Pay the aggregate Exercise Price for the purchased shares in one or more of the following forms:
(A) cash or certified check made payable to the Company; or
(B) at the discretion of the Plan Administrator and to the extent permitted by Applicable Law, in shares of Common Stock valued at Fair Market Value on the date on which this Option shall have been exercised in accordance with this Section 9 (the Exercise Date) and held by Optionee (or any other person or persons exercising the Option) for the requisite period (if any) necessary to avoid a charge to the Companys earnings for financial reporting purposes; or
(C) to the extent the option is exercised for vested Option Shares following the IPO, through a special sale and remittance procedure established by the Company pursuant to which Optionee (or any other person or persons exercising the option) shall concurrently provide irrevocable instructions (1) to a brokerage firm (reasonably satisfactory to the Company for purposes of administering such procedure in compliance with any applicable pre-clearance or pre-notification requirements) to effect the immediate sale of the purchased shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Exercise Price payable for the purchased shares plus all applicable income and employment taxes required to be withheld by the Company by reason of such exercise and (2) to the Company to deliver the certificates for the purchased shares directly to such brokerage firm on such settlement date in order to complete the sale; or
(D) such other method of payment as the Plan Administrator may approve.
(iii) Furnish to the Company appropriate documentation that the person or persons exercising the option (if other than Optionee) have the right to exercise this Option.
(iv) Execute and deliver to the Company such written representations as may be requested by the Company in order for it to comply with the applicable requirements of applicable securities laws.
Exhibit A to Notice of Grant of Stock Option
Page 4
(v) Make appropriate arrangements with the Company (or Affiliate employing or retaining Optionee) for the satisfaction of all applicable income and employment tax withholding requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the Company shall issue to or on behalf of Optionee (or any other person or persons exercising this Option) a certificate for the purchased Option Shares, with the appropriate legends affixed thereto.
(c) In no event may this Option be exercised for any fractional shares.
10. Compliance with Laws and Regulations.
(a) The exercise of this Option and the issuance of the Option Shares upon such exercise shall be subject to compliance by the Company and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange on which the Common Stock may be listed for trading at the time of such exercise and issuance.
(b) The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of any Common Stock pursuant to this Option shall relieve the Company of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. The Company, however, shall use its best efforts to obtain all such approvals.
11. Successors and Assigns. Except to the extent otherwise provided in Sections 3 and 5, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and Optionee, Optionees assigns and the legal representatives, heirs and legatees of Optionees estate.
12. Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated below Optionees signature line on the Grant Notice. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.
Optionee generally consents to the delivery of any notice pursuant to the Delaware General Corporation Law (the DGCL), as amended or superseded from time to time, by electronic transmission pursuant to Section 232 of the DGCL (Electronic Notice) at the electronic mail address or the facsimile number as set forth in the books of the Company. To the extent that any notice given via electronic transmission is returned or undeliverable for any reason, the foregoing consent shall be deemed to have been revoked until a new or corrected electronic mail address has been provided, and such attempted Electronic Notice shall be ineffective and deemed to not have been given. Optionee agrees to promptly notify the Company of any change in Optionees electronic mail address, but failure to do so shall not affect the foregoing.
Exhibit A to Notice of Grant of Stock Option
Page 5
13. Construction; Administrator Discretions. This Agreement and the Option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in this Option.
14. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to options awarded under the Plan or future options that may be awarded under the Plan by electronic means or request Optionees consent to participate in the Plan by electronic means. Optionee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or another third party designated by the Company.
15. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Texas without resort to that states conflict-of-laws rules.
16. Stockholder Approval. If the Option Shares covered by this Agreement exceed, as of the Grant Date, the number of shares of Common Stock which may be issued under the Plan as last approved by the Companys stockholders, then this Option shall be void with respect to such excess shares, unless stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan.
17. Code Section 409A. Under Section 409A of the Code, an option that is granted with an exercise price per share of Common Stock that is determined by the Internal Revenue Service (the IRS) to be less than the Fair Market Value of a share of Common Stock on the Grant Date (a Discount Option) may be considered deferred compensation. A Discount Option may result in (i) income recognition by Optionee prior to the exercise of the option, (ii) an additional twenty percent (20%) federal income tax, and (iii) potential penalty and interest charges. The Discount Option may also result in additional state income, penalty and interest tax to Optionee. Optionee acknowledges that the Company cannot and has not guaranteed that the IRS will agree that the exercise price per share of Common Stock of this Option equals or exceeds the Fair Market Value of a share of Common Stock on the Grant Date in a later examination. Optionee agrees that if the IRS determines that this Option was granted with an exercise price per share of Common Stock that was less than the Fair Market Value of a share of Common Stock on the Grant Date, Optionee will be solely responsible for Optionees costs related to such a determination.
18. Modifications to the Agreement. This Agreement and the Plan constitutes the entire understanding of the parties on the subjects covered. Optionee expressly warrants that he or she is not accepting this Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to the Option, this Agreement or the Plan can be made only in an express written contract executed by a duly authorized officer of the Company. Notwithstanding anything to the contrary in the Plan or this Agreement, the Company reserves the right to revise this Agreement as it deems necessary or advisable, in its sole discretion and without the consent of Optionee, to comply with Section 409A of the Code or to otherwise avoid imposition of any additional tax or income recognition under Section 409A of the Code in connection to this Option.
Exhibit A to Notice of Grant of Stock Option
Page 6
19. Market Standoff Agreement. Optionee hereby agrees that, if requested by the managing underwriter, it will not, without the prior written consent of the Company, during the period commencing on the date of the final prospectus relating to the Companys initial public offering or any secondary public offering, as applicable, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) calendar days in the case of an initial public offering and, solely in the case of a holder of shares of the Companys Common Stock, ninety (90) calendar days in the case of any secondary public offering (or such other period as may be requested by the Company or managing underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto)) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired), whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of securities, in cash or otherwise. Optionee agrees that any transferee of the Option or shares acquired pursuant to the Option shall be bound by this Section 20.
* * * * * *
Exhibit A to Notice of Grant of Stock Option
Page 7
NON-EMPLOYEE DIRECTOR
EXHIBIT I
NOTICE OF EXERCISE
Mavenir Systems, Inc.
1700 International Parkway, Suite 200
Richardson, TX 75081
Attn: Secretary
1. Exercise of Option. Effective as of today, , , the undersigned (Optionee) hereby elects to exercise Optionees option (the Option) to purchase shares of the Common Stock (the Shares) of Mavenir Systems, Inc. (the Company) under and pursuant to the 2013 Equity Incentive Plan (the Plan) and the Notice of Grant of Stock Option (and Stock Option Agreement) dated , (the Option Agreement).
2. Delivery of Payment. Optionee herewith delivers to the Company the full purchase price of the Shares as set forth in the Option Agreement, and any and all withholding taxes due in connection with the exercise of the Option.
3. Representations of Optionee. Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares shall be issued to the Optionee as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in the Plan.
5. Companys Right of First Refusal. Before any Shares held by Optionee or any transferee (either being sometimes referred to herein as the Holder) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section (the Right of First Refusal).
(a) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the Company a written notice (the Notice) stating: (i) the Holders bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (Proposed Transferee); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the Offered Price), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase up to all of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.
Exhibit I to Stock Option Agreement
Page 1
(c) Purchase Price. The purchase price (Purchase Price) for the Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within 30 days after receipt of the Notice or in the manner and at the times set forth in the Notice.
(e) Holders Right to Transfer. To the extent that the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within 120 days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary contained in this Section notwithstanding, the transfer of any or all of the Shares during the Optionees lifetime or on the Optionees death by will or intestacy to the Optionees immediate family or a trust for the benefit of the Optionees immediate family shall be exempt from the provisions of this Section. Immediate Family as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section, and there shall be no further transfer of such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First Refusal shall terminate as to any Shares upon the earlier to occur of (i) the consummation of a Change of Control or (ii) first sale of Common Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act.
6. Tax Consultation. Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionees purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.
Exhibit I to Stock Option Agreement
Page 2
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company may cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS, IN THE OPINION OF COUNSEL (WHICH MAY BE COUNSEL TO THE COMPANY) SATISFACTORY TO THE COMPANY, SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, INCLUDING A 180-DAY MARKET STANDOFF AGREEMENT, AND A RIGHT OF FIRST REFUSAL HELD BY THE COMPANY AS SET FORTH IN AN EXERCISE NOTICE BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate stop transfer instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
8. Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Exercise Notice shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns.
Exhibit I to Stock Option Agreement
Page 3
9. Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Optionee or by the Company forthwith to the Plan Administrator which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Plan Administrator shall be final and binding on all parties.
10. Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated below Optionees signature line on this Exercise Notice. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.
Optionee generally consents to the delivery of any notice pursuant to the Delaware General Corporation Law (the DGCL), as amended or superseded from time to time, by electronic transmission pursuant to Section 232 of the DGCL (Electronic Notice) at the electronic mail address or the facsimile number as set forth in the books of the Company. To the extent that any notice given via electronic transmission is returned or undeliverable for any reason, the foregoing consent shall be deemed to have been revoked until a new or corrected electronic mail address has been provided, and such attempted Electronic Notice shall be ineffective and deemed to not have been given. Optionee agrees to promptly notify the Company of any change in Optionees electronic mail address, but failure to do so shall not affect the foregoing.
11. Governing Law; Severability. This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of Texas. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, the remaining provisions hereof will continue in full force and effect.
Exhibit I to Stock Option Agreement
Page 4
12. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. This Exercise Notice, the Plan and the Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionees interest except by means of a writing signed by the Company and Optionee.
Submitted by: | Accepted by: | |||||
OPTIONEE: | MAVENIR SYSTEMS, INC. | |||||
By: | ||||||
Signature
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Its: | |||||
Print Name
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Date Received | ||||||
Address | ||||||
* * * * * *
Exhibit I to Stock Option Agreement
Page 5
EXHIBIT B
2013 EQUITY INCENTIVE PLAN
Exhibit 10.11
MAVENIR SYSTEMS, INC.
NOTICE OF GRANT OF RESTRICTED STOCK UNIT
Notice is hereby given of the following award (the Award) of Restricted Stock Units of Mavenir Systems, Inc., a Delaware corporation (the Company):
Participant: [Name]
Award Date: [Award Date]
Vesting Commencement Date: [Date]
Number of Shares Subject to Award: [# of Shares Awarded] Shares of Common Stock (the Shares)
Vesting Schedule: The Shares shall become vested with respect to (i) one fourth (1/4th) of the Shares on the first anniversary of the Vesting Commencement Date and (ii) an additional one fourth (1/4th) of the Shares on each anniversary of the Vesting Commencement Date thereafter. In no event, shall any additional Shares vest following Participants cessation of Service, except to the extent (if any) specifically authorized by the Plan Administrator in its sole discretion pursuant to a written agreement with Participant.
Issuance Schedule: Each Share in which the Participant vests in accordance with the terms of this Award shall be issued, subject to the Companys collection of all applicable Withholding Taxes, on the applicable vesting date for that Share or as soon thereafter as administratively practicable, but in no event later than the close of the calendar year in which such vesting date occurs or (if later) the fifteenth day of the third calendar month following such vesting date (the Issuance Date). The Shares which vest pursuant to Section 5 of the attached Restricted Stock Unit Issuance Agreement shall be issued in accordance with the provisions of such Section. The applicable Withholding Taxes are to be collected pursuant to the procedures set forth in Section 7 of the attached Restricted Stock Unit Issuance Agreement.
Participant understands and agrees that the Award is granted subject to and in accordance with the terms of the Mavenir Systems, Inc. 2013 Equity Incentive Plan (the Plan). Participant further agrees to be bound by the terms of the Plan and the terms of the Award as set forth in the Restricted Stock Unit Issuance Agreement attached hereto as Exhibit A. Participant hereby acknowledges receipt of a copy of the Plan in the form attached hereto as Exhibit B.
At Will Employment. Nothing in this Notice or in the attached the attached Restricted Stock Unit Issuance Agreement or Plan shall confer upon Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Affiliate employing or retaining Participant) or of Participant, which rights are hereby expressly reserved by each, to terminate Participants Service at any time for any reason, with or without cause.
Definitions. All capitalized terms in this Notice shall have the meaning assigned to them in this Notice, in the attached Restricted Stock Unit Issuance Agreement or in the Plan.
MAVENIR SYSTEMS, INC. |
By: |
Name: |
Title: |
PARTICIPANT |
Signature: |
Print Name: |
Address: |
Attachments:
Exhibit A - Restricted Stock Unit Issuance Agreement
Exhibit B - 2013 Equity Incentive Plan
Notice of Grant of Restricted Stock Units
EXHIBIT A
RESTRICTED STOCK UNIT ISSUANCE AGREEMENT
MAVENIR SYSTEMS, INC.
RESTRICTED STOCK UNIT ISSUANCE AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the services of selected Employees, Directors and Consultants in the Service of the Company (or any Affiliate).
B. Participant is to render valuable services to the Company (or an Affiliate), and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Companys issuance of Common Stock to the Participant under the Plan.
C. All capitalized terms in this Agreement not defined herein shall have the meaning assigned to them in the Grant Notice (as defined below) or in the Plan.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Restricted Stock Units. The Company hereby awards to the Participant, as of the Award Date as specified in the Notice of Grant of Restricted Stock Units accompanying this Agreement, pursuant to which Participant has been informed of the basic terms of the Restricted Stock Units evidenced hereby (the Grant Notice), the number of Restricted Stock Units specified in the Grant Notice. Each Restricted Stock Unit represents the right to receive one share of Common Stock on the date that unit vests in accordance with the Grant Notice and the express provisions of this Agreement.
2. Limited Transferability. Prior to actual receipt of the Shares which vest in the Grant Notice and hereunder, the Participant may not transfer any interest in the Award or the underlying Shares. Any Shares which vest in accordance with the Grant Notice and this Agreement but which otherwise remain unissued at the time of the Participants death may be transferred pursuant to the provisions of the Participants will or the laws of inheritance.
3. Cessation of Service. Except as otherwise provided in Section 5 below, should the Participant cease Service for any reason prior to vesting in one or more Shares subject to this Award, then the Award will be immediately cancelled with respect to those unvested Shares, and the number of Restricted Stock Units will be reduced accordingly. The Participant shall thereupon cease to have any right or entitlement to receive any Shares under those cancelled units.
4. Shareholder Rights. The holder of this Award shall not have any stockholder rights, including voting or dividend rights, with respect to the Shares subject to the Award until the Participant becomes the record holder of those Shares upon their actual issuance following the Companys collection of the applicable Withholding Taxes.
Exhibit A to Notice of Grant of Restricted Stock Units
Page 1
5. Change of Control.
(a) Any Restricted Stock Units subject to this Award at the time of a Change of Control may be assumed by the successor entity or otherwise continued in full force and effect. In the event of such assumption or continuation of the Award, no accelerated vesting of the Restricted Stock Units shall occur at the time of the Change of Control.
(b) In the event the Award is assumed or otherwise continued in effect, the Restricted Stock Units subject to the Award shall be adjusted immediately after the consummation of the Change of Control so as to apply to the number and class of securities into which the Shares subject to those units immediately prior to the Change of Control would have been converted in consummation of that Change of Control had those Shares actually been issued and outstanding at that time. To the extent the actual holders of the outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change of Control, the successor corporation (or parent entity) may, in connection with the assumption or continuation of the Restricted Stock Units subject to the Award at that time and subject to the Plan Administrators approval, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per Common Stock in the Change of Control transaction provided such common stock is readily traded on an established U.S. countries exchange or market.
(c) If the Restricted Stock Units subject to this Award at the time of the Change of Control are not assumed or otherwise continued in effect in accordance with Section 5(a), then those units shall vest immediately prior to the closing of the Change of Control. The Shares subject to those vested units shall be converted into the right to receive for each such Share the same consideration per share of Common Stock payable to the other stockholders of the Company upon consummation of that Change of Control, and such consideration shall be distributed to the Participant within three (3) business days following the effective date of that Change of Control. Such distribution shall be subject to the Companys collection of the applicable Withholding Taxes pursuant to the provisions of Section 7.
(d) This Agreement shall not in any way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
6. Adjustment in Shares. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction or other change affecting the outstanding Common Stock as a class without the Companys receipt of consideration, or should the value of the outstanding shares of Common stock be substantially reduced as a result of a spin-off transaction or extraordinary dividend or distribution, then equitable adjustments shall be made by the Plan Administrator to the total number and/or class of securities issuable pursuant to this Award in order to reflect such change and those adjustments shall be final, binding and conclusive.
7. Issuance of Shares.
(a) On each applicable Issuance Date for the Shares which vest in accordance with the Grant Notice or the provisions of this Agreement, the Company shall issue to or on behalf of the Participant a certificate (which may be in electronic form) for the vested Common Stock to be issued on such date, subject to the Companys collection of the applicable Withholding Taxes.
Exhibit A to Notice of Grant of Restricted Stock Units
Page 2
(b) Until such time as the Company provides the Participant with notice to the contrary, the Company shall collect the applicable Withholding Taxes through an automatic Share withholding procedure pursuant to which the Company will withhold, on the applicable Issuance Date for the Shares that vest under the Award, a portion of those vested Shares with a Fair Market Value (measured as of the Issuance Date) equal to the amount of such Withholding Taxes (the Share Withholding Method); provided, however, that the amount of any Shares so withheld shall not exceed the amount necessary to satisfy the Companys required Withholding Tax obligations using the minimum statutory withholding rates therefor, that are applicable to supplemental taxable income. The Participant shall be notified in writing in the event such Share Withholding Method is no longer available.
(c) Should any Shares vest under the Award at a time when the Share Withholding Method is not available, then the Withholding Taxes shall be collected from the Participant through either of the following alternatives:
(i) the Participants delivery of his or her separate check payable to the Company in the amount of such Withholding Taxes; or
(ii) the use of the proceeds from a next-day sale of the Shares issued to the Participant, provided and only if (A) such a sale is permissible under the Companys insider trading policies governing the sale of Common Stock; (B) the Participant makes an irrevocable commitment, on or before the vesting date for those Shares, to effect such sale of the Shares; and (C) the transaction is not otherwise deemed to constitute a prohibited loan under Section 402 of the Sarbanes-Oxley Act of 2002.
(d) Except as otherwise provided in Section 5 or Section 7(b), the settlement of all Restricted Stock Units which vest under the Award shall be made solely in Common Stock. No fractional share shall be issued pursuant to this Award, and any fractional share resulting from any calculation made in accordance with the terms of this Agreement shall be rounded down to the next whole share of Common Stock.
8. Compliance with Laws and Regulations. The issuance of Common Stock pursuant to the Award shall be subject to compliance by the Company and the Participant with all applicable requirements of law relating thereto and with all applicable regulations of the Stock Exchange on which the Common Stock is listed for trading at the time of such issuance.
9. Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices, and directed to the attention of Plan Administrator. Any notice required to be given or delivered to the Participant shall be in writing and addressed to the Participant at the most current address then on record with the Company or shall be delivered electronically to the Participant through the Companys electronic mail system. All notices shall be deemed effective upon personal delivery, upon sending of an email or upon deposit in the mail, postage prepaid and properly addressed to the party to be notified.
Exhibit A to Notice of Grant of Restricted Stock Units
Page 3
Participant generally consents to the delivery of any notice pursuant to the Delaware General Corporation Law (the DGCL), as amended or superseded from time to time, by electronic transmission pursuant to Section 232 of the DGCL (Electronic Notice) at the electronic mail address or the facsimile number as set forth in the books of the Company. To the extent that any notice given via electronic transmission is returned or undeliverable for any reason, the foregoing consent shall be deemed to have been revoked until a new or corrected electronic mail address has been provided, and such attempted Electronic Notice shall be ineffective and deemed to not have been given. Participant agrees to promptly notify the Company of any change in Participants electronic mail address, but failure to do so shall not affect the foregoing.
10. Successors and Assigns. Except to the extent otherwise provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and the Participant, the Participants assigns, and the legal representatives, heirs and legatees of the Participants estate.
11. Construction; Administrator Discretions. This Agreement and the Award evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in the Award.
12. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to Restricted Stock Units awarded under the Plan or future Restricted Stock Units that may be awarded under the Plan by electronic means or request Participants consent to participate in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or another third party designated by the Company.
13. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Texas without resort to that States conflict-of-laws rules.
14. Code Section 409A. It is the intention of the parties that the provisions of this Agreement comply with the requirements of the short-term deferral exception of Section 409A of the Code and Treasury Regulations Section 1.409A-1(b)(4). Accordingly, to the extent there is any ambiguity as to whether one or more provisions of this Agreement would otherwise contravene the requirements or limitations of Code Section 409A applicable to such short-term deferral exception, then those provisions shall be interpreted and applied in a manner that does not result in a violation of the requirements or limitations of Code Section 409A and the Treasury Regulations thereunder that apply to such exception.
Exhibit A to Notice of Grant of Restricted Stock Units
Page 4
EXHIBIT B
2013 EQUITY INCENTIVE PLAN
Exhibit 10.12
STANDARD
MAVENIR SYSTEMS, INC.
NOTICE OF GRANT OF STOCK OPTION
(INTERNATIONAL FORM)
Notice is hereby given of the following option grant (the Option) to purchase shares (the Option Shares) of the Common Stock of Mavenir Systems, Inc., a Delaware corporation (the Company):
Optionee:
Grant Date:
Vesting Commencement Date:
Exercise Price: $ per share
Number of Option Shares: shares of Common Stock
Expiration Date:
Type of Option: Incentive Stock Option
Non-Qualified Stock Option
Date Exercisable: This Option shall become vested and exercisable with respect to (i) one fourth (1/4th) of the Option Shares on the first anniversary of the Vesting Commencement Date and (ii) an additional one forty-eighth (1/48th) of the Option Shares on the corresponding day of each calendar month thereafter or, if such calendar month does not have the corresponding day, on the last day of such calendar month. In no event shall this Option vest or become exercisable for any additional Option Shares following Optionees cessation of Service, except to the extent (if any) specifically authorized by the Plan Administrator in its sole discretion pursuant to a written agreement with Optionee.
Optionee understands and agrees that the Option is granted subject to and in accordance with the terms of the Mavenir Systems, Inc. 2013 Equity Incentive Plan (the Plan). Optionee further agrees to be bound by the terms of the Plan and the terms of the Option as set forth in the Stock Option Agreement attached hereto as Exhibit A. Optionee hereby acknowledges receipt of a copy of the Plan in the form attached hereto as Exhibit B.
At Will Employment. Nothing in this Notice or in the attached Stock Option Agreement or Plan shall confer upon Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Affiliate employing or retaining Optionee) or of Optionee, which rights are hereby expressly reserved by each, to terminate Optionees Service at any time for any reason, with or without cause, subject to Applicable Law and the terms of any employment agreement.
Definitions. All capitalized terms in this Notice shall have the meaning assigned to them in this Notice, in the attached Stock Option Agreement or in the Plan.
MAVENIR SYSTEMS, INC. | ||
By: | ||
Name: | ||
Title: | ||
OPTIONEE | ||
Signature: | ||
Print Name: | ||
Address: | ||
Attachments:
Exhibit A Stock Option Agreement
Exhibit B 2013 Equity Incentive Plan
Notice of Grant of Stock Option
Page 2
EXHIBIT A
STOCK OPTION AGREEMENT
STANDARD
MAVENIR SYSTEMS, INC.
STOCK OPTION AGREEMENT
(INTERNATIONAL)
RECITALS
A. The Board has adopted the 2013 Equity Incentive Plan (the Plan) for the purpose of retaining the services of selected Employees, Directors and Consultants in the service of the Company (or any Affiliate).
B. Optionee is to render valuable services to the Company (or an Affiliate), and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Companys grant of an option to Optionee.
C. All capitalized terms in this Agreement not defined herein shall have the meaning assigned to them in the Grant Notice (as defined below) or in the Plan.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Company hereby grants to Optionee, as of the Grant Date as specified in the Notice of Grant of Stock Option accompanying this Agreement, pursuant to which Optionee has been informed of the basic terms of the option evidenced hereby (the Grant Notice), an option to purchase up to the number of Option Shares specified in the Grant Notice. The Option Shares shall be purchasable from time to time during the option term specified in Section 2 at the Exercise Price.
2. Option Term. This Option shall have a term of ten (10) years measured from the Grant Date and shall accordingly expire at the close of business on the date on which the option expires as specified in the Grant Notice (the Expiration Date), unless sooner terminated in accordance with Sections 5 or 6.
3. Limited Transferability. This Option shall be neither transferable nor assignable by Optionee other than by will or the laws of inheritance following Optionees death and may be exercised, during Optionees lifetime, only by Optionee. However, to the extent permitted by applicable law, Optionee may designate one or more persons as the beneficiary or beneficiaries of this Option, and this Option shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon Optionees death while holding this Option. Such beneficiary or beneficiaries shall take the transferred option subject to all the terms and conditions of this Agreement, including (without limitation) the limited time period during which this Option may, pursuant to Section 5, be exercised following Optionees death.
4. Dates of Exercise. This Option shall vest and become exercisable for the Option Shares in one or more installments as specified in the Grant Notice (the Exercise Schedule). As the Option becomes exercisable for such installments, those installments shall accumulate, and the Option shall remain exercisable for the accumulated installments until the Expiration Date or sooner termination of the Option term under Sections 5 or 6.
Exhibit A to Notice of Grant of Stock Option
Page 1
5. Cessation of Service. The option term specified in Section 2 shall terminate (and this Option shall cease to be outstanding) prior to the Expiration Date should any of the following provisions become applicable:
(a) Should Optionee cease to remain in Service for any reason (other than death, Permanent Disability or Cause) while this Option is outstanding, then Optionee (or any person or persons to whom this Option is transferred pursuant to a permitted transfer under Section 3) shall have a period of three (3) months (commencing with the date of such cessation of Service) during which to exercise this Option, but in no event shall this Option be exercisable at any time after the Expiration Date.
(b) Should Optionee die while this Option is outstanding, then the personal representative of Optionees estate or the person or persons to whom the option is transferred pursuant to Optionees will or the laws of inheritance following Optionees death or, if applicable, the person to whom the option is transferred during Optionees lifetime pursuant to a permitted transfer under Section 3 shall have the right to exercise this Option. However, if Optionee dies while holding this Option and has an effective beneficiary designation in effect for this Option at the time of his or her death, then the designated beneficiary or beneficiaries shall have the exclusive right to exercise this Option following Optionees death. Any such right to exercise this Option shall lapse, and this Option shall cease to be outstanding, upon the earlier of (i) the expiration of the twelve (12)-month period measured from the date of Optionees death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Permanent Disability while this Option is outstanding, then Optionee (or any person or persons to whom this Option is transferred pursuant to a permitted transfer under Section 3) shall have a period of twelve (12) months (commencing with the date of such cessation of Service) during which to exercise this Option. In no event shall this Option be exercisable at any time after the Expiration Date.
(d) During the limited period of post-Service exercisability, this Option may not be exercised in the aggregate for more than the number of Option Shares for which this Option is, at the time of Optionees cessation of Service, exercisable pursuant to the Exercise Schedule specified in the Grant Notice or the special vesting acceleration provisions of Section 6. No additional Option Shares shall vest, whether pursuant to the normal Exercise Schedule specified in the Grant Notice or the special vesting acceleration provisions of Section 6, following Optionees cessation of Service, except to the extent (if any) specifically authorized by the Plan Administrator pursuant to an express written agreement with Optionee. Upon the expiration of such limited exercise period or (if earlier) upon the Expiration Date, this Option shall terminate and cease to be outstanding for any vested Option Shares for which the option has not been exercised.
(e) Should Optionees Service be terminated for Cause or should Optionee otherwise engage in conduct constituting grounds for a termination for Cause while this Option is outstanding, then this Option shall terminate immediately and cease to remain outstanding.
Exhibit A to Notice of Grant of Stock Option
Page 2
(f) For purposes of this Agreement and notwithstanding anything to the contrary in the Plan, Optionees Service will be deemed to terminate on the date that Optionee ceases to actively provide Services to the Company (or any Affiliate) and shall not be extended by any notice period mandated or implied under local law during which Optionee is not actually providing Services (e.g. garden leave or similar leave) or during or for which Optionee receives pay in lieu of notice or severance pay. Accordingly, Optionees right to vest in this Option shall terminate, and the post-termination exercise period shall be measured, as of such termination of active Service. The Company shall have the sole discretion to determine when Optionee is no longer in active Service for purposes of this Agreement, without reference to any other agreement, written or oral, including Optionees contract of employment.
6. Change of Control.
(a) Should a Change of Control occur during Optionees period of Service, then this Option, to the extent outstanding at the time but not otherwise exercisable in full, shall automatically vest in full so that this Option shall, immediately prior to the effective date of the Change of Control, become exercisable for all of the Option Shares as fully vested shares and may be exercised for any or all of those Option Shares as vested shares. However, the Option Shares shall not vest on such an accelerated basis if and to the extent: (i) this Option is assumed or substituted with an equivalent award by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change of Control transaction or (ii) this Option is replaced with a cash retention program of the successor corporation which preserves the spread existing on the Option Shares for which this Option is not exercisable at the time of the Change of Control (the excess of the Fair Market Value of those Option Shares over the Exercise Price payable for such shares) and provides for subsequent payout of that spread in accordance with the same Exercise Schedule applicable to those unvested Option Shares as set forth in the Grant Notice or (iii) such accelerated vesting is otherwise precluded pursuant to the provisions of Paragraph 5(d) above. Notwithstanding the foregoing, no such cash retention program shall be established for this Option (or any other option granted to Optionee under the Plan) to the extent such program would otherwise be deemed to constitute a deferred compensation arrangement subject to the requirements of Code Section 409A and the Treasury Regulations thereunder.
(b) Immediately following the Change of Control, this Option shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change of Control transaction.
(c) If this Option is assumed in connection with a Change of Control or otherwise continued in effect, then this Option shall be appropriately adjusted, immediately after such Change of Control, to apply to the number and class of securities which would have been issuable to Optionee in consummation of such Change of Control had the Option been exercised immediately prior to such Change of Control, and appropriate adjustments shall also be made to the Exercise Price, provided the aggregate Exercise Price shall remain the same. To the extent that the actual holders of the Companys outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change of Control, the successor corporation may, in connection with the assumption or continuation of this Option, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change of Control provided such common stock is readily traded on an established U.S. securities exchange or market.
Exhibit A to Notice of Grant of Stock Option
Page 3
7. Adjustment in Option Shares. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction or other change affecting the outstanding Common Stock as a class without the Companys receipt of consideration or should the value of the outstanding shares of Common Stock be substantially reduced as a result of a spin-off transaction or an extraordinary dividend or distribution, then equitable adjustments shall be made to (i) the total number and/or class of securities subject to this Option and (ii) the Exercise Price. The adjustments shall be made by the Plan Administrator in such manner as the Plan Administrator deems appropriate in order to reflect such change, and those adjustments shall be final, binding and conclusive.
8. Stockholder Rights. The holder of this Option shall not have any stockholder rights with respect to the Option Shares until such person shall have exercised the Option, paid the Exercise Price and become the record holder of the purchased shares.
9. Manner of Exercising Option.
(a) In order to exercise this Option with respect to all or any part of the Option Shares for which this Option is at the time exercisable, Optionee (or any other person or persons exercising this Option) must take the following actions:
(i) Complete and submit to the Secretary of the Company or a person designated by the Secretary of the Company the Notice of Exercise attached as Exhibit I attached hereto or comply with such other procedures as the Company may establish for notifying the Company of the exercise of this Option.
(ii) Pay the aggregate Exercise Price for the purchased shares in one or more of the following forms:
(A) cash or certified check made payable to the Company; or
(B) at the discretion of the Plan Administrator and to the extent permitted by Applicable Law, in shares of Common Stock valued at Fair Market Value on the date on which this Option shall have been exercised in accordance with this Section 9 (the Exercise Date) and held by Optionee (or any other person or persons exercising the Option) for the requisite period (if any) necessary to avoid a charge to the Companys earnings for financial reporting purposes; or
(C) to the extent the option is exercised for vested Option Shares following the IPO, through a special sale and remittance procedure established by the Company pursuant to which Optionee (or any other person or persons exercising the option) shall concurrently provide irrevocable instructions (1) to a brokerage firm (reasonably satisfactory to the Company for purposes of administering such procedure in compliance with any applicable pre-clearance or pre-notification requirements) to effect the immediate sale of the purchased shares and remit to the Company, out of the sale proceeds available on the settlement
Exhibit A to Notice of Grant of Stock Option
Page 4
date, sufficient funds to cover the aggregate Exercise Price payable for the purchased shares plus all applicable Taxes (as such term is defined below) required to be withheld by the Company by reason of such exercise and (2) to the Company to deliver the certificates for the purchased shares directly to such brokerage firm on such settlement date in order to complete the sale; or
(D) such other method of payment as the Plan Administrator may approve.
(iii) Furnish to the Company appropriate documentation that the person or persons exercising the option (if other than Optionee) have the right to exercise this Option.
(iv) Execute and deliver to the Company such written representations as may be requested by the Company in order for it to comply with the applicable requirements of applicable securities laws.
(v) Make appropriate arrangements with the Company (or Affiliate employing or retaining Optionee) for the satisfaction of all applicable income tax, employment tax, payroll tax, social security tax, social insurance, contributions, payment on account obligations, national and local tax or other payments (Taxes) required to be withheld, collected or accounted for in connection with the Option exercise.
(b) As soon as practical after the Exercise Date, the Company shall issue to or on behalf of Optionee (or any other person or persons exercising this Option) a certificate for the purchased Option Shares, with the appropriate legends affixed thereto.
(c) In no event may this Option be exercised for any fractional shares.
10. Responsibility for Taxes.
(a) Regardless of any action the Company and/or Optionees employer (the Employer) take with respect to any or all Taxes, Optionee acknowledges that the ultimate liability for all Taxes is and remains Optionees responsibility and may exceed the amount actually withheld by the Company or the Employer. Optionee further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Taxes in connection with any aspect of the Option, including the grant, vesting or exercise of the Option, the subsequent sale of any Option Shares acquired at exercise; and (ii) do not commit to, and are under no obligation to, structure the terms of the grant or any aspect of the Option to reduce or eliminate Optionees liability for Taxes or achieve any particular tax result. Further, if Optionee is subject to Taxes in more than one jurisdiction between the Grant Date and the date of any relevant taxable or tax withholding event, as applicable, Optionee acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Taxes in more than one jurisdiction.
(b) Prior to the relevant taxable event, Optionee agrees to make arrangements satisfactory to the Company and/or the Employer to satisfy all Taxes. In this regard, Optionee authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy the obligations with regard to all Taxes by withholding from any wages or other cash compensation paid to Optionee by the Company and/or the Employer.
Exhibit A to Notice of Grant of Stock Option
Page 5
11. Compliance with Laws and Regulations.
(a) The exercise of this Option and the issuance of the Option Shares upon such exercise shall be subject to compliance by the Company and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange on which the Common Stock may be listed for trading at the time of such exercise and issuance.
(b) The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of any Common Stock pursuant to this Option shall relieve the Company of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. The Company, however, shall use its best efforts to obtain all such approvals.
12. Successors and Assigns. Except to the extent otherwise provided in Sections 3 and 5, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and Optionee, Optionees assigns and the legal representatives, heirs and legatees of Optionees estate.
13. Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated below Optionees signature line on the Grant Notice. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.
Optionee generally consents to the delivery of any notice pursuant to the Delaware General Corporation Law (the DGCL), as amended or superseded from time to time, by electronic transmission pursuant to Section 232 of the DGCL (Electronic Notice) at the electronic mail address or the facsimile number as set forth in the books of the Company. To the extent that any notice given via electronic transmission is returned or undeliverable for any reason, the foregoing consent shall be deemed to have been revoked until a new or corrected electronic mail address has been provided, and such attempted Electronic Notice shall be ineffective and deemed to not have been given. Optionee agrees to promptly notify the Company of any change in Optionees electronic mail address, but failure to do so shall not affect the foregoing.
14. Construction; Administrator Discretions. This Agreement and the Option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in this Option.
Exhibit A to Notice of Grant of Stock Option
Page 6
15. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to options awarded under the Plan or future options that may be awarded under the Plan by electronic means or request Optionees consent to participate in the Plan by electronic means. Optionee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or another third party designated by the Company.
16. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Texas without resort to that states conflict-of-laws rules.
17. Stockholder Approval. If the Option Shares covered by this Agreement exceed, as of the Grant Date, the number of shares of Common Stock which may be issued under the Plan as last approved by the Companys stockholders, then this Option shall be void with respect to such excess shares, unless stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan.
18. Code Section 409A. Under Section 409A of the Code, an option that is granted with an exercise price per share of Common Stock that is determined by the Internal Revenue Service (the IRS) to be less than the Fair Market Value of a share of Common Stock on the Grant Date (a Discount Option) may be considered deferred compensation. A Discount Option may result in (i) income recognition by Optionee prior to the exercise of the option, (ii) an additional twenty percent (20%) federal income tax, and (iii) potential penalty and interest charges. The Discount Option may also result in additional state income, penalty and interest tax to Optionee. Optionee acknowledges that the Company cannot and has not guaranteed that the IRS will agree that the exercise price per share of Common Stock of this Option equals or exceeds the Fair Market Value of a share of Common Stock on the Grant Date in a later examination. Optionee agrees that if the IRS determines that this Option was granted with an exercise price per share of Common Stock that was less than the Fair Market Value of a share of Common Stock on the Grant Date, Optionee will be solely responsible for Optionees costs related to such a determination.
19. Modifications to the Agreement. This Agreement and the Plan constitutes the entire understanding of the parties on the subjects covered. Optionee expressly warrants that he or she is not accepting this Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to the Option, this Agreement or the Plan can be made only in an express written contract executed by a duly authorized officer of the Company. Notwithstanding anything to the contrary in the Plan or this Agreement, the Company reserves the right to revise this Agreement as it deems necessary or advisable, in its sole discretion and without the consent of Optionee, to comply with Section 409A of the Code or to otherwise avoid imposition of any additional tax or income recognition under Section 409A of the Code in connection to this Option.
Exhibit A to Notice of Grant of Stock Option
Page 7
20. Additional Terms Applicable to an Incentive Stock Option. In the event this Option is designated an Incentive Stock Option in the Grant Notice, the following terms and conditions shall also apply to the grant:
(a) This Option shall cease to qualify for favorable tax treatment as an Incentive Stock Option if (and to the extent) this Option is exercised for one or more Option Shares (i) more than three (3) months after the date Optionee ceases to be an Employee for any reason other than death or Permanent Disability; or (ii) more than twelve (12) months after the date Optionee ceases to be an Employee by reason of Permanent Disability.
(b) No installment under this Option shall qualify for favorable tax treatment as an Incentive Stock Option if (and to the extent) the aggregate Fair Market Value (determined at the Grant Date) of the Common Stock for which such installment first becomes exercisable hereunder would, when added to the aggregate value (determined as of the respective date or dates of grant) of any earlier installments of the Common Stock and any other securities for which this Option or any other Incentive Stock Options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Company or any Affiliate) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should such One Hundred Thousand Dollar ($100,000) limitation be exceeded in any calendar year, this Option shall nevertheless become exercisable for the excess shares in such calendar year as a Non-Qualified Option.
(c) Should Optionee hold, in addition to this Option, one or more other options to purchase Common Stock which become exercisable for the first time in the same calendar year as this Option, then for purposes of the foregoing limitations on the exercisability of such options as Incentive Stock Options, this Option and each of those other options shall be deemed to become first exercisable in that calendar year on the basis of the chronological order in which they were granted, except to the extent otherwise provided under applicable law or regulation.
21. No Entitlement Or Claims For Compensation. In accepting the grant of this Option, Optionee acknowledges the following:
(i) The Plan is established voluntarily by the Company, the grant of options under the Plan is made at the discretion of the Plan Administrator and the Plan may be modified, amended, suspended or terminated by the Company at any time.
(ii) The grant of this Option is voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted repeatedly in the past.
(iii) All decisions with respect to future option grants, if any, will be at the sole discretion of the Plan Administrator.
(iv) Optionee is voluntarily participating in the Plan.
(v) This Option and any Option Shares acquired under the Plan are extraordinary items that do not constitute compensation of any kind for services of any kind rendered to the Company or any Affiliate (including, as applicable, Optionees Employer) and which are outside the scope of Optionees employment contract, if any.
Exhibit A to Notice of Grant of Stock Option
Page 8
(vi) This Option and any Option Shares acquired under the Plan and their value are not to be considered part of Optionees normal or expected compensation or salary for any purpose, including, but not limited to, calculating any severance, resignation, termination, payment in lieu of notice, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.
(vii) This Option and the Option Shares are not intended to replace any pension rights or compensation.
(viii) In the event that Optionees Employer is not the Company, the grant of this Option will not be interpreted to form an employment or service contract with the Company and, furthermore, the grant of this Option will not be interpreted to form an employment or service contract with Optionees Employer or any Affiliate and shall not interfere with the ability of the Company, the Employer or any Affiliate, as applicable, to terminate Optionees employment or service relationship (if any).
(ix) The future value of the underlying Option Shares is unknown and cannot be predicted with certainty. If the Option Shares do not increase in value, the Option will have no value. If Optionee exercise his or her Option and obtains the Option Shares, the value of those Option Shares acquired upon exercise may increase or decrease in value, even below the Exercise Price.
(x) Optionee acknowledges and agrees that none of the Company, the Employer or any Affiliate shall be liable for any foreign exchange rate fluctuation between Optionees local currency and the United States Dollar that may affect the value of the Option or of any amounts due to Optionee pursuant to the exercise of the Option or the subsequent sale of any Option Shares acquired upon exercise.
(xi) Optionee shall have no rights, claim or entitlement to compensation or damages as a result of Optionees cessation of employment for any reason whatsoever, whether or not in breach of contract or local labor law, insofar as these rights, claim or entitlement arise or may arise from Optionees ceasing to have rights under or be entitled to exercise this Option as a result of such cessation or loss or diminution in value of the Option or any of the Option Shares purchased through exercise of the Option as a result of such cessation, and Optionee irrevocably releases his or her employer, the Company and its Affiliates, as applicable, from any such rights, entitlement or claim that may arise. If, notwithstanding the foregoing, any such right or claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, Optionee shall be deemed to have irrevocably waived his or her entitlement to pursue such rights or claim.
Exhibit A to Notice of Grant of Stock Option
Page 9
22. Data Privacy.
A. Optionee hereby explicitly and unambiguously consents to the collection, use, disclosure and transfer, in electronic or other form, of his or her personal data as described in this Agreement by and among, as applicable, his or her employer, the Company and its Affiliates for the exclusive purpose of implementing, administering and managing his or her participation in the Plan.
B. Optionee understands that his or her Employer, the Company and its Affiliates, as applicable, hold certain personal information about him or her regarding Optionees employment, the nature and amount of Optionees compensation and the fact and conditions of Optionees participation in the Plan, including, but not limited to, his or her name, home address, telephone number and e-mail address, date of birth, social insurance number or other identification number, salary, nationality, job title, any equity or directorships held in the Company and its Affiliates, details of all options or any other entitlement to equity awarded, canceled, exercised, vested, unvested or outstanding in his or her favor, for the purpose of implementing, administering and managing the Plan (the Data).
C. Optionee understands that the Data may be transferred to the Company, its Affiliates and any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in his or her country, or elsewhere, and that the recipients country may have different data privacy laws and protections than his or her country. Optionee understands that he or she may request a list with the names and addresses of any potential recipients of the Data by contacting Optionees local human resources representative. Optionee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing his or her participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party. Optionee understands that the Data will be held only as long as is necessary to implement, administer and manage his or her participation in the Plan. Optionee understands that he or she may, at any time, view the Data, request additional information about the storage and processing of the Data, require any necessary amendments to the Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. Optionee understands, however, that refusing or withdrawing Optionees consent may affect his or her ability to participate in the Plan. For more information on the consequences of Optionees refusal to consent or withdrawal of consent, Optionee understands that he or she may contact his or her local human resources representative.
23. Country Specific Terms. Notwithstanding anything to the contrary herein, this Option shall be subject to the Country-Specific Terms attached hereto as Addendum A. In addition, if Optionee relocates to one of the countries included in the Country-Specific Terms, the special terms and conditions for such country will apply to Optionee to the extent the Company determines that the application of such terms and conditions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan. The Country-Specific Terms constitute part of this Agreement and are incorporated herein by reference.
Exhibit A to Notice of Grant of Stock Option
Page 10
24. Market Standoff Agreement. Optionee hereby agrees that, if requested by the managing underwriter, it will not, without the prior written consent of the Company, during the period commencing on the date of the final prospectus relating to the Companys initial public offering or any secondary public offering, as applicable, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) calendar days in the case of an initial public offering and, solely in the case of a holder of shares of the Companys Common Stock, ninety (90) calendar days in the case of any secondary public offering (or such other period as may be requested by the Company or managing underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto)) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired), whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of securities, in cash or otherwise. Optionee agrees that any transferee of the Option or shares acquired pursuant to the Option shall be bound by this Section 24.
* * * * * *
Exhibit A to Notice of Grant of Stock Option
Page 11
ADDENDUM A TO STOCK OPTION AGREEMENT
(INTERNATIONAL)
COUNTRY-SPECIFIC TERMS FOR PARTICIPANTS OUTSIDE THE U.S.
These Country-Specific Terms include additional terms and conditions that govern the Option granted to Optionee under the Plan if Optionee resides in one of the countries listed below. Capitalized terms used but not defined in these Country-Specific Terms are defined in the Plan or the Stock Option Agreement and have the meanings set forth therein.
CHINA
The grant of the Option and issuance of Option Shares pursuant to exercise of this Option shall be subject to compliance by the Company and Optionee with all applicable requirements of the laws and rules of the Peoples Republic of China including, without limitation, the State Administration of Foreign Exchange (SAFE). Such laws and rules may require that the Option Shares be held in a Company-designated brokerage account following exercise, that any acquired Option Shares be sold upon issuance or within a designated period of time following termination of employment and/or that sales proceeds from the sale of the Option Shares be remitted to the Peoples Republic of China and distributed to Optionee in accordance with applicable requirements.
UNITED KINGDOM
Employers NICs
As a condition to participation in the Plan and the exercise of this Option, Optionee hereby agrees to accept all liability for and pay all secondary Class 1 National Insurance Contributions which would otherwise be payable by the Company (or any successor or any Affiliate employing or previously employing Optionee) with respect to the exercise of the Option or any other event giving rise to taxation under this Option (the Employer NIC). Optionee agrees that Optionee will execute, within the time period specified by the Company, a joint election (the Joint Election) provided by the Company as approved by HM Revenue and Customs and any other consent or elections required to effect the transfer of the Employer NIC. Optionee further agrees to execute such other joint elections as may be required between Optionee and any successor to the Company and/or Optionees employer. Optionee further agrees that the Company and/or Optionees employer may collect the Employer NIC by any of the means set forth in the Joint Election.
Exhibit A to Notice of Grant of Stock Option
Page 1
STANDARD
EXHIBIT I
NOTICE OF EXERCISE
Mavenir Systems, Inc.
1700 International Parkway, Suite 200
Richardson, TX 75081
Attn: Secretary
1. Exercise of Option. Effective as of today, ___________, ____, the undersigned (Optionee) hereby elects to exercise Optionees option (the Option) to purchase ____________ shares of the Common Stock (the Shares) of Mavenir Systems, Inc. (the Company) under and pursuant to the 2013 Equity Incentive Plan (the Plan) and the Notice of Grant of Stock Option (and Stock Option Agreement) dated ______________, _______ (the Option Agreement).
2. Delivery of Payment. Optionee herewith delivers to the Company the full purchase price of the Shares as set forth in the Option Agreement, and any and all withholding taxes due in connection with the exercise of the Option.
3. Representations of Optionee. Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares shall be issued to the Optionee as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in the Plan.
5. Companys Right of First Refusal. Before any Shares held by Optionee or any transferee (either being sometimes referred to herein as the Holder) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section (the Right of First Refusal).
(a) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the Company a written notice (the Notice) stating: (i) the Holders bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (Proposed Transferee); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the Offered Price), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase up to all of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.
Exhibit I to Stock Option Agreement
Page 1
(c) Purchase Price. The purchase price (Purchase Price) for the Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within 30 days after receipt of the Notice or in the manner and at the times set forth in the Notice.
(e) Holders Right to Transfer. To the extent that the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within 120 days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary contained in this Section notwithstanding, the transfer of any or all of the Shares during the Optionees lifetime or on the Optionees death by will or intestacy to the Optionees immediate family or a trust for the benefit of the Optionees immediate family shall be exempt from the provisions of this Section. Immediate Family as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section, and there shall be no further transfer of such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First Refusal shall terminate as to any Shares upon the earlier to occur of (i) the consummation of a Change of Control or (ii) the first sale of Common Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act.
6. Tax Consultation. Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionees purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.
Exhibit I to Stock Option Agreement
Page 2
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company may cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS, IN THE OPINION OF COUNSEL (WHICH MAY BE COUNSEL TO THE COMPANY) SATISFACTORY TO THE COMPANY, SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, INCLUDING A 180-DAY MARKET STANDOFF AGREEMENT, AND A RIGHT OF FIRST REFUSAL HELD BY THE COMPANY AS SET FORTH IN AN EXERCISE NOTICE BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate stop transfer instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
8. Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Exercise Notice shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns.
Exhibit I to Stock Option Agreement
Page 3
9. Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Optionee or by the Company forthwith to the Plan Administrator which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Plan Administrator shall be final and binding on all parties.
10. Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated below Optionees signature line on this Exercise Notice. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.
Optionee generally consents to the delivery of any notice pursuant to the Delaware General Corporation Law (the DGCL), as amended or superseded from time to time, by electronic transmission pursuant to Section 232 of the DGCL (Electronic Notice) at the electronic mail address or the facsimile number as set forth in the books of the Company. To the extent that any notice given via electronic transmission is returned or undeliverable for any reason, the foregoing consent shall be deemed to have been revoked until a new or corrected electronic mail address has been provided, and such attempted Electronic Notice shall be ineffective and deemed to not have been given. Optionee agrees to promptly notify the Company of any change in Optionees electronic mail address, but failure to do so shall not affect the foregoing.
11. Governing Law; Severability. This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of Texas. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, the remaining provisions hereof will continue in full force and effect.
Exhibit I to Stock Option Agreement
Page 4
12. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. This Exercise Notice, the Plan and the Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionees interest except by means of a writing signed by the Company and Optionee.
Submitted by: | Accepted by: | |||||
OPTIONEE: | MAVENIR SYSTEMS, INC. | |||||
By: | ||||||
Signature
|
Its: | |||||
Print Name
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Date Received | ||||||
Address | ||||||
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Exhibit I to Stock Option Agreement
Page 5
EXHIBIT B
2013 EQUITY INCENTIVE PLAN
Exhibit 10.13
MAVENIR SYSTEMS, INC.
NOTICE OF GRANT OF RESTRICTED STOCK UNIT
(INTERNATIONAL)
Notice is hereby given of the following award (the Award) of Restricted Stock Units of Mavenir Systems, Inc., a Delaware corporation (the Company):
Participant: [Name]
Award Date: [Award Date]
Vesting Commencement Date: [Date]
Number of Shares Subject to Award: [# of Shares Awarded] Shares of Common Stock (the Shares)
Vesting Schedule: The Shares shall become vested with respect to (i) one fourth (1/4th) of the Shares on the first anniversary of the Vesting Commencement Date and (ii) an additional one fourth (1/4th) of the Shares on each anniversary of the Vesting Commencement Date thereafter. In no event, shall any additional Shares vest following Participants cessation of Service, except to the extent (if any) specifically authorized by the Plan Administrator in its sole discretion pursuant to a written agreement with Participant.
Issuance Schedule: Each Share in which the Participant vests in accordance with the terms of this Award shall be issued, subject to the Companys collection of all applicable Withholding Taxes, on the applicable vesting date for that Share or as soon thereafter as administratively practicable, but in no event later than the close of the calendar year in which such vesting date occurs or (if later) the fifteenth day of the third calendar month following such vesting date (the Issuance Date). The Shares which vest pursuant to Section 5 of the attached Restricted Stock Unit Issuance Agreement shall be issued in accordance with the provisions of such Section. The applicable Withholding Taxes are to be collected pursuant to the procedures set forth in Section 7 of the attached Restricted Stock Unit Issuance Agreement.
Participant understands and agrees that the Award is granted subject to and in accordance with the terms of the Mavenir Systems, Inc. 2013 Equity Incentive Plan (the Plan). Participant further agrees to be bound by the terms of the Plan and the terms of the Award as set forth in the Restricted Stock Unit Issuance Agreement attached hereto as Exhibit A. Participant hereby acknowledges receipt of a copy of the Plan in the form attached hereto as Exhibit B.
At Will Employment. Nothing in this Notice or in the attached the attached Restricted Stock Unit Issuance Agreement or Plan shall confer upon Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Affiliate employing or retaining Participant) or of Participant, which rights are hereby expressly reserved by each, to terminate Participants Service at any time for any reason, with or without cause, subject to Applicable Law and the terms of any employment agreement.
Definitions. All capitalized terms in this Notice shall have the meaning assigned to them in this Notice, in the attached Restricted Stock Unit Issuance Agreement or in the Plan.
MAVENIR SYSTEMS, INC. | ||
By: |
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Name: | ||
Title: |
PARTICIPANT | ||
Signature: |
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Print Name: | ||
Address: | ||
Attachments:
Exhibit A - Restricted Stock Unit Issuance Agreement
Exhibit B - 2013 Equity Incentive Plan
Notice of Grant of Restricted Stock Units
EXHIBIT A
RESTRICTED STOCK UNIT ISSUANCE AGREEMENT
MAVENIR SYSTEMS, INC.
RESTRICTED STOCK UNIT ISSUANCE AGREEMENT
(INTERNATIONAL)
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the services of selected Employees, Directors and Consultants in the Service of the Company (or any Affiliate).
B. Participant is to render valuable services to the Company (or an Affiliate), and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Companys issuance of Common Stock to the Participant under the Plan.
C. All capitalized terms in this Agreement not defined herein shall have the meaning assigned to them in the Grant Notice (as defined below) or in the Plan.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Restricted Stock Units. The Company hereby awards to the Participant, as of the Award Date as specified in the Notice of Grant of Restricted Stock Units accompanying this Agreement, pursuant to which Participant has been informed of the basic terms of the Restricted Stock Units evidenced hereby (the Grant Notice), the number of Restricted Stock Units specified in the Grant Notice. Each Restricted Stock Unit represents the right to receive one share of Common Stock on the date that unit vests in accordance with the Grant Notice and the express provisions of this Agreement.
2. Limited Transferability. Prior to actual receipt of the Shares which vest in the Grant Notice and hereunder, the Participant may not transfer any interest in the Award or the underlying Shares. Any Shares which vest in accordance with the Grant Notice and this Agreement but which otherwise remain unissued at the time of the Participants death may be transferred pursuant to the provisions of the Participants will or the laws of inheritance.
3. Cessation of Service. Except as otherwise provided in Section 5 below, should the Participant cease Service for any reason prior to vesting in one or more Shares subject to this Award, then the Award will be immediately cancelled with respect to those unvested Shares, and the number of Restricted Stock Units will be reduced accordingly. The Participant shall thereupon cease to have any right or entitlement to receive any Shares under those cancelled units. For purposes of this Agreement and notwithstanding anything to the contrary in the Plan, the Participants Service will be deemed to terminate on the date that the Participant ceases to actively provide Services to the Company (or any Affiliate) and shall not be extended by any notice period mandated or implied under local law during which the Participant is not actually providing Services (e.g. garden leave or similar leave) or during or for which the Participant receives pay in lieu of notice or severance pay. Accordingly, the Participants right to vest in this Award shall terminate, as of such termination of active Service. The Company shall have the sole discretion to determine when the Participant is no longer in active Service for purposes of this Agreement, without reference to any other agreement, written or oral, including the Participants contract of employment.
Exhibit A to Notice of Grant of Restricted Stock Units
Page 1
4. Shareholder Rights. The holder of this Award shall not have any stockholder rights, including voting or dividend rights, with respect to the Shares subject to the Award until the Participant becomes the record holder of those Shares upon their actual issuance following the Companys collection of the applicable Withholding Taxes.
5. Change of Control.
(a) Any Restricted Stock Units subject to this Award at the time of a Change of Control may be assumed by the successor entity or otherwise continued in full force and effect. In the event of such assumption or continuation of the Award, no accelerated vesting of the Restricted Stock Units shall occur at the time of the Change of Control.
(b) In the event the Award is assumed or otherwise continued in effect, the Restricted Stock Units subject to the Award shall be adjusted immediately after the consummation of the Change of Control so as to apply to the number and class of securities into which the Shares subject to those units immediately prior to the Change of Control would have been converted in consummation of that Change of Control had those Shares actually been issued and outstanding at that time. To the extent the actual holders of the outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change of Control, the successor corporation (or parent entity) may, in connection with the assumption or continuation of the Restricted Stock Units subject to the Award at that time and subject to the Plan Administrators approval, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per Common Stock in the Change of Control transaction provided such common stock is readily traded on an established U.S. countries exchange or market.
(c) If the Restricted Stock Units subject to this Award at the time of the Change of Control are not assumed or otherwise continued in effect in accordance with Section 5(a), then those units shall vest immediately prior to the closing of the Change of Control. The Shares subject to those vested units shall be converted into the right to receive for each such Share the same consideration per share of Common Stock payable to the other stockholders of the Company upon consummation of that Change of Control, and such consideration shall be distributed to the Participant within three (3) business days following the effective date of that Change of Control. Such distribution shall be subject to the Companys collection of the applicable Withholding Taxes pursuant to the provisions of Section 7.
(d) This Agreement shall not in any way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
6. Adjustment in Shares. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of
Exhibit A to Notice of Grant of Restricted Stock Units
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shares, spin-off transaction or other change affecting the outstanding Common Stock as a class without the Companys receipt of consideration, or should the value of the outstanding shares of Common stock be substantially reduced as a result of a spin-off transaction or extraordinary dividend or distribution, then equitable adjustments shall be made by the Plan Administrator to the total number and/or class of securities issuable pursuant to this Award in order to reflect such change and those adjustments shall be final, binding and conclusive.
7. Issuance of Shares.
(a) On each applicable Issuance Date for the Shares which vest in accordance with the Grant Notice or the provisions of this Agreement, the Company shall issue to or on behalf of the Participant a certificate (which may be in electronic form) for the vested Common Stock to be issued on such date, subject to the Companys collection of the applicable Taxes. Taxes shall mean all applicable income tax, employment tax, payroll tax, social security tax, social insurance, contributions, payment on account obligations, national and local tax or other payments required to be withheld, collected or accounted for in connection with the issuance of shares of Common Stock under the Award.
(b) Until such time as the Company provides the Participant with notice to the contrary, the Company shall collect the applicable Taxes through an automatic Share withholding procedure pursuant to which the Company will withhold, on the applicable Issuance Date for the Shares that vest under the Award, a portion of those vested Shares with a Fair Market Value (measured as of the Issuance Date) equal to the amount of such Taxes (the Share Withholding Method); provided, however, that the amount of any Shares so withheld shall not exceed the amount necessary to satisfy the Companys required Tax obligations using the minimum applicable statutory rates. The Participant shall be notified in writing in the event such Share Withholding Method is no longer available.
(c) Should any Shares vest under the Award at a time when the Share Withholding Method is not available, then the Taxes shall be collected from the Participant through either of the following alternatives:
(i) the Participants delivery of his or her separate check payable to the Company in the amount of such Taxes; or
(ii) the use of the proceeds from a next-day sale of the Shares issued to the Participant, provided and only if (A) such a sale is permissible under the Companys insider trading policies governing the sale of Common Stock; (B) the Participant makes an irrevocable commitment, on or before the vesting date for those Shares, to effect such sale of the Shares; and (C) the transaction is not otherwise deemed to constitute a prohibited loan under Section 402 of the Sarbanes-Oxley Act of 2002.
(d) Regardless of any action the Company and/or the Participants employer (the Employer) take with respect to any or all Taxes, the Participant acknowledges that the ultimate liability for all Taxes is and remains the Participants responsibility and may exceed the
Exhibit A to Notice of Grant of Restricted Stock Units
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amount actually withheld by the Company or the Employer. The Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Taxes in connection with any aspect of the Award, including the grant or vesting of the Award, the issuance of Shares or the subsequent sale of any Shares acquired at vesting; and (ii) do not commit to, and are under no obligation to, structure the terms of the grant or any aspect of the Award to reduce or eliminate the Participants liability for Taxes or achieve any particular tax result. Further, if the Participant is subject to Taxes in more than one jurisdiction between the Grant Date and the date of any relevant taxable or tax withholding event, as applicable, the Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Taxes in more than one jurisdiction.
(e) Prior to the relevant taxable event, the Participant agrees to make arrangements satisfactory to the Company and/or the Employer to satisfy all Taxes. In this regard, the Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy the obligations with regard to all Taxes by withholding from any wages or other cash compensation paid to the Participant by the Company and/or the Employer.
(f) Except as otherwise provided in Section 5 or Section 7(b), the settlement of all Restricted Stock Units which vest under the Award shall be made solely in Common Stock. No fractional share shall be issued pursuant to this Award, and any fractional share resulting from any calculation made in accordance with the terms of this Agreement shall be rounded down to the next whole share of Common Stock.
8. Compliance with Laws and Regulations. The issuance of Common Stock pursuant to the Award shall be subject to compliance by the Company and the Participant with all applicable requirements of law relating thereto and with all applicable regulations of the Stock Exchange on which the Common Stock is listed for trading at the time of such issuance.
9. Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices, and directed to the attention of Plan Administrator. Any notice required to be given or delivered to the Participant shall be in writing and addressed to the Participant at the most current address then on record with the Company or shall be delivered electronically to the Participant through the Companys electronic mail system. All notices shall be deemed effective upon personal delivery, upon sending of an email or upon deposit in the mail, postage prepaid and properly addressed to the party to be notified.
The Participant generally consents to the delivery of any notice pursuant to the Delaware General Corporation Law (the DGCL), as amended or superseded from time to time, by electronic transmission pursuant to Section 232 of the DGCL (Electronic Notice) at the electronic mail address or the facsimile number as set forth in the books of the Company. To the extent that any notice given via electronic transmission is returned or undeliverable for any reason, the foregoing consent shall be deemed to have been revoked until a new or corrected electronic mail address has been provided, and such attempted Electronic Notice shall be
Exhibit A to Notice of Grant of Restricted Stock Units
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ineffective and deemed to not have been given. The Participant agrees to promptly notify the Company of any change in the Participants electronic mail address, but failure to do so shall not affect the foregoing.
10. Successors and Assigns. Except to the extent otherwise provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and the Participant, the Participants assigns, and the legal representatives, heirs and legatees of the Participants estate.
11. Construction; Administrator Discretions. This Agreement and the Award evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in the Award.
12. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to Restricted Stock Units awarded under the Plan or future Restricted Stock Units that may be awarded under the Plan by electronic means or request the Participants consent to participate in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or another third party designated by the Company.
13. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Texas without resort to that States conflict-of-laws rules.
14. Code Section 409A. It is the intention of the parties that the provisions of this Agreement comply with the requirements of the short-term deferral exception of Section 409A of the Code and Treasury Regulations Section 1.409A-1(b)(4). Accordingly, to the extent there is any ambiguity as to whether one or more provisions of this Agreement would otherwise contravene the requirements or limitations of Code Section 409A applicable to such short-term deferral exception, then those provisions shall be interpreted and applied in a manner that does not result in a violation of the requirements or limitations of Code Section 409A and the Treasury Regulations thereunder that apply to such exception.
15. No Entitlement Or Claims For Compensation. In accepting the grant of this Award, the Participant acknowledges the following:
(a) The Plan is established voluntarily by the Company, the grant of awards under the Plan is made at the discretion of the Plan Administrator and the Plan may be modified, amended, suspended or terminated by the Company at any time.
(b) The grant of this Award is voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted repeatedly in the past.
Exhibit A to Notice of Grant of Restricted Stock Units
Page 5
(c) All decisions with respect to future award grants, if any, will be at the sole discretion of the Plan Administrator.
(d) The Participant is voluntarily participating in the Plan.
(e) This Award and any Shares acquired under the Plan are extraordinary items that do not constitute compensation of any kind for services of any kind rendered to the Company or any Affiliate (including, as applicable, the Participants Employer) and which are outside the scope of the Participants employment contract, if any.
(f) This Award and any Shares acquired under the Plan and their value are not to be considered part of the Participants normal or expected compensation or salary for any purpose, including, but not limited to, calculating any severance, resignation, termination, payment in lieu of notice, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.
(g) This Award and the Shares are not intended to replace any pension rights or compensation.
(h) In the event that the Participants Employer is not the Company, the grant of this Award will not be interpreted to form an employment or service contract with the Company and, furthermore, the grant of this Award will not be interpreted to form an employment or service contract with the Participants Employer or any Affiliate and shall not interfere with the ability of the Company, the Employer or any Affiliate, as applicable, to terminate the Participants employment or service relationship (if any).
(i) The future value of the underlying Shares is unknown and cannot be predicted with certainty. If the Participant vests in the Shares, the value of those Shares may increase or decrease in value.
(j) The Participant acknowledges and agrees that none of the Company, the Employer or any Affiliate shall be liable for any foreign exchange rate fluctuation between the Participants local currency and the United States Dollar that may affect the value of the Award or of any amounts due to the Participant pursuant to the vesting of the Award or the subsequent sale of any Shares acquired upon vesting.
(k) The Participant shall have no rights, claim or entitlement to compensation or damages as a result of the Participants cessation of employment for any reason whatsoever, whether or not in breach of contract or local labor law, insofar as these rights, claim or entitlement arise or may arise from the Participants ceasing to have rights under or be entitled to vest in this Award as a result of such cessation or loss or diminution in value of the Award or any of the Shares acquired under the Award as a result of such cessation, and the Participant irrevocably releases his or her Employer, the Company and its Affiliates, as applicable, from any such rights, entitlement or claim that may arise. If, notwithstanding the foregoing, any such right or claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, the Participant shall be deemed to have irrevocably waived his or her entitlement to pursue such rights or claim.
Exhibit A to Notice of Grant of Restricted Stock Units
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16. Data Privacy.
(a) The Participant hereby explicitly and unambiguously consents to the collection, use, disclosure and transfer, in electronic or other form, of his or her personal data as described in this Agreement by and among, as applicable, his or her Employer, the Company and its Affiliates for the exclusive purpose of implementing, administering and managing his or her participation in the Plan.
(b) The Participant understands that his or her Employer, the Company and its Affiliates, as applicable, hold certain personal information about him or her regarding the Participants employment, the nature and amount of the Participants compensation and the fact and conditions of the Participants participation in the Plan, including, but not limited to, his or her name, home address, telephone number and e-mail address, date of birth, social insurance number or other identification number, salary, nationality, job title, any equity or directorships held in the Company and its Affiliates, details of all options or any other entitlement to equity awarded, canceled, exercised, vested, unvested or outstanding in his or her favor, for the purpose of implementing, administering and managing the Plan (the Data).
(c) The Participant understands that the Data may be transferred to the Company, its Affiliates and any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in his or her country, or elsewhere, and that the recipients country may have different data privacy laws and protections than his or her country. The Participant understands that he or she may request a list with the names and addresses of any potential recipients of the Data by contacting the Participants local human resources representative. The Participant authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing his or her participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party. The Participant understands that the Data will be held only as long as is necessary to implement, administer and manage his or her participation in the Plan. The Participant understands that he or she may, at any time, view the Data, request additional information about the storage and processing of the Data, require any necessary amendments to the Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. The Participant understands, however, that refusing or withdrawing the Participants consent may affect his or her ability to participate in the Plan. For more information on the consequences of the Participants refusal to consent or withdrawal of consent, the Participant understands that he or she may contact his or her local human resources representative.
Exhibit A to Notice of Grant of Restricted Stock Units
Page 7
17. Country Specific Terms. Notwithstanding anything to the contrary herein, this Award shall be subject to the Country-Specific Terms attached hereto as Attachment I. In addition, if the Participant relocates to one of the countries included in the Country-Specific Terms, the special terms and conditions for such country will apply to the Participant to the extent the Company determines that the application of such terms and conditions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan. The Country-Specific Terms constitute part of this Agreement and are incorporated herein by reference.
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Exhibit A to Notice of Grant of Restricted Stock Units
Page 8
RESTRICTED STOCK UNIT ISSUANCE AGREEMENT
ATTACHMENT I
(INTERNATIONAL)
COUNTRY-SPECIFIC TERMS
FOR PARTICIPANTS OUTSIDE THE U.S.
These Country-Specific Terms include additional terms and conditions that govern the Award granted to the Participant under the Plan if the Participant resides in one of the countries listed below. Capitalized terms used but not defined in these Country-Specific Terms are defined in the Plan or the Restricted Stock Unit Agreement and have the meanings set forth therein.
CHINA
The grant of the Award and issuance of Shares pursuant to vesting of this Award shall be subject to compliance by the Company and the Participant with all applicable requirements of the laws and rules of the Peoples Republic of China including, without limitation, the State Administration of Foreign Exchange (SAFE). Such laws and rules may require that the Option Shares be held in a Company-designated brokerage account following vesting of the Award, that any acquired Shares be sold upon issuance or within a designated period of time following termination of employment and/or that sales proceeds from the sale of the Shares be remitted to the Peoples Republic of China and distributed to the Participant in accordance with applicable requirements.
UNITED KINGDOM
Employers NICs
As a condition to participation in the Plan and the vesting of this Award, the Participant hereby agrees to accept all liability for and pay all secondary Class 1 National Insurance Contributions which would otherwise be payable by the Company (or any successor or any Affiliate employing or previously employing the Participant) with respect to the vesting of the Award, the issuance of Shares or any other event giving rise to taxation under this Award (the Employer NIC). The Participant agrees that the Participant will execute, within the time period specified by the Company, a joint election (the Joint Election¨) provided by the Company as approved by HM Revenue and Customs and any other consent or elections required to effect the transfer of the Employer NIC. The Participant further agrees to execute such other joint elections as may be required between the Participant and any successor to the Company and/or the Participants employer. The Participant further agrees that the Company and/or the Participants employer may collect the Employer NIC by any of the means set forth in the Joint Election.
EXHIBIT B
2013 EQUITY INCENTIVE PLAN
Exhibit 10.14
MAVENIR SYSTEMS, INC.
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I.
PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the interests of Mavenir Systems, Inc., a Delaware corporation, by providing eligible employees with the opportunity to acquire a proprietary interest in the Company through participation in an employee stock purchase plan designed to qualify under Section 423 of the Code for one or more specified offerings made under such plan.
The Plan shall become effective on May 20, 2014 (the Effective Time).
Capitalized terms herein shall have the meanings assigned to such terms in the attached Appendix.
ARTICLE II.
ADMINISTRATION OF THE PLAN
2.1 The Plan Administrator shall have full authority to interpret and construe any provision of the Plan and to adopt such rules and regulations for administering the Plan as it may deem necessary in order to bring one or more offerings under the Plan into compliance with the requirements of Code Section 423.
2.2 The Plan Administer may authorize one or more offerings under the Plan that are not designed to comply with the requirements of Code Section 423 but with the requirements of the foreign jurisdictions in which those offerings are conducted. Such offerings shall be separate from any offerings designed to comply with the Code Section 423 requirements but may be conducted concurrently with those offerings.
2.3 Decisions of the Plan Administrator shall be final and binding on all parties having an interest in the Plan.
ARTICLE III.
STOCK SUBJECT TO PLAN
3.1 The stock purchasable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares of Common Stock purchased on the open market. The number of shares of Common Stock reserved for issuance over the term of the Plan shall initially be limited to 3,375,000 shares.
3.2 The number of shares of Common Stock available for issuance under the Plan shall automatically increase on the first trading day in January each calendar year during the term of the Plan, beginning with the 2015 calendar year, by an amount equal to one percent (1%) of the total number of shares of Common Stock outstanding on the last trading day in the immediately preceding calendar month, but in no event shall any such annual increase exceed 3,000,000 shares.
3.3 Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction or other change affecting the outstanding Common Stock as a class without the Companys receipt of consideration or should the value of outstanding shares of Common Stock be substantially reduced as a result of a spin-off transaction or an extraordinary dividend or distribution, then equitable adjustments shall be made by the Plan Administrator to (i) the maximum number and class of securities issuable under the Plan; (ii) the maximum number and class of securities by which the share reserve is to increase automatically each calendar year pursuant to the provisions of Section 3.2 of this Article III; (iii) the maximum number and class of securities purchasable per Participant on any one Purchase Date during an offering period; (iv) the maximum number and class of securities purchasable in total by all Participants under the Plan on any one Purchase Date; and (v) the number and class of securities and the price per share in effect under each outstanding purchase right. The adjustments shall be made in such manner as the Plan Administrator deems appropriate, and such adjustments shall be final, binding and conclusive.
ARTICLE IV.
OFFERING PERIODS
4.1 Shares of Common Stock shall be offered for purchase under the Plan through a series of successive offering periods until such time as (i) the maximum number of shares of Common Stock available for issuance under the Plan shall have been purchased or (ii) the Plan shall have been sooner terminated.
4.2 Each offering period shall be of such duration not to exceed twenty-four (24) months, as determined by the Plan Administrator prior to the start of the applicable offering period. Until such time as the Plan Administrator specifies otherwise, offering periods shall be of a duration of approximately six (6) months and shall commence on the first Trading Day in the in the six (6)-month period commencing on May 20 and November 20 each year and end on the last Trading Day of such six (6)-month period, respectively.
4.3 Each offering period shall be comprised of one or more Purchase Intervals. Until such time as the Plan Administrator specifies otherwise, each offering period shall be comprised of one Purchase Interval.
4.4 The terms and conditions of each offering period may vary, and two or more offerings periods may run concurrently under the Plan, each with its own terms and conditions. In addition, special offering periods may be established with respect to entities that are acquired by the Company (or any subsidiary of the Company) or under such other circumstances as the Plan Administrator deems appropriate. In no event, however, shall the terms and conditions of any offering period contravene the express limitations and restrictions of the Plan, and the participants in each separate offering period conducted by one or more Participating Companies in the United States shall have equal rights and privileges under that offering in accordance with the requirements of Section 423(b)(5) of the Code and the applicable Treasury Regulations thereunder.
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4.5 The following provision may, at the discretion of the Plan Administrator, apply with respect to offering periods comprised of two (2) or more Purchase Intervals. Should the Fair Market Value per share of Common Stock on any Purchase Date within such an offering period be less than the Fair Market Value per share of Common Stock on the start date of that offering period, then the individuals participating in that offering period shall, immediately after the purchase of shares of Common Stock on their behalf on such Purchase Date, be transferred from that offering period and automatically enrolled in the offering period commencing on the next business day following such Purchase Date, provided and only if the Fair Market Value per share of Common Stock on the start date of that new offering period is lower than the Fair Market Value per share of Common Stock on the start date of the offering period in which they were currently enrolled.
ARTICLE V.
ELIGIBILITY
5.1 Purchase rights may be granted under the Plan only to Employees of the Company or an Affiliate. Unless otherwise determined by the Plan Administrator for an offering, each individual who is an Eligible Employee on the start date of the offering period under the Plan may enter that offering period on such start date. However, an Eligible Employee may participate in only one offering period at a time.
5.2 The date an individual enters an offering period shall be designated his or her Entry Date for purposes of that offering period.
5.3 An Affiliate shall become a Participating Company when authorized by the Plan Administrator to extend the benefits of the Plan to its Eligible Employees.
5.4 Except as otherwise provided in Sections 4.5, the Eligible Employee must, in order to participate in the Plan for a particular offering period, complete the enrollment forms prescribed by the Plan Administrator (including a stock purchase agreement and a payroll deduction authorization or other authorization form for any other form of contribution permitted for that offering period) and file such forms with the Plan Administrator (or its designate) on or before his or her scheduled Entry Date.
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ARTICLE VI.
PAYROLL DEDUCTIONS/OTHER FORMS OF CONTRIBUTION
6.1 For each offering period, the Plan Administrator may allow contributions to the Plan to be effected in the form of periodic payroll deductions or one or more other forms of permitted contribution specified by the Plan Administrator prior to the start date of the applicable offering period. However, all contributions, whether in the form of payroll deductions or other mode, shall be made solely on the basis of the Participants Cash Earnings for the offering period. Unless the Plan Administrator determines otherwise prior to the start of the applicable offering period:
(a) Participant contributions for each offering period shall be solely in the form of payroll deductions; and
(b) the payroll deductions or other form of permitted contribution that each Participant may authorize for purposes of acquiring shares of Common Stock during an offering period may be in any multiple of one percent (1%) of the Cash Earnings paid to that Participant during each Purchase Interval within such offering period, up to a maximum of fifteen percent (15%).
6.2 Payroll deductions or other permitted forms of contribution collected in a currency other than U.S. Dollars shall be converted into U.S. Dollars on the last day of the Purchase Interval in which collected, with such conversion to be based on an exchange rate determined by the Plan Administration in its sole discretion.
6.3 The rate of payroll deduction or other permitted form of contribution shall continue in effect throughout the offering period, except for changes effected in accordance with the following guidelines:
(a) The Participant may, at any time during the offering period, reduce the rate of his or her payroll deduction or other permitted form of contribution to become effective as soon as administratively possible after filing the appropriate form with the Plan Administrator. The Participant may not, however, effect more than one (1) such reduction per Purchase Interval.
(b) The Participant may, at any time during the offering period, increase the rate of his or her payroll deduction or other permitted form of contribution (up to the maximum percentage limit for that offering period) to become effective as soon as administratively possible after filing the appropriate form with the Plan Administrator. The Participant may not, however, effect more than one (1) such increase per Purchase Interval.
(c) The Participant may at any time reduce his or her rate of payroll deduction or other form of permitted contribution to 0%. Such reduction shall become effective as soon as administratively practicable following the filing of the appropriate form with the Plan Administrator. The Participants existing payroll deductions or other permitted form of contribution authorized for the Purchase Interval in which such reduction occurs shall be applied to the purchase of shares of Common Stock on the next scheduled Purchase Date.
6.4 Payroll deductions shall begin on the first pay day administratively feasible following the Participants Entry Date into the offering period and shall (unless sooner terminated by the Participant) continue through the pay day ending with or immediately prior to the last day of that offering period. To the extent the Plan Administrator permits other forms of contribution for an offering period, those permitted contributions at the level authorized by each affected Participant shall be collected in the manner specified by the Plan Administrator for that offering period. The payroll deductions or other permitted forms of contribution so collected shall be credited to the Participants book account under the Plan, but no interest shall be paid on the balance from time to time outstanding in such account, unless otherwise required by the terms of that offering period. Unless the Plan Administrator determines otherwise prior to the start of the applicable offering period, the amounts collected from the Participant shall not be required to be held in any segregated account or trust fund and may be commingled with the general assets of the Company and used for any corporate purpose.
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6.5 Payroll deductions or other permitted form of contribution authorized by the Participant shall automatically cease upon the termination of the Participants purchase right in accordance with the provisions of the Plan.
6.6 The Participants acquisition of Common Stock under the Plan on any Purchase Date shall neither limit nor require the Participants acquisition of Common Stock on any subsequent Purchase Date, whether within the same or a different offering period.
ARTICLE VII.
PURCHASE RIGHTS
7.1 Grant of Purchase Right. A Participant shall be granted a separate purchase right for each offering period in which he or she participates. The purchase right shall be granted on the Participants Entry Date into the offering period. Unless the Plan Administrator determines otherwise prior to the start date of the applicable offering period and subject to the limitations of Article VIII below, each purchase right granted for an offering period shall provide the Participant with the right to purchase up to 4,000 shares of Common Stock on each Purchase Date within that offering period subject to (i) periodic adjustments in the event of certain changes in the Companys capitalization and/or (ii) adjustment by the Plan Administrator as provided in Section 7.4 of this Article VII. The Participant shall execute a stock purchase agreement embodying such terms and such other provisions (not inconsistent with the Plan) as the Plan Administrator may deem advisable.
Under no circumstances shall purchase rights be granted under the Plan to any Eligible Employee if such individual would, immediately after the grant, own (within the meaning of Code Section 424(d)) or hold outstanding options or other rights to purchase, stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any Affiliate.
7.2 Exercise of the Purchase Right. Each purchase right shall be automatically exercised in installments on each successive Purchase Date within the offering period, and shares of Common Stock shall accordingly be purchased on behalf of each Participant (other than Participants whose payroll deductions or other authorized contributions have previously been refunded pursuant to the Termination of Purchase Right provisions below) on each such Purchase Date. The purchase shall be effected by applying the Participants authorized payroll deductions or other form of permitted contribution for the Purchase Interval ending on such Purchase Date to the purchase of whole shares of Common Stock at the purchase price in effect for the Participant for that Purchase Date.
7.3 Purchase Price. The purchase price per share at which Common Stock will be purchased on the Participants behalf on each Purchase Date within the offering period will be established by the Plan Administrator prior to the start of that offering period, but in no event shall such purchase price be less than eighty-five percent (85%) of the lower of (i) the Fair Market Value per share of Common Stock on the Participants Entry Date into that offering period; or (ii) the Fair Market Value per share of Common Stock on that Purchase Date.
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7.4 Number of Purchasable Shares. The number of shares of Common Stock purchasable by a Participant on each Purchase Date during the offering period shall be the number of whole shares obtained by dividing the amount collected from the Participant through his or her authorized payroll deductions or other permitted form of contribution during the Purchase Interval ending with that Purchase Date by the purchase price in effect for the Participant for that Purchase Date. However, the maximum number of shares of Common Stock purchasable per Participant on any one Purchase Date shall be governed by the limitation set forth in Section 7.1, as adjusted periodically in the event of certain changes in the Companys capitalization. In addition, the maximum number of shares of Common Stock purchasable in total by all Participants on any one Purchase Date shall not exceed 1,250,000 shares, subject to periodic adjustments in the event of certain changes in the Companys capitalization. However, the Plan Administrator shall have the discretionary authority, exercisable prior to the start of any offering period under the Plan, to increase or decrease the limitations to be in effect for the number of shares purchasable per Participant (and the corresponding maximum number of shares purchasable per Participant for that offering period) and in total by all Participants on each Purchase Date within that offering period.
7.5 Excess Payroll Deductions/Contributions. Any authorized payroll deductions or other permitted form of contribution not applied to the purchase of shares of Common Stock on any Purchase Date because they are not sufficient to purchase a whole share of Common Stock shall be held for the purchase of Common Stock on the next Purchase Date. However, any authorized payroll deductions or other permitted form of contribution not applied to the purchase of Common Stock by reason of the limitation on the maximum number of shares purchasable per Participant or in the aggregate on the Purchase Date shall be promptly refunded.
7.6 Suspension of Payroll Deductions/Contributions. In the event that a Participant is, by reason of the accrual limitations in Article VIII, precluded from purchasing additional shares of Common Stock on one or more Purchase Dates during the offering period in which he or she is enrolled, then no further payroll deductions or other permitted form of contribution authorized by the Participant for that offering period shall be collected from such Participant with respect to those Purchase Dates. The suspension of such deductions or contributions shall not terminate the Participants purchase right for the offering period in which he or she is enrolled, and the Participants authorized payroll deductions or other permitted form of contribution shall automatically resume on behalf of such Participant once he or she is again able to purchase shares during that offering period in compliance with the accrual limitations of Article VIII.
7.7 Termination of Purchase Right. The following provisions shall govern the termination of outstanding purchase rights:
(a) A Participant may withdraw from the offering period in which he or she is enrolled by filing the appropriate form with the Plan Administrator (or its designate) at any time prior to the next scheduled Purchase Date in that offering period, and no further payroll deductions or other permitted form of contribution shall be collected from the Participant with
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respect to the offering period. Any payroll deductions or other permitted form of contribution authorized by the Participant and collected during the Purchase Interval in which such withdrawal occurs shall, at the Participants election, be immediately refunded or held for the purchase of shares on the next Purchase Date. If no such election is made at the time of such withdrawal, then the payroll deductions or other permitted form of contribution authorized by the Participant and collected with respect to the Purchase Interval in which such withdrawal occurs shall be refunded to the Participant as soon as possible.
(b) The Participants withdrawal from the offering period shall be irrevocable, and the Participant may not subsequently rejoin that offering period at a later date. In order to resume participation in any subsequent offering period, such individual must re-enroll in the Plan (by making a timely filing of the prescribed enrollment forms) on or before his or her scheduled Entry Date into that offering period.
(c) Should the Participant cease to remain an Eligible Employee for any reason (including death, disability or change in status) while his or her purchase right remains outstanding, then that purchase right shall immediately terminate, and all of the Participants authorized payroll deductions or other permitted contributions for the Purchase Interval in which the purchase right so terminates shall be immediately refunded. However, should the Participant cease to remain in active service by reason of an approved unpaid leave of absence, then the Participant shall have the right, exercisable up until the last business day of the Purchase Interval in which such leave commences, to (i) withdraw all the payroll deductions or other permitted contributions authorized by the Participant and collected to date on his or her behalf for that Purchase Interval or (ii) have such funds held for the purchase of shares on his or her behalf on the next scheduled Purchase Date. Unless otherwise determined by the Plan Administrator for one or more offerings, in no event, however, shall any further payroll deductions or other permitted form of contribution be collected on the Participants behalf during such leave. Upon the Participants return to active service (x) within three (3) months following the commencement of such leave; or (y) prior to the expiration of any longer period for which such Participant is provided with reemployment rights by statute or contract, his or her authorized payroll deductions or other permitted form of contribution under the Plan shall automatically resume at the rate in effect at the time the leave began, unless the Participant withdraws from the Plan prior to his or her return. Unless otherwise determined by the Plan Administrator for one or more offerings, an individual who returns to active employment following a leave of absence which exceeds in duration the applicable (x) or (y) time period above will be treated as a new Employee for purposes of subsequent participation in the Plan and must accordingly re-enroll in the Plan (by making a timely filing of the prescribed enrollment forms) on or before his or her scheduled Entry Date into the offering period.
7.8 Change in Control. Each outstanding purchase right shall automatically be exercised, immediately prior to the effective date of any Change in Control, by applying the authorized payroll deductions or other permitted contributions of each Participant for the Purchase Interval in which such Change in Control occurs to the purchase of whole shares of Common Stock at the purchase price per share in effect for that Purchase Interval pursuant to the Purchase Price provisions of Section 7.3 of this Article VII. However, the applicable limitation on the number of shares of Common Stock purchasable per Participant shall continue to apply to any such purchase, but not the limitation applicable to the maximum number of shares of Common Stock purchasable in total by all Participants.
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The Company shall use reasonable efforts to provide at least ten (10)-days prior written notice of the occurrence of any Change in Control, and the Participants shall, following the receipt of such notice, have the right to terminate their outstanding purchase rights prior to the effective date of the Change in Control.
7.9 Proration of Purchase Rights. Should the total number of shares of Common Stock to be purchased pursuant to outstanding purchase rights on any particular date exceed the number of shares then available for issuance under the Plan, the Plan Administrator shall make a pro-rata allocation of the available shares on a uniform and nondiscriminatory basis, and the authorized payroll deductions or other permitted form of contribution of each Participant, to the extent in excess of the aggregate purchase price payable for the Common Stock pro-rated to such individual, shall be refunded.
7.10 ESPP Broker Account. The shares purchased on behalf of each Participant shall be deposited directly into a brokerage account which the Company shall establish for the Participant at a Company-designated brokerage firm. The account will be known as the ESPP Broker Account. Except as otherwise provided below, the deposited shares may not be transferred (either electronically or in certificate form) from the ESPP Broker Account until the later of the following two periods: (i) the end of the two (2)-year period measured from the Participants Entry Date into the offering period in which the shares were purchased; and (ii) the end of the one (1)-year measured from the actual purchase date of those shares. Such limitation shall apply both to transfers to different accounts with the same ESPP broker and to transfers to other brokerage firms. Any shares held for the required holding period may thereafter be transferred (either electronically or in certificate form) to other accounts or to other brokerage firms.
The foregoing procedures shall not in any way limit when the Participant may sell his or her shares. Those procedures are designed solely to assure that any sale of shares prior to the satisfaction of the required holding period is made through the ESPP Broker Account. In addition, the Participant may request a stock certificate or share transfer from his or her ESPP Broker Account prior to the satisfaction of the required holding period should the Participant wish to make a gift of any shares held in that account. However, shares may not be transferred (either electronically or in certificate form) from the ESPP Broker Account for use as collateral for a loan, unless those shares have been held for the required holding period.
The foregoing procedures shall apply to all shares purchased by each Participant, whether or not that Participant continues in Employee status.
7.11 Assignability. The purchase right shall be exercisable only by the Participant and shall not be assignable or transferable by the Participant.
7.12 Stockholder Rights. A Participant shall have no stockholder rights with respect to the shares subject to his or her outstanding purchase right until the shares are purchased on the Participants behalf in accordance with the provisions of the Plan and the Participant has become a holder of record of the purchased shares.
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ARTICLE VIII.
ACCRUAL LIMITATIONS
8.1 No Participant shall be entitled to accrue rights to acquire Common Stock pursuant to any purchase right outstanding under the Plan if and to the extent such accrual, when aggregated with (i) rights to purchase Common Stock accrued under any other purchase right granted under the Plan; and (ii) similar rights accrued under other employee stock purchase plans (within the meaning of Code Section 423) of the Company or any Affiliate, would otherwise permit such Participant to purchase more than Twenty-Five Thousand Dollars ($25,000.00) worth of stock of the Company or any Affiliate (determined on the basis of the Fair Market Value per share on the date or dates such rights are granted) for each calendar year such rights are at any time outstanding.
8.2 For purposes of applying such accrual limitations to the purchase rights granted under the Plan, the following provisions shall be in effect:
(a) The right to acquire Common Stock under each outstanding purchase right shall accrue in a series of installments on each successive Purchase Date during the offering period on which such right remains outstanding.
(b) No right to acquire Common Stock under any outstanding purchase right shall accrue to the extent the Participant has already accrued in the same calendar year the right to acquire Common Stock under one or more other purchase rights at a rate equal to Twenty-Five Thousand Dollars ($25,000.00) worth of Common Stock (determined on the basis of the Fair Market Value per share on the date or dates of grant) for each calendar year such rights were at any time outstanding.
8.3 If by reason of such accrual limitations, any purchase right of a Participant does not accrue for a particular Purchase Interval, then the authorized payroll deductions or other permitted form of contribution which the Participant made during that Purchase Interval with respect to such purchase right shall be promptly refunded.
8.4 In the event there is any conflict between the provisions of this Article VIII and one or more provisions of the Plan or any instrument issued thereunder, the provisions of this Article VIII shall be controlling.
ARTICLE IX.
EFFECTIVE DATE AND TERM OF THE PLAN
9.1 The Plan shall become effective for the offering period commencing at the Effective Time; provided, however, that (i) the Plan shall have been approved by the stockholders of the Company; and (ii) no purchase rights granted under the Plan shall be exercised, and no shares of Common Stock shall be issued hereunder, until the Company shall have complied with all applicable requirements of the 1933 Act (including the registration of the shares of Common Stock issuable under the Plan on a Form S-8 registration statement filed with
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the Securities and Exchange Commission), all applicable listing requirements of any Stock Exchange (or the Nasdaq Stock Market, if applicable) on which the Common Stock is listed for trading and all other applicable requirements established by law or regulation.
9.2 Unless sooner terminated by the Board, the Plan shall terminate upon the earliest of (i) November 19, 2024; (ii) the date on which all shares available for issuance under the Plan shall have been sold pursuant to purchase rights exercised under the Plan; or (iii) the date on which all purchase rights are exercised in connection with a Change in Control. No further purchase rights shall be granted or exercised, and no further payroll deductions or other forms of contribution shall be collected, under the Plan following such termination.
ARTICLE X.
AMENDMENT OF THE PLAN
10.1 The Board may alter or amend the Plan at any time to become effective as of the start date of the next offering period thereafter under the Plan. In addition, the Board may suspend or terminate the Plan at any time to become effective immediately following the close of any subsequent Purchase Interval.
10.2 In no event may the Board effect any of the following amendments or revisions to the Plan without the approval of the Companys stockholders: (i) increase the number of shares of Common Stock issuable under the Plan, except for permissible adjustments in the event of certain changes in the Companys capitalization or (ii) modify the eligibility requirements for participation in the Plan.
ARTICLE XI.
GENERAL PROVISIONS
11.1 All costs and expenses incurred in the administration of the Plan shall be paid by the Company; provided, however, each Plan Participant shall bear all costs and expenses incurred by such individual in the sale or other disposition of any shares purchased under the Plan.
11.2 Nothing in the Plan shall confer upon the Participant any right to continue in the employ of the Company or any Affiliate for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Affiliate employing such person) or of the Participant, which rights are hereby expressly reserved by each, to terminate such persons employment at any time for any reason, with or without cause.
11.3 The provisions of the Plan shall be governed by the laws of the State of Delaware without resort to that States conflict-of-laws rules.
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Schedule A
Companies Participating in
the Mavenir Systems, Inc. 2013
Employee Stock Purchase Plan
As of the Effective Time
MAVENIR SYSTEMS, INC.
Schedule A-1
APPENDIX
The following definitions shall be in effect under the Plan:
1.1 Affiliate shall mean any parent or subsidiary corporation of the Company (as determined in accordance with Code Section 424), whether now existing or subsequently established.
1.2 Board shall mean the Companys Board of Directors.
1.3 Cash Earnings shall, unless otherwise specified by the Plan Administrator prior to the start of an offering period, mean (i) the regular base salary paid to such Participant by one or more Participating Companies during such individuals period of participation in one or more offering periods under the Plan; and (ii) any overtime payments, bonuses, commissions, profit-sharing distributions and other incentive-type payments received during such period. Cash Earnings shall be calculated before deduction of (A) any income or employment tax or other withholdings; or (B) any contributions made by the Participant to any Code Section 401(k) salary deferral plan or Code Section 125 cafeteria benefit program now or hereafter established by the Company or any Affiliate. Cash Earnings shall not include any contributions made on the Participants behalf by the Company or any Affiliate to any employee benefit or welfare plan now or hereafter established (other than Code Section 401(k) or Code Section 125 contributions deducted from such Cash Earnings). The Plan Administrator may make modifications to the definition of Cash Earnings for one or more offerings as decided appropriate.
1.4 Change in Control shall mean a change in ownership of the Company pursuant to any of the following transactions:
(a) the closing of a merger, consolidation or other reorganization approved by the Companys stockholders in which a change in ownership or control of the Company is effected through the acquisition by any person or group of persons comprising a group within the meaning of Rule 13d-5(b)(1) of the 1934 Act (other than the Company or a person that, prior to such transaction, directly or indirectly controls, is controlled by or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Companys outstanding securities (as measured in terms of the power to vote with respect to the election of Board members);
(b) the closing of a sale, transfer or other disposition of all or substantially all of the Companys assets;
(c) the closing of any transaction or series of related transactions pursuant to which any person or any group of persons comprising a group within the meaning of Rule 13d-5(b)(1) of the 1934 Act (other than the Company or a person that, prior to such transaction or series of related transactions, directly or indirectly controls, is controlled by or is under common control with, the Company) acquires directly or indirectly (whether as a result of a single acquisition or by reason of one or more acquisitions within the twelve (12)-month period ending with the most recent acquisition) beneficial ownership (within the meaning of Rule 13d-3 of the
Appendix-1
1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Companys securities (as measured in terms of the power to vote with respect to the election of Board members) outstanding immediately after the consummation of such transaction or series of related transactions, whether such transaction involves a direct issuance from the Company or the acquisition of outstanding securities held by one or more of the Companys existing stockholders; or
(d) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases by reason of one or more contested elections for Board membership to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination.
1.5 Code shall mean the Internal Revenue Code of 1986, as amended.
1.6 Common Stock shall mean the Companys common stock.
1.7 Company shall mean Mavenir Systems, Inc., a Delaware corporation, and any corporate successor to all or substantially all of the assets or voting stock of Mavenir Systems, Inc. that shall assume the Plan.
1.8 Effective Time shall mean May 20, 2014. Any Affiliate that becomes a Participating Company after such Effective Time shall have a subsequent Effective Time with respect to its employee-Participants that is determined in accordance with Section 5.3 of the Plan.
1.9 Eligible Employee shall mean any person who is employed by a Participating Company on a basis under which he or she is regularly expected to render more than twenty (20) hours of service per week for more than five (5) months per calendar year for earnings that are considered wages under Code Section 3401 (a); provided, however, that the Plan Administrator may, prior to the start of the applicable offering period, waive one or both of the twenty (20) hour and five (5) month service requirements.
1.10 Entry Date shall mean the date an Eligible Employee first commences participation in the offering period in effect under the Plan. The earliest Entry Date under the Plan shall be the Effective Time.
1.11 Fair Market Value per share of Common Stock on any relevant date shall be the closing price per share of Common Stock at the close of regular trading hours (i.e., before after-hours trading begins) on the date in question on the Stock Exchange serving as the primary market for the Common Stock, as such price is reported by the National Association of Securities Dealers (if primarily traded on the Nasdaq Global or Global Select Market) or as officially quoted in the composite tape of transactions on any other Stock Exchange on which the Common Stock is then primarily traded. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.
Appendix-2
1.12 1933 Act shall mean the Securities Act of 1933, as amended.
1.13 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
1.14 Participant shall mean any Eligible Employee of a Participating Company who is actively participating in the Plan.
1.15 Participating Company shall mean the Company and such Affiliate or Affiliates as may be authorized, in accordance with Section 5.3 of the Plan, to extend the benefits of the Plan to their Eligible Employees. The Participating Companies in the Plan as of the Effective Time are listed in attached Schedule A.
1.16 Plan shall mean the Mavenir Systems, Inc. 2013 Employee Stock Purchase Plan, as set forth in this document.
1.17 Plan Administrator means the particular entity, whether one or more Committees or the Board, which is authorized to administer the Plan with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under the Plan with respect to the persons under its jurisdiction.
1.18 Purchase Date shall mean the last business day of each Purchase Interval.
1.19 Purchase Interval shall mean each successive purchase interval within an offering period at the end of which there shall be purchased shares of Common Stock on behalf of each Participant.
1.20 Stock Exchange shall mean the Nasdaq Global Market, the Nasdaq Global Select Market, the Nasdaq Capital Market, the New York Stock Exchange or the NYSE MKT.
1.21 Trading Day shall mean a day on which the Stock Exchange on which the Common Stock is listed is open for trading.
Appendix-3
Exhibit 10.15
2012 Executive Bonus Plan (EBP)
Document Version: 1a
Company Confidential | Document Version: 1a | |
Draft Date: 28/11/2012 |
2012 Executive Bonus |
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For more information on Mavenir Systems, visit our Web site:
http://www.mavenir.com/
Every reasonable effort has been made to ensure the information and procedures detailed in this document are complete and accurate at the time of printing. However, information contained in this document is subject to change without notice.
© 2011 Mavenir Systems Inc.
Company Confidential |
Document Version: 1a | |
Print Date: 20/08/2012 |
2012 Executive Bonus |
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Contents
1 Introduction |
1 | |||
1.1 Document Goal |
1 | |||
1.2 Intended Audience |
1 | |||
1.3 Objective |
1 | |||
1.4 Plan Administration |
1 | |||
1.5 Glossary |
1 | |||
2 Eligibility |
2 | |||
2.1 EBP Ranges |
2 | |||
3 Plan Components |
4 | |||
3.1 Maximum EBP Potential |
4 | |||
3.2 Business Targets |
4 | |||
3.2.1 Pro-rated achievement and thresholds |
4 | |||
3.2.1 Graphs showing %s for pro rata achievement |
5 | |||
Graph to show % of MBP allocated for different Revenue Achievements |
5 | |||
Graph to show % of MBP allocated for different Operatign Income Achievements |
5 | |||
3.3 Individual performance - Management Objectives |
6 | |||
4 Payment Calculation |
7 | |||
4.1.1 Example 1 |
7 | |||
4.1.2 Example 2 |
7 | |||
4.1.3 Example 3 |
8 | |||
4.1.4 Example 4 |
8 | |||
5 Bonus Payments |
9 | |||
6 General Provisions |
10 | |||
6.1 Employment |
10 | |||
6.2 Tax & Social Security Liabilities |
10 | |||
6.3 Modifications, Suspension or Termination |
10 | |||
6.4 Terminations |
10 | |||
6.5 Events |
10 | |||
6.6 Other Agreements |
10 | |||
6.7 Administrative Guidelines |
10 |
Company Confidential |
i | |
Print Date: 20/08/2012 |
2012 Executive Bonus |
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Document History
Issue |
Date |
Change summary |
Owner | |||
1a |
14/05/2012 | First Version of 2012 Executive Bonus Plan | Carolyn Turner |
Changes since last issue
Document control |
||||||
Owner: |
Carolyn Turner | Approver: | Terry Hungle | |||
Owner title: |
VP Human Resources | Approver title: | CFO | |||
Doc file name: |
Mavenir Executive Bonus Plan.doc | |||||
Document date: |
14th May 2012 |
Company Confidential |
ii | |
Print Date: 20/08/2012 |
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1 | Introduction |
1.1 | Document Goal |
This document defines the details of the Mavenir Systems 2012 Bonus Plan (Plan) for Executives.
1.2 | Intended Audience |
All Executives whose contractual terms & conditions indicate that they are eligible to participate in the Plan.
1.3 | Objective |
The aim of the Plan is to link individual and company performance to remuneration in order to foster a high performance environment. And it encourages individuals to focus on what they can influence whilst keeping any payments aligned with the overall financial success of the Company.
1.4 | Plan Administration |
The Plan shall be administered by a bonus committee consisting CEO, CFO and VP Human Resources. The Committee in its sole discretion shall determine the calculation of payments awarded as described herein. All decisions of the committee are final and binding.
EBP payments are made on an annual basis according to the Companys and the Individuals performance. The fact EBP payments are paid in one year sets no precedent that they will be paid in subsequent years.
All EBP payments are discretionary and subject to Board approval. The Company reserves the right to alter this plan, including the level of any payout, at any time.
1.5 | Glossary |
Table 1 Document Glossary
Item |
Definition | |
CEO |
Chief Executive Officer of the Company | |
CFO |
Chief Financial Officer of the Company | |
EBP |
2012 Executive Bonus Plan | |
MBP |
Maximum Bonus Potential | |
IP |
Individual Performance against Management Objectives | |
Company |
Mavenir Systems, Inc. | |
HRO |
Human Resources Office | |
Participant |
A person eligible to participate in the Plan |
Company Confidential |
1 | |
Print Date: 20/08/2012 |
2012 Executive Bonus |
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2 | Eligibility |
Staff classified as Executives by the Board are eligible for the Plan. If so, eligibility will be defined in the contractual terms and conditions of the employee.
Eligibility in a previous calendar year sets no precedent for eligibility in any future calendar year.
The VP Human Resources is responsible for establishing lists of eligible employees and sending them an information letter detailing starting date and incentive range for each calendar year. All eligible executives in a given calendar year will be notified in writing.
The Plan is payable to all eligible employees who are (actively) on payroll and have not tendered their resignation prior to the date the payment is made for the reference year. Any employee leaving the Company before the payment date is not eligible for EBP payment for the previous reference year.
The EBP bonus is pro-rated over the eligibility period for complete months worked in the reference year, i.e. should an employee become EBP eligible on March 10th, the EBP would be calculated based on 9 months of annual EBP entitlement.
Sales and Business Development Executives are not eligible for the EBP. They are compensated via the Sales Incentive Plan (SIP)
Bonus schemes are mutually exclusive. No employee can be eligible for a full EBP and full SIP. However, dual EBP/SIP arrangements may be put in place for certain roles. In such instances the details will be confirmed in writing to the individual.
2.1 | EBP Ranges |
Maximum EBP amounts vary by position usually varying between 15% and 30% of annual base salary as determined by an individuals contractual terms and conditions. The Board are responsible for agreeing EBP ranges for executives.
The EBP range depends on role, organizational level of the employee and local market practices.
Company Confidential |
2 | |
Print Date: 20/08/2012 |
2012 Executive Bonus |
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3 | Plan Components |
The breakdown of the Plan components for executives are as follows:
| The eligible employees Maximum Bonus Potential amount (MBP) |
| Business Revenue Achievements (RA) and Operating Income Achievements (OIA) |
| Individual Performance (IP) against management objectives |
3.1 | Maximum EBP Potential |
For EBP payment calculations, Maximum Bonus Potential (MBP) in local currency is as specified in the eligible employees employment terms and conditions and any % based on the employees base compensation as of 31st December of the reference year.
3.2 | Business Targets |
Business targets and performance against Management objectives are used as factors in calculating the EBP payment. Components are
| Revenue Achievement (RA) |
| Operating Income Achievement (OIA) |
| Performance Against Management Objectives (IP) |
Table 2 Weightings of components and targets
Achievement |
Percentage of MBP | 2012 Target | ||||||
Annual revenue target |
50 | % | US$ | 90m | ||||
Operating Income |
30 | % | US$ | 3m | ||||
Management Objectives |
20 | % |
3.2.1 | Pro-rated achievement and thresholds |
Achievement of the Revenue target would result in 50% of the MBP being allocated for payment.
Achievement of the Operating Income target would result in 30% of the MBP being allocated for payment.
There are minimum thresholds for payment against revenue and operating income achievement.
| Minimum revenue threshold for payment = 90% of revenue target (i.e. $81M for 2012) |
| Minimum Operating income threshold for payment = $1 |
Achievement of minimum threshold pays 0.5 of the associated MBP %s , i.e. 25% for revenue and 15% for operating income. Payment increases linearly from these levels to 100% achievement of target.
Company Confidential |
4 | |
Print Date: 20/08/2012 |
2012 Executive Bonus |
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< 90% achievement of the revenue target will result in no payment for revenue achievement being allocated.
Achievement of <$1 operating income will result in no payment for operating income achievement being allocated.
Payment for between 100% and 120% achievement of the revenue target (i.e. for 2012 between US$90m and US$108m) is calculated on a linear pro rata basis from 100% subject to a maximum threshold of 200% for 120% of revenue achievement. A revenue achievement of >=120% (i.e. >= US$108m for 2012) would result in double the revenue % of MBP being allocated.(i.e. 100%)
Payment for >100% achievement of the operating income target is calculated on a linear pro rata basis from 100% subject to a maximum threshold of 200% achievement. A operating income achievement of >=200% (i.e >= US$6m for 2012) would result in double the operating income % of MBP being allocated. (i.e. 60%).
3.2.1 | Graphs showing %s for pro rata achievement |
Graph to show % of MBP allocated for different Revenue Achievements
Graph to show % of MBP allocated for different Operating Income Achievements
Company Confidential |
5 | |
Print Date: 20/08/2012 |
2012 Executive Bonus |
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3.3 | Individual performanceManagement Objectives |
At the beginning of each year between 2 and 4 objectives will be agreed in writing with each executive and approved by the Board. At the end of each financial year % achievement against these objectives (IP) will be judged by CEO and CFO.
The maximum individual achievement factor is 20%. The minimum achievement factor is 0%.
Company Confidential |
6 | |
Print Date: 20/08/2012 |
2012 Executive Bonus |
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4 | Payment Calculation |
For a given year an individuals annual EBP payment is calculated as follows:
EBP Payment = MBP * (RA%+OIA% +IP%)
Where:
MBP = Maximum Bonus Potential
RA% = Revenue achievement %
OIA% = Operating Income achievement %
IP% = % awarded for individual achievement of management objectives
The Revenue and Operating Income figures will be as published for end of year accounts.
Some examples calculations are given belowit may help to refer to the graphs shown in section 3.2.1.
Example 1
Table 3 Example 1
Criteria |
Figures | |
Maximum Bonus Potential (MBP) |
$10,000 | |
Revenue achieved (RA) |
US$99m (110% of target) | |
Revenue achievement % paid (RA%) |
75% | |
Operating Income achieved (OI) |
US$3.75m (125% of target) gives factor =1.25 | |
Operating Income achievement % (OI%) |
1.25*30%=37.5% | |
Individual Achievement against MBOs (IP) |
16% (80%of 20) | |
Bonus calculation |
10,000 * (75%+37.5%+ 16%) | |
Bonus paid |
US$12850 |
4.1.1 | Example 2 |
Table 4 Example 2
Criteria |
Figures | |
Maximum Bonus Potential (MBP) |
$10,000 | |
Revenue achieved (RA) |
US$81m (90% of target) | |
Revenue achievement % (RA%) |
0.5 * 50%= 25% | |
Operating Income achieved (OI) |
US$0m | |
Operating Income achievement % (OI%) |
0 | |
Individual Achievement against MBOs (IP) |
15% (75% of 20%) | |
Bonus calculation |
10,000 * (25%+0% + 15%) | |
Bonus paid |
US$4,000 |
Company Confidential |
7 | |
Print Date: 20/08/2012 |
2012 Executive Bonus |
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4.1.2 | Example 3 |
Table 5 Example 3
Criteria |
Figures | |
Maximum Bonus Potential (MBP) |
$10,000 | |
Revenue achieved (RA) |
US$85.5m (95% of target) | |
Revenue achievement % paid (RA%) |
37.5% | |
Operating Income achieved (OI) |
US$2.25m (75% of target) | |
Operating Income achievement % (OI%) |
26.25% | |
Individual Achievement (IP) |
10%(50% of 20%) | |
Bonus calculation |
10,000 * (37.5%+26.25%+10%) | |
Bonus paid |
US$7,375 |
4.1.3 | Example 4 |
Table 6 Example 4
Criteria |
Figures | |
Maximum Bonus Potential (MBP) |
$10,000 | |
Revenue achieved (RA) |
US$225m (250% of target) | |
Revenue achievement % paid (RA%) |
2 * 50% = 100% | |
Operating Income achieved (OI) |
US$6m (200% of target) | |
Operating Income achievement % (OI%) |
2 * 30% = 60% | |
Individual Achievement (IP) |
18% (90% of 20%) | |
Bonus calculation |
10,000 * (100%+60%+18%) | |
Bonus paid |
US$17,800 |
Company Confidential |
8 | |
Print Date: 20/08/2012 |
2012 Executive Bonus |
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5 | Bonus Payments |
EBP payments are made after the previous years financial results have been confirmed and the Board has approved the associated EBP payments. Payments are targeted to be made in the February payroll but this is not guaranteed.
All EBP payments are subject to Board approval. There is no entitlement to payout for pro-rated achievement.
Company Confidential |
9 | |
Print Date: 20/08/2012 |
2012 Executive Bonus |
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6 | General Provisions |
6.1 | Employment |
This Plan shall not be construed to create a contract of employment between the Company and the Plan Participant. This Plan does not replace or modify any components of the Plan Participants individual Employment Agreement with the Company.
6.2 | Tax & Social Security Liabilities |
Deductions for tax and social security liabilities will be calculated and withheld from all commissions, bonuses, and other incentives as appropriate to country and/or local requirements.
6.3 | Modifications, Suspension or Termination |
The CEO of Mavenir Systems reserves the right to modify, suspend, or terminate this plan, in writing, without advance notice to Plan Participants.
6.4 | Terminations |
When a Plan participants employment is terminated by the Company without cause after the end of the reference year but prior to the payment of EBP payments for the year any amount due to the Plan participants will be calculated and paid as per the terms of the Plan.
6.5 | Events |
Any event not previously described or anticipated by this plan will be reviewed by the CEO of Mavenir Systems.
6.6 | Other Agreements |
The Plan, including any amendment hereto, constitutes the entire understanding of the Company and the Plan Participant with respect to bonus incentives and cancels and supersedes all other agreements relating to such compensation.
6.7 | Administrative Guidelines |
If any provision of the Plan is found to be void or unenforceable by a Court of Law, it shall be amended or deleted and the remainder of the Plan shall remain in full force and effect.
Company Confidential |
10 | |
Print Date: 20/08/2012 |
Exhibit 10.16
Sales Commission Plan
2012
Document Version: 1.0
Final
Company Confidential Document Date: 08/02/2012 |
Sales Commission Plan |
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For more information on Mavenir Systems, visit our Web site:
http://www.mavenir.com/
Every reasonable effort has been made to ensure the information and procedures detailed in this document are complete and accurate at the time of printing. However, information contained in this document is subject to change without notice.
© 2011 Mavenir Systems Inc.
Company Confidential |
Document v1.0 Final | |
Document Date: 08/02/2012 |
Sales Commission Plan |
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Contents
1 Introduction |
6 | |||
1.1 Document Goal |
6 | |||
1.2 Objective |
6 | |||
1.3 Plan Administration |
6 | |||
1.4 Compensation |
6 | |||
1.4.1 Quota Carriers |
6 | |||
1.4.2 Sales Engineers |
7 | |||
1.5 Glossary |
7 | |||
2 Eligibility |
8 | |||
3 Terms & Conditions |
9 | |||
3.1 Account/Territory Assignment |
9 | |||
3.2 Base Incentive Compensation |
9 | |||
3.3 Bookings |
9 | |||
3.4 Exchange Rates |
9 | |||
4 Commission Calculation |
11 | |||
4.1 Booking |
11 | |||
4.1.1 Sales Booking |
11 | |||
4.1.2 Management of Plans & Commissions |
11 | |||
4.1.3 Commission Splits (other than channels) |
11 | |||
4.1.4 Order Representation |
11 | |||
4.2 Total Commission Calculation |
11 | |||
4.2.1 Commission Rates |
12 | |||
4.2.2 Support Contracts |
12 | |||
4.2.3 Commission for Referrals |
12 | |||
4.2.4 New Account Incentives |
12 | |||
4.2.5 Booking Base for Channel Sale |
13 | |||
4.2.6 Special Campaign Bonus (Kickers) |
13 | |||
4.3 Commission Payments |
14 | |||
4.3.1 Commission Escalators Above Quota |
14 | |||
4.3.2 Target Adjustment |
15 | |||
4.4 Cash Collection |
15 | |||
4.4.1 Methodology |
15 | |||
4.5 Sales Credits, Cancellations & Adjustments |
16 | |||
4.6 Overpayment |
16 | |||
4.7 Special Situations |
16 | |||
5 General Provisions |
17 | |||
5.1 Employment |
17 | |||
5.2 Tax & Similar Withholdings |
17 | |||
5.3 Severability; Governing Law |
17 | |||
5.4 Confidentiality |
17 | |||
5.5 Interpretation; Modifications, Suspension or Termination |
17 | |||
5.6 Transfers |
17 | |||
5.7 Terminations |
18 | |||
5.8 Payments |
18 | |||
5.9 Retirement, Disability and/or Death |
18 | |||
5.10 Entire Agreement |
18 | |||
5.11 No Individual Liability |
18 | |||
5.12 Assignment |
18 | |||
5.13 Administrative Guidelines |
19 | |||
6 Appendix A |
20 |
Company Confidential |
i | |
Document Date: 08/02/2012 |
Sales Commission Plan |
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Company Confidential |
ii | |
Document Date: 08/02/2012 |
Sales Commission Plan |
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Document History
Issue |
Date |
Change summary |
Owner | |||
1a |
16 Jan 2012 |
1st version of 2012 Plan |
Clive Innes | |||
1b |
30 Jan 2012 |
Final draft for review |
Clive Innes | |||
1c |
7 Feb 2012 |
Para 4.2.6 added, para 4.3.2 modified |
Clive Innes | |||
1.0 |
8 Feb 2012 |
Para 4.6 amended. Final |
Clive Innes |
Changes since last issue
Document control | ||||||
Owner: | Clive Innes | Approvers / Titles: | Pardeep Kohli, CEO | |||
Owner title: | Global Sales Operations Director | Terry Hungle, CFO | ||||
Review record: | On File | |||||
Doc file name: | 2012 Compensation Plan | |||||
Document date: | 08/02/2012 |
Company Confidential |
iii | |
Document Date: 08/02/2012 |
Sales Commission Plan |
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1 | Introduction |
1.1 | Document Goal |
The goal of the 2012 Mavenir Systems, Inc. Sales Compensation Plan (the Plan) is to ensure a highly motivated professional sales team with a compensation package aligned with Mavenirs evolving corporate objectives. Specifically, areas of emphasis for 2012 are:
| Orders |
| New Customer Acquisition |
This Plan shall apply from January 1, 2012 through December 31, 2012 (the Plan Period). The Plan being introduced this year is intended to support Mavenirs growth targets.
1.2 | Objective |
It is the objective of the plan to provide a sound basis by which sales personnel are motivated and rewarded for achieving and exceeding Product and Service sales goals.
This document describes the plan provisions under which each sales compensation plan will be administered.
1.3 | Plan Administration |
The Plan shall be administered by a sales compensation committee (the Committee) consisting of the CEO, the CFO. The CEO may determine in his or her sole discretion to add other sales executives to the Committee from time to time. The Committee, in its sole discretion, shall determine the calculations/categorizations described herein. All decisions of the Committee are and will be final and binding on all Participants.
1.4 | Compensation |
1.4.1 | Quota Carriers |
A Personal Compensation Plan (PCP) is provided to each Participant detailing their individual targets and showing the BCR paid for each type of sale.
The booking quota will be a full-year target for the calendar year 2012.
Once quota or target objectives are established, adjustments should not be necessary. However, the Company reserves the right to make changes (up or down) to individual quotas and targets due to changes in competition or other factors, at the sole discretion of the Committee. It is the responsibility of the EVP Sales and/or the Regional VP to ensure any such changes are communicated to the individual in writing via a revised PCP.
All PCPs must be signed by each Participant and his/her EVP Sales or Regional VP and the CFO and delivered to the HRO before incentive payments are made.
Company Confidential |
1 | |
Document Date: 08/02/2012 |
Sales Commission Plan |
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1.4.2 | Sales Engineers |
Incentive payments for sales engineer staff will be based on overall regional and/or global order achievements. Compensation will be split 80% for regional targets and 20% for the Mavenir global target. The respective Sales Engineer PCP will contain details of these targets and any variation from the standard terms.
1.5 | Glossary |
Table 1 Document Glossary
Item |
Definition | |
BCR | Base Commission Rate | |
BIC | Base Incentive Compensation | |
CEO | Chief Executive Officer of the Company | |
CFO | Chief Financial Officer of the Company | |
Company | Mavenir Systems, Inc. | |
EVP | Executive Vice President Americas and International | |
FY 12 | Financial Year - January 1st December 31st 2012 | |
GM | Gross Margin | |
HRO | Human Resources Office | |
Participant | A person eligible to participate in the Plan | |
PCP | Personal Compensation Plan | |
PQS | Price Quotation System | |
Regional VP Sales | VPs in EMEA, Americas,Asia Pac(inc. Australasia) | |
Sales Directors | Sales Directors | |
Sales Engineers | Sales Engineers | |
Salesforce.com | Web-based CRM tool used by Mavenir Sales | |
SCP or the Plan | 2012 Sales Compensation Plan | |
Xactly Express | Web-based commission tool used by Mavenir Sales Operations |
Company Confidential |
2 | |
Print Date: 14/12/2012 |
Sales Commission Plan |
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2 | Eligibility |
Positions eligible for participation in this Plan (Participants) will be quota carrying personnel and must be approved by the CEO of the Company. These will include account managers, senior account managers, sales engineers, sales directors, business development account managers, account vice president, Vice President Business Development/Channel Partner Management & Strategic Accounts, VP Sales, Regional VP Sales and the EVP Sales Americas and International. All eligible staff will be notified in writing and must have signed a PCP.
Company Confidential |
3 | |
Print Date: 14/12/2012 |
Sales Commission Plan |
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3 | Terms & Conditions |
3.1 | Account/Territory Assignment |
Participants are assigned accounts/territories by their line managers. These may be defined by geographic areas, specific customers, prospects, specific products and services, and/or combinations. All assignments are subject to change as sales resources and business conditions dictate. Out-of-territory/channel assignments will be made selectively and in writing.
3.2 | Base Incentive Compensation |
An individuals Base Incentive Compensation is defined as the total anticipated sum to be paid to a Participant assuming 100% attainment of all objectives/targets in a full year, excluding the base salary of such individual.
3.3 | Bookings |
Booking value, for purposes of administering this Plan, will be an amount equal to the list price, including all third party content, less customer discounts, trade-in credits, purchase credits, Distributor/Marketing Representative/Agent commission payments, withholding tax and performance bonds.
All of the following criteria must be met to constitute a Booking:
| A valid signed contract with executed terms. In the case where the contract is directly with a Distributor/Marketing Representative, a copy of the contractual agreement (translated to English) between the Representative and the ultimate end user must be submitted to the CFO. |
| A bona fide purchase order submitted in hard copy to the CFO. |
| A system configuration (PQS) or margin analysis with corresponding bid reference IDs submitted to the CFO. |
| A scheduled shipment date within twelve months of receipt of the purchase order. In those circumstances where a purchase order has a shipment date more than 12 months into the future, a Booking will be recognized in the period in which the shipment date falls within a 12 month window. |
A Booking will be recognized in the period in which all of the above criteria have been satisfied, as determined by the CFO, and not necessarily the period in which the customer purchase order was received.
3.4 | Exchange Rates |
In circumstances where an order from a customer requires conversion from one currency to another, the following rules will apply:
| Bookings will be converted from the contracted currency to US Dollars at the Company published rate prevailing in the month of the Booking. |
Company Confidential |
4 | |
Print Date: 14/12/2012 |
Sales Commission Plan |
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| Commissions will be calculated in US Dollars on the above mentioned Bookings consistent with the formula contained in the individuals PCP. |
| Participant variable earnings as defined in their contract of employment will be converted from their local currency to US Dollars using the Company published exchange rate or other rate as defined by the CFO. The calculated commissions in US Dollars will be converted back to the applicable local currency using the same exchange rate. This rate will remain unchanged for the duration of the Plan Period and will be quoted in the individuals PCP. |
Company Confidential |
5 | |
Print Date: 14/12/2012 |
Sales Commission Plan |
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4 | Commission Calculation |
4.1 | Booking |
4.1.1 | Sales Booking |
An order Booking will be applied against assigned full-year Booking quotas when the Participant has been instrumental in securing the order or sale for direct sales, as determined by the Committee in its sole discretion. For channel sales the order booking will be made for the territory and/or the relevant Participant(s) according to individual rules stated in their respective PCP.
4.1.2 | Management of Plans & Commissions |
The Company uses a web-based tool, Xactly Express, to manage the calculation of commissions and credits for each Participant. Each Participant is issued with their own account and can log-in at any time to review credits and commissions to date. RVPs can review both their own and their teams performance.
The credit and commission calculations rely on data from Salesforce.com. It is therefore vital that each Participant ensures the timely veracity of the Salesforce.com data pertaining to their territory and target accounts.
The Company reserves the right to audit and amend the Salesforce.com records.
4.1.3 | Commission Splits (other than channels) |
Provisions may be available for commission splits to accommodate those transactions which have not been specifically defined under these plan provisions. This type of non-standard commission structure will be addressed by the Committee on an as needed basis and defined before taking the order. The total credit is not to exceed 100% between Account Managers, unless specifically approved by the Committee.
4.1.4 | Order Representation |
All Participants are responsible for accurately representing all components of their orders including data records saved in Salesforce.com. Any participant who misrepresents or modifies the accuracy of an order will be subject to corrective action, up to and including termination of employment. In addition, any such participant will be liable to and will reimburse the Company for any compensation paid to the participant as a result of such misrepresentation.
4.2 | Total Commission Calculation |
Commissions will be calculated based on each Participants full-year bookings target.
The bookings target is the full-year sales quota in US Dollars.
BIC target is the incentive element of each Participants compensation package for the full-year and is earned in addition to each Participants base salary for achieving such Participants quota. The BIC target will be stated in the local currency as defined in the Participants contract of employment. For the purposes of calculating commissions the BIC target is converted to US Dollars at a rate defined in the Participants PCP.
Company Confidential |
6 | |
Print Date: 14/12/2012 |
Sales Commission Plan |
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The commissions to be earned by each Participant will be detailed in such Participants individual PCP.
In the event that a Participants BIC changes during the Plan Period then a new BCR will be calculated from a pro-rated BIC (x months/12 x old BIC + y months/12 x new BIC). This new BCR will be applied to all bookings for the Plan Period in question.
4.2.1 | Commission Rates |
Participants will earn commissions on all eligible bookings at a single BCR for all types of revenue and accounts.
Each Plan Participants standard BCR will be quoted on their PCP.
Participants will receive booking credits for all eligible bookings regardless of revenue and account type.
RVPs will earn commission and quota credits on all eligible bookings for their respective region.
For bookings that include greater than $200,000 of non-partner third party content, any commissions paid to qualifying Participants will be subject to the discretion of the Committee on a case by case basis.
4.2.2 | Support Contracts |
Participants will earn commissions on all support contracts at the same rate as defined in 3.2.1 above.
Multiyear support contracts will be treated in the following manner:
Firstly, to be recognised as multiyear contract the booking must be supported by a Purchase Order for the entire period and a signed and current agreement with terms and conditions.
Commissions will be calculated at 100% of the applicable commission rate prevailing at the time of the original booking against the whole Purchase Order value. The actual booking value, however, will be that which can be billed in the 12 months from the date of the original booking. The corresponding proportion of commissions will be released, as normal, in the next commission payment cycle.
The remaining Purchase Order value will be added to backlog quarter by quarter until the full value of the Purchase Order has been recognised. Likewise the corresponding proportion of commission will be released quarter by quarter. An illustration is included in Appendix A to this document.
4.2.3 | Commission for Referrals |
In the event that a Company approved partner is introduced to an opportunity that, under the terms of the agreement with the partner, triggers a referral payment to the Company, then at the discretion of the Company the Participant will be eligible for a further commission payment to be decided on a case by the Committee
4.2.4 | New Account Incentives |
The NAI is in place to recognize the importance to the Company of growing the account base by developing and delivering new customers to the existing base. To support this, the following special incentive will be part of the Plan in 2012. The incentive will be a flat
Company Confidential |
7 | |
Print Date: 14/12/2012 |
Sales Commission Plan |
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quarterly payout for new customer accounts that have been secured in the applicable quarter. The incentive amount will be based on the initial order dollar value for commercial deployment (trials do not count towards this bonus, trials do count towards quota relief). The payouts will be a flat lump sum to the account manager, sales director and sales executives directly involved in securing the account. The amounts are as follows:
Table 2 Amounts
AM Payout |
Executive | |||
$2,500 |
$ | 1,000 | ||
SE Prime |
SE Support | |||
$1,500 |
$ | 1,000 |
To be eligible for this payout, the account, or a subsidiary of the account must not have previously ordered commercial deployment equipment from Mavenir Systems. In addition, both a signed Master Supply Agreement as well as a binding, approved purchase order must be in place. In the event of the order being cancelled or reduced in size any compensation owed on the order will be cancelled (or, as applicable, reduced in size). In addition, any compensation previously paid for the order will either be deducted (in full or in part, as appropriate) from future amounts otherwise payable to the employee or will be required to be paid back (in full or in part, as appropriate) to the Company by the employee. The NAI does not apply to trial systems or paid lab systems. The minimum order value to be eligible for a NAI is $500,000.
While the NAI does apply to new OEM channel accounts, it does not apply to new accounts brought into Mavenir Systems through existing OEM channels. In addition, OEM accounts that subsequently become direct Company accounts, and direct customer accounts that are subsequently transferred to OEMs, are not eligible.
4.2.5 | Booking Base for Channel Sale |
Non-territory specific Participants such as channel managers may be commissioned as a Participant regardless of the territory in which their channel sales are achieved. Channel Manager PCPs will provide individual details of applicable territories. All territory-specific Participants will be eligible for 100% commission on any channel sales made in their territory.
Existing Channels are defined as: Ericsson, Alcatel Lucent, Huawei, HP, Nokia Siemens and IBM.
Regarding regional booking and revenue credit for all established channels, the booking and revenue credit will be realised in the territory where the services and/or solution are delivered.
4.2.6 | Special Campaign Bonus (Kickers) |
Plan Participants are eligible for Special Campaign Bonuses (Kickers). From time to time the Committee may define a special ad hoc campaign i.e. new product sales, competitor replacement or similar where a single one-off payment is offered for fulfilling a specific objective.
In every case, the conditions and value of this kicker will be communicated in writing to the Plan Participant(s) and will be paid in full in the next commission payment following satisfactory completion. These one-off payments are not normally subject to the cash collection conditions described in 4.4 above.
Company Confidential |
8 | |
Print Date: 14/12/2012 |
Sales Commission Plan |
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If the kicker value is variable and/or related to the booking value and/or applicable to more than a single booking then the cash collection conditions will be applied as described in 4.4 above.
4.3 | Commission Payments |
Commissions will be paid as follows: 50% of the commissions will be paid against the booking of the order by the Company and 50% of the commissions will be paid against cash collection for all Participants
All payments under this Plan will be made within 61 days after the end of the quarter in which the payment is earned according to the foregoing schedule. For example, if a $100,000 order is booked by the Company on February 1, 2012, 50% of the commission for that order will be paid on or before May 31, 2012. If the cash is collected for that order on July 31, 2012, then the remaining 50% of the commission for that order will be paid on or before November 30, 2012.
To be eligible to be paid a commission for an order, a participant must continue to be an employee of the company or one of its subsidiaries on the day the order is received by the Company. If a participants employment has ended for any reason prior to the day the order is received, the participant will not be paid any of the commissions on the order.
In the event the participants employment with the company has been terminated for any reason, the participant will be responsible for repayment of unearned commission and bonus due to sales credits, cancellations or other adjustments. Such repayments will be deducted from the last payment due to the participant and any overage will be secured by a promissory note payable to the company.
The booking commission is paid as a percentage of the total booking. The Plan has four levels of compensation as provided in the PCP. Up to 100% of quota, from 101% to 125% of quota, from 126% to 150% of quota and above 151% of quota. Alternative levels can be specified on an individual basis and stated in the PCP. Each level has a different percentage. The percentage of a specific order will be calculated according to the accumulated total booking from the beginning of this Plan Period.
4.3.1 | Commission Escalators Above Quota |
| A 2 X escalator will apply from 101% to 125% of annual booking quota; |
| A 3 X escalator will apply from 126% to 150% of annual booking quota; |
| A 4 X escalator will apply for attainment greater than 150%of annual booking quota. |
| Example: a Participant has an annual quota of $4m, a BIC of $100,000 and a BCR of 2.5%. |
| For achieving the annual quota within the Plan period the Participant will receive $4m x 2.5% = $100,000 compensation. |
| For every $ booked over $4m total (100% of quota) to $5m total (125% of quota) within the Plan period then the commission rate applied to this increment will be 2 x BCR or, in this example, 5%. |
Company Confidential |
9 | |
Print Date: 14/12/2012 |
Sales Commission Plan |
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| For every $ booked over $5m total (125% of quota) to $6m total (150% of quota) within the Plan period then the commission rate applied to this increment will be 3 x BCR or, in this example, 7.5%. |
| For every $ booked greater than $6m total (150% of quota) within the Plan period then the commission rate applied to this increment will be 4 x BCR or, in this example, 10%. |
4.3.2 | Target Adjustment |
Due to market conditions and other factors beyond its control, the Company acknowledges that there is reasonable uncertainty regarding the timing and value of orders for its products and services, and thus the level of possible achievement of critical objectives during the Plan Period is quite dynamic. Based on these factors, the Company at its sole discretion reserves the right to make adjustments to each Participants Targets to ensure equitability and affordability. The Committee may review a Participants Plan Period Targets at any point in a Plan Period. Following such a review, any changes to Targets, BCR or BIC will require the Participant to sign a revised PCP.
4.4 | Cash Collection |
Vital to the Companys future is the efficient collection of cash. The sales role is a key factor in determining the Companys ability to invoice and collect cash, principally in the areas relating to payment terms and achievable milestones during contract negotiation.
On acceptance of a booking, full quota credit will be assigned to the appropriate Participant. All commissions for the booking will be paid as outlined in section 4.3. The commission calculation application, Incent Express, details the amount of commission withheld so each Participant can review via their Incent account. Cash collection releases, however, are credited manually each quarter and are recorded in a personal statement issued to each participant each quarter.
The deadline for cash collection receipts to initiate cash collection release payments for any given quarter is the last day of the quarter.
4.4.1 | Methodology |
This Section 4.4.1 will apply to all bookings occurring on or after January 1, 2009.
Each quarter a rolling cash collected statement will be produced for all bookings from the start date above. This statement will list each Participants bookings, the amount of commission held by booking and the amount of cash collected by booking and the amount of commission released. The difference between current quarter released and the previous quarter released will be paid in the next commission payment round.
From time to time any outstanding receivables will be reviewed and action taken as follows:
i. | should the receivables not be overdue then the Company can choose to grant full payment of the outstanding commission or extend further the period of retention. |
ii. | If the receivables are significantly overdue then the Company reserves the right to void any further commission payments. This will be considered on a case by case basis. |
iii. | If, at any point after taking the booking, the Company declares the receivable to be a bad debt then the Company reserves the right to recover all commissions from the Participant attributable to the value of that bad debt including the portion relating to the booking itself. |
Company Confidential |
10 | |
Print Date: 14/12/2012 |
Sales Commission Plan |
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In all cases the final decision will be at the discretion of the Committee.
4.5 | Sales Credits, Cancellations & Adjustments |
In the event of cancellation or adjustment of a customer order (including returns, credit memos, order or backlog cancellations), the appropriate reduction will be made to the Participants current period compensation calculation. In the event all of the total reduction due to the Company cannot be offset against the Participants compensation for the current period, the Company will carry forward the outstanding balance and offset such amount against the Participants future incentive compensation. In the event the Participant has terminated employment from the Company, the Plan Participant will be responsible for repayment of unearned commission and bonus due to sales credits, cancellations or adjustments. Such repayments will be deducted from the last payment due to the Participant and any overage will be secured by a Promissory Note payable to the Company.
4.6 | Overpayment |
In the event an overpayment is made, the amount due and owing to the Company will be returned by the employee within sixty (60) days of the end of the quarter that the overpayment is determined, only subject to further extension based upon a decision by the CEO or the CFO. In the event the Participants employment with the Company has been terminated for any reason, the individual will be responsible for repayment of any unearned commission and/or bonus due to the overpayment. Such repayments will be deducted from the last payment due to the Participant and any overage will be secured by a Promissory Note payable to the Company.
4.7 | Special Situations |
Special situations may arise with respect to large opportunities such that a number of significant contributors resulted in the order being booked. These contributors become essential and helpful to the sales person on certain opportunities. In certain circumstances, as deemed appropriate by the Committee, a commission adjustment may apply to these discussed account opportunities. If necessary, this commission adjustment may be retrospective. These special situations may involve splits, or joint ventures, third party business development resources, and/or major corporate relation derived activities.
Where multiple Participants become eligible for commission for a given booking the Company reserves the right to place a cap on the total commission paid. Such situations will be considered on a case by case basis and the determination of the split of the capped commission will be solely at the discretion of the Committee.
Additionally, full commission rates are payable for Bookings made in accordance with Company standard terms, conditions and discounts. Extraordinary costs, terms, conditions and discounts may require lower commission rates. However, discounts within the normal authority of Sales management will not generally fall into this category. The determination of whether lower commission rates are applicable is at the sole discretion of the Committee.
Company Confidential |
11 | |
Print Date: 14/12/2012 |
Sales Commission Plan |
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5 | General Provisions |
5.1 | Employment |
This Plan shall not be construed to create a contract of employment between the Company and the Participant. This Plan does not replace or modify any components of the Participants individual employment agreement with the Company.
5.2 | Tax & Similar Withholdings |
Deductions for tax and other applicable withholdings will be calculated and withheld from all commissions, bonuses, and other incentives as appropriate to country and/or local requirements.
5.3 | Severability; Governing Law |
If any sentence, paragraph or clause of this Plan, or combination of the same, is in violation of any applicable law or regulation, or is unenforceable or void for any reason, such sentence, paragraph, clause or combinations of the same shall be modified to the extent necessary to accomplish the intention on such provision without violating applicable law or regulation and the remainder of the Agreement shall remain binding and in full force and effect upon the Participants.
This plan will be governed by the laws of the state of Texas without regard for conflicts of law principles.
5.4 | Confidentiality |
Each participant will at all times treat the terms of the plan as confidential information of the Company in accordance with the confidential information agreement between the Participant and the Company.
5.5 | Interpretation; Modifications, Suspension or Termination |
Notwithstanding anything to the contrary herein, the Committee has final approval on all payments hereunder and may make changes, in its sole discretion, as it deems appropriate to ensure fair and equitable application of the terms of this Plan to the interests of the Company as well as the interests of the Participants. Any situation which will require a deviation from the terms of the Plan (or an addition or subtraction to the Plan) must be approved by the Committee in its sole discretion. Any event not previously described or anticipated by this Plan will be reviewed by the Committee. All decisions of the Committee are and will be final and binding on the Participants.
The Committee reserves the right to modify, suspend, or terminate this plan, at any time without advance notice to the Participants in its sole and absolute discretion.
5.6 | Transfers |
In the event that a customer account is transferred from one sales person to another, the transition plan which will be applied to all bookings, revenue and cash credit for purposes of commission calculations will be according to the decision of the RVP with the Committee. This decision will be made on a case by case basis and confirmed to the Participants in writing.
Company Confidential |
12 | |
Print Date: 14/12/2012 |
Sales Commission Plan |
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5.7 | Terminations |
To be eligible to be paid a commission for an order, a participant must continue to be an employee of the company or one of its subsidiaries on the day the order is placed. If a participants employment has ended for any reason prior to the day the order is received, the participant will not be paid any commission for the order. Commissions will only be paid on orders received up to and including a participants last day of employment.
Commission held subject to cash collection will be released for all cash collected to the end of the fiscal quarter immediately following the Participants last day of employment. Any commission arising will be paid in the normal commission payment cycle after the end of the quarter in question. Thereafter the Participant is not entitled to any further payment of commission held.
5.8 | Payments |
All commissions will be paid in accordance with Section 4.
5.9 | Retirement, Disability and/or Death |
In the event that a Participant should retire, become disabled, or die during the Plan year, the Participant (or the designated beneficiary) will be eligible to receive incentive compensation as follows:
| all commission earned but not yet paid will be settled in the normal cycle upon the employees retirement, disability or death; |
| the Participant (or designated beneficiary) will receive credit for any business derived from an assigned customer within 90 days from the date of the sales employees retirement, disability or death. |
5.10 | Entire Agreement |
The Plan and the PCP, including any amendments hereto or thereto, (i) constitute the entire understanding of the Company and each Participant with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, between Mavenir and each Plan Participant with respect to the subject matter hereof and (ii) are not intended to confer upon any other person any rights or remedies hereunder.
5.11 | No Individual Liability |
No member of the Board of Directors or any Officer of the Company shall be liable for any determination, decision or action made in good faith with respect to the Plan or any payment under the Plan.
5.12 | Assignment |
No Participant may assign or transfer such Participants interest under the Plan.
Company Confidential |
13 | |
Print Date: 14/12/2012 |
Sales Commission Plan |
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5.13 | Administrative Guidelines |
If any provision of the Plan is found to be void or unenforceable by a Court of Law, it shall be amended or deleted and the remainder of the Plan shall remain in full force and effect.
Note: All plans and changes to these plans must be documented and kept on file with HRO.
Company Confidential |
14 | |
Print Date: 14/12/2012 |
Sales Commission Plan |
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6 | Appendix A |
An illustration of a multi-year support booking and how it would be handled with respect to booking value, backlog and release of commission earned.
Mar 12 | May 12 | Jun 12 | Aug 12 | Sep 12 | Nov 12 | Dec 12 | Feb 12 | Mar 13 | May 13 | Jun 13 | Aug 13 | Sep 13 | Nov 13 | Dec 13 | Feb 13 | Mar 14 | May 14 | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PO received | 100,000 | 1 | 100,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Booking value | 50,000 | 12,500 | 12,500 | 12,500 | 100,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Backlog | 50,000 | 50,000 | 50,000 | 50,000 | 12,500 | 37,500 | 25,000 | 12,500 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commission paid | 500 | 125 | 125 | 125 | 50,000 | 125 | 1,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Invoicing | 12,500 | 12,500 | 12,500 | 12,500 | 12,500 | 12,500 | 12,500 | 100,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash received | 12,500 | 12,500 | 12,500 | 12,500 | 12,500 | 12,500 | 12,500 | 12,500 | 12,500 | 100,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash collection release | 125 | 125 | 125 | 125 | 125 | 125 | 125 | 125 | 1,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commission | 500 | 250 | 250 | 250 | 250 | 125 | 125 | 125 | 125 | 2,000 |
Assumes a 2 year support booking with invoicing quarterly in advance. All in USD. Assumes a base commission rate of 2% applicable to current FY; no accelerators apply.
Company Confidential |
15 | |
Print Date: 14/12/2012 |
Exhibit 10.17.1
MAVENIR SYSTEMS, INC.
OMNIBUS AMENDMENT TO STOCK OPTION AGREEMENTS
THIS OMNIBUS AMENDMENT TO STOCK OPTION AGREEMENTS (this Amendment) dated as of , 2013, amends those one or more certain stock options (the Options) granted on to (Optionee) under the terms of the Mavenir Systems, Inc. (the Company) 2005 Stock Plan (the Plan), which Options were evidenced by those one or more certain Stock Option Agreements (the Option Agreements) by and between the Company and Optionee. All capitalized terms in this Amendment, to the extent not otherwise defined herein, shall have the meanings assigned to them in the Plan.
RECITALS:
WHEREAS, to provide for acceleration of vesting under the Options in the event that Optionee is terminated without Cause (as defined in the Addendum) or leaves for Good Reason (as defined in the Addendum) within six (6) months following a Change of Control (as defined in the Addendum), the parties hereto desire to amend the Option Agreements to incorporate the provisions of the Addendum to Stock Option Agreement (the Addendum) attached hereto as Annex I into the Option Agreements.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises and certain other good and valuable consideration, the receipt and sufficiency of which is hereby expressly acknowledged, the parties hereto agree as follows:
1. Addendum to Option Agreement. The provisions of the Addendum are hereby added to each of the Option Agreements below the applicable language describing the vesting schedule for each such Option Agreement.
2. Miscellaneous Provisions.
(a) Effectiveness of Amendment. This Amendment shall be effective upon execution by the Company and Optionee.
(b) Full Force and Effect. Except as set forth in this Amendment, all the terms and provisions of the Option Agreements shall continue in full force and effect.
(c) Governing Law. This Amendment shall be governed by and construed under the laws of the State of Texas, without giving effect to conflict of laws principles.
(d) Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall be one and the same document. Counterparts may delivered in person, by facsimile, or by electronic delivery format.
[Signature page follows]
IN WITNESS WHEREOF, this Omnibus Amendment to Stock Option Agreements has been executed by the parties hereto, effective as of the date first set forth above.
COMPANY: | ||
MAVENIR SYSTEMS, INC. | ||
By: |
| |
Name: |
| |
Title: |
| |
OPTIONEE: | ||
SIGNATURE PAGE TO OMNIBUS AMENDMENT TO STOCK OPTION AGREEMENTS
ANNEX I
ADDENDUM TO STOCK OPTION AGREEMENT
6 Months Accelerated Vesting
In the event an Optionee (i) is terminated by the Company involuntarily without Cause or Optionee resigns with Good Reason (ii) upon or during the twelve (12) month period after the effective date of such Change of Control ((i) and (ii) together, a Double Trigger Termination and the termination date being the Termination Date), the shares at the time under the Option that would vest based solely on the passage of time (rather than vesting based on performance conditions) and that would vest within the six (6) month period following the Termination Date shall vest effective as of the Termination Date. Notwithstanding the foregoing, in the event that such Double Trigger Termination occurs prior to the first anniversary of the vesting commencement date under the Option, the Option will provide (A) that, notwithstanding any cliff vesting provision, such Optionees normal vesting schedule will revert to a monthly vesting schedule so that the shares under the Option will vest in successive, equal amounts over the entire vesting schedule in order to give such Optionee vesting credit from the vesting commencement date through the Termination Date and (B) for accelerated vesting such that the shares under the Option that would vest based solely on the passage of time (rather than vesting based on performance conditions) and that would vest within the six (6) month period following the Termination Date shall vest effective as of the Termination Date.
1. Change of Control shall mean a change in ownership or control of the Company effected through any of the following transactions:
(A) the closing of a merger, consolidation or other reorganization approved by the Companys stockholders in which a change in ownership or control of the Company is effected through the acquisition by any person or group of persons comprising a group within the meaning of Rule 13d-5(b)(1) of the Securities Exchange Act of 1934, as amended (the Exchange Act) (other than the Company or a person that, prior to such transaction, directly or indirectly controls, is controlled by or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Companys outstanding securities (as measured in terms of the power to vote with respect to the election of Board members);
(B) the closing of a sale, transfer or other disposition of all or substantially all of the Companys assets;
(C) the closing of any transaction or series of related transactions pursuant to which any person or any group of persons comprising a group within the meaning of Rule 13d-5(b)(1) of the Exchange Act (other than the Company or a person that, prior to such transaction or series of related transactions, directly or indirectly controls, is controlled by or is under common control with, the Company) acquires directly or indirectly (whether as a result of a
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single acquisition or by reason of one or more acquisitions within the twelve (12)-month period ending with the most recent acquisition) beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Companys securities (as measured in terms of the power to vote with respect to the election of Board members) outstanding immediately after the consummation of such transaction or series of related transactions, whether such transaction involves a direct issuance from the Company or the acquisition of outstanding securities held by one or more of the Companys existing stockholders; or
(D) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases by reason of one or more contested elections for Board membership to be comprised of individuals who either (x) have been Board members continuously since the beginning of such period or (y) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (x) who were still in office at the time the Board approved such election or nomination.
Notwithstanding the foregoing, solely with respect to any Award that is subject to Section 409A of the Internal Revenue Code and payable upon a Change of Control, the term Change of Control shall mean an event described in one or more of the foregoing provisions of this definition, but only if it also constitutes a change of control event within the meaning of Treas. Reg. §1.409A-3(i)(5).
2. Cause shall mean: (A) Optionees continued failure to substantially perform the principal duties and obligations of Optionees position with the Company (other than any such failure resulting from incapacity due to physical or mental illness), which failure is not remedied within ten (10) business days after receipt of written notice from the Company; (B) any willful act of personal dishonesty, fraud or misrepresentation taken by Optionee which was intended to result in substantial gain or personal enrichment of Optionee at the expense of the Company; (C) Optionees willful violation of a federal or state law or regulation applicable to the Companys business which violation was or is reasonably likely to be materially and demonstrably injurious to the Company; (D) Optionees conviction of a felony or a plea of nolo contendere to a felony charge under the laws of the United States or any State; or (E) Optionees willful breach of the terms of Optionees proprietary information agreement (or similar confidentiality agreement) with the Company or of the restrictive covenants of any employment agreement between Optionee and the Company. For the purposes of this Option, no act or failure to act shall be considered willful unless done or omitted to be done in bad faith and without reasonable belief that the act or omission was in or not opposed to the best interests of the Company. The Board of Directors (excluding Optionee if Optionee is at such time a member of the Board) shall make all determinations relating to termination, including without limitation any determination regarding Cause, pursuant to this Option.
3. Good Reason shall mean the occurrence of any of the following without Optionees consent: (A) a material reduction of Optionees duties or responsibilities, relative to Optionees duties or responsibilities as in effect immediately prior to such reduction; (B) except as provided below, a material reduction in the Optionees base salary as in effect immediately
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prior to such reduction; (C) except as provided below, a material reduction by the Company in the kind or level of employee benefits, including bonuses, to which the Optionee was entitled immediately prior to such reduction, with the result that Optionees overall benefits package is materially reduced; or (D) the relocation of Optionee to a facility or a location more than fifty (50) miles from Optionees then present location. The Board of Directors, or a duly authorized committee thereof, may decrease the base salary and/or employee benefits, including bonuses, in the event that the Board or such committee determines that financial exigencies require such decrease, provided that the compensation of all executives of the Company is also reduced at the same time in a substantially commensurate manner.
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Exhibit 10.17.2
MAVENIR SYSTEMS, INC.
OMNIBUS AMENDMENT TO STOCK OPTION AGREEMENTS
THIS OMNIBUS AMENDMENT TO STOCK OPTION AGREEMENTS (this Amendment) dated as of , 2013, amends those one or more certain stock options (the Options) granted on to (Optionee) under the terms of the Mavenir Systems, Inc. (the Company) 2005 Stock Plan (the Plan), which Options were evidenced by those one or more certain Stock Option Agreements (the Option Agreements) by and between the Company and Optionee. All capitalized terms in this Amendment, to the extent not otherwise defined herein, shall have the meanings assigned to them in the Plan.
RECITALS:
WHEREAS, to provide for acceleration of vesting under the Options in the event that Optionee is terminated without Cause (as defined in the Addendum) or leaves for Good Reason (as defined in the Addendum) within twelve (12) months following a Change of Control (as defined in the Addendum), the parties hereto desire to amend the Option Agreements to incorporate the provisions of the Addendum to Stock Option Agreement (the Addendum) attached hereto as Annex I into the Option Agreements.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises and certain other good and valuable consideration, the receipt and sufficiency of which is hereby expressly acknowledged, the parties hereto agree as follows:
1. Addendum to Option Agreement. The provisions of the Addendum are hereby added to each of the Option Agreements below the applicable language describing the vesting schedule for each such Option Agreement.
2. Miscellaneous Provisions.
(a) Effectiveness of Amendment. This Amendment shall be effective upon execution by the Company and Optionee.
(b) Full Force and Effect. Except as set forth in this Amendment, all the terms and provisions of the Option Agreements shall continue in full force and effect.
(c) Governing Law. This Amendment shall be governed by and construed under the laws of the State of Texas, without giving effect to conflict of laws principles.
(d) Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall be one and the same document. Counterparts may delivered in person, by facsimile, or by electronic delivery format.
[Signature page follows]
IN WITNESS WHEREOF, this Omnibus Amendment to Stock Option Agreements has been executed by the parties hereto, effective as of the date first set forth above.
COMPANY: | ||
MAVENIR SYSTEMS, INC. | ||
By: | ||
Name: |
||
Title: |
||
OPTIONEE: | ||
SIGNATURE PAGE TO OMNIBUS AMENDMENT TO STOCK OPTION AGREEMENTS
ANNEX I
ADDENDUM TO STOCK OPTION AGREEMENT
12 Months Accelerated Vesting
In the event Optionee (i) is terminated by the Company involuntarily without Cause or Optionee resigns with Good Reason (ii) upon or during the twelve (12) month period after the effective date of such Change of Control ((i) and (ii) together, a Double Trigger Termination and the termination date being the Termination Date), the shares at the time under the Option that would vest based solely on the passage of time (rather than vesting based on performance conditions) and that would vest within the twelve (12) month period following the Termination Date shall vest effective as of the Termination Date.
1. Change of Control shall mean a change in ownership or control of the Company effected through any of the following transactions:
(A) the closing of a merger, consolidation or other reorganization approved by the Companys stockholders in which a change in ownership or control of the Company is effected through the acquisition by any person or group of persons comprising a group within the meaning of Rule 13d-5(b)(1) of the Securities Exchange Act of 1934, as amended (the Exchange Act) (other than the Company or a person that, prior to such transaction, directly or indirectly controls, is controlled by or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Companys outstanding securities (as measured in terms of the power to vote with respect to the election of Board members);
(B) the closing of a sale, transfer or other disposition of all or substantially all of the Companys assets;
(C) the closing of any transaction or series of related transactions pursuant to which any person or any group of persons comprising a group within the meaning of Rule 13d-5(b)(1) of the Exchange Act (other than the Company or a person that, prior to such transaction or series of related transactions, directly or indirectly controls, is controlled by or is under common control with, the Company) acquires directly or indirectly (whether as a result of a single acquisition or by reason of one or more acquisitions within the twelve (12)-month period ending with the most recent acquisition) beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Companys securities (as measured in terms of the power to vote with respect to the election of Board members) outstanding immediately after the consummation of such transaction or series of related transactions, whether such transaction involves a direct issuance from the Company or the acquisition of outstanding securities held by one or more of the Companys existing stockholders; or
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(D) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases by reason of one or more contested elections for Board membership to be comprised of individuals who either (x) have been Board members continuously since the beginning of such period or (y) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (x) who were still in office at the time the Board approved such election or nomination.
Notwithstanding the foregoing, solely with respect to any Award that is subject to Section 409A of the Internal Revenue Code and payable upon a Change of Control, the term Change of Control shall mean an event described in one or more of the foregoing provisions of this definition, but only if it also constitutes a change of control event within the meaning of Treas. Reg. §1.409A-3(i)(5).
2. Cause shall mean: (A) Optionees continued failure to substantially perform the principal duties and obligations of Optionees position with the Company (other than any such failure resulting from incapacity due to physical or mental illness), which failure is not remedied within ten (10) business days after receipt of written notice from the Company; (B) any willful act of personal dishonesty, fraud or misrepresentation taken by Optionee which was intended to result in substantial gain or personal enrichment of Optionee at the expense of the Company; (C) Optionees willful violation of a federal or state law or regulation applicable to the Companys business which violation was or is reasonably likely to be materially and demonstrably injurious to the Company; (D) Optionees conviction of a felony or a plea of nolo contendere to a felony charge under the laws of the United States or any State; or (E) Optionees willful breach of the terms of Optionees proprietary information agreement (or similar confidentiality agreement) with the Company or of the restrictive covenants of any employment agreement between Optionee and the Company. For the purposes of this Option, no act or failure to act shall be considered willful unless done or omitted to be done in bad faith and without reasonable belief that the act or omission was in or not opposed to the best interests of the Company. The Board of Directors (excluding Optionee if Optionee is at such time a member of the Board) shall make all determinations relating to termination, including without limitation any determination regarding Cause, pursuant to this Option.
3. Good Reason shall mean the occurrence of any of the following without Optionees consent: (A) a material reduction of Optionees duties or responsibilities, relative to Optionees duties or responsibilities as in effect immediately prior to such reduction; (B) except as provided below, a material reduction in the Optionees base salary as in effect immediately prior to such reduction; (C) except as provided below, a material reduction by the Company in the kind or level of employee benefits, including bonuses, to which the Optionee was entitled immediately prior to such reduction, with the result that Optionees overall benefits package is materially reduced; or (D) the relocation of Optionee to a facility or a location more than fifty (50) miles from Optionees then present location. The Board of Directors, or a duly authorized committee thereof, may decrease the base salary and/or employee benefits, including bonuses, in the event that the Board or such committee determines that financial exigencies require such decrease, provided that the compensation of all executives of the Company is also reduced at the same time in a substantially commensurate manner.
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Exhibit 10.18
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the Agreement) is made as of the 18th day of December, 2012 between Mavenir Systems, Inc., a Delaware corporation (the Company), and Pardeep Kohli, an individual resident of the State of Texas (Executive).
1. Employment; Duties; Full Time Employment. The Company hereby employs Executive, and Executive hereby accepts employment, as President and Chief Executive Officer of the Company. In such capacity, Executive shall perform such executive duties and exercise such powers for the Company and its subsidiaries as the Board of Directors of the Company may assign to or vest in Executive from time to time and, as such, from and after the date hereof shall report directly to and shall be subject to the direction of the Companys Board of Directors. Executive shall be nominated to serve on the Board of Directors during his employment by the Company. Executive covenants and agrees that, at all times during Executives employment, Executive shall devote Executives full business time and efforts to Executives duties as an employee of the Company and that Executive will not, directly or indirectly, engage or participate in any other business or professional activities during Executives employment, other than activities for non-profit organizations that do not interfere or conflict with Executives obligations hereunder and such other activities approved by the Board of Directors of the Company from time to time.
2. At Will Employment. The Company agrees to employ Executive, and Executive agrees to serve the Company, on an at will basis, which means that either the Company or Executive may terminate Executives employment with the Company at any time and for any or no reason, as provided in and subject to Sections 7 and 8 below.
3. Compensation. During Executives employment, the Company shall pay to Executive the following compensation:
(a) Base Salary. The Company shall pay Executive a base salary (Base Salary) at the rate of $31,666.67 per month (annualized to $380,000), less applicable withholding taxes, payable in accordance with the Companys normal payroll practices. The Base Salary may be increased by the Board of Directors, or a duly authorized committee thereof, in its sole discretion. In addition, the Board of Directors, or a duly authorized committee thereof, may decrease the Base Salary in the event that the Board or such committee determines that financial exigencies require such decrease, provided that the compensation of all executives of the Company is also reduced at the same time in a substantially commensurate manner. Any increase or decrease in Base Salary (together with the then existing Base Salary) shall serve as the Base Salary for future employment under this Agreement.
(b) Equity Compensation. Executive may be granted stock options, stock appreciation rights, restricted stock units, restricted stock or other stock- or performance-based
equity awards (each, an Award), as determined from time to time in the discretion of the Companys Board of Directors or a duly authorized committee thereof, under the Companys Amended and Restated 2005 Stock Plan or any other equity incentive plan that may be adopted by the Companys Board of Directors (each, an Equity Plan). The terms of any such Award, including the vesting schedule, if any, will be set forth in an award agreement (an Award Agreement) in the form determined by the Companys Board of Directors or a duly authorized committee thereof. The vesting schedule of any such Awards shall be subject to additional acceleration as described in Section 7 of this Agreement, unless otherwise set forth in the applicable Award Agreement.
4. Other Compensation and Benefits. In addition to the compensation specified in Section 3, the Company shall provide the following to Executive:
(a) Incentive Plan Participation. Executive shall be eligible to participate in the Companys management incentive plan, executive bonus plan or any other such incentive plan (each, a Performance Incentive Plan) to the extent determined by the Companys Board of Directors or a duly authorized committee thereof; provided however, that any such participation and payments shall be subject in all respects to the terms of such Performance Incentive Plan and the meeting of performance metrics as determined by the Companys Board of Directors or a duly authorized committee thereof.
(b) Benefits. During Executives employment, Executive shall be entitled to (i) vacation in accordance with the Companys vacation policy, to be taken in accordance with such policy, (ii) holidays and sick leave as made generally available to employees of the Company, and (iii) subject to eligibility therefor, the right to participate in any profit sharing plan, retirement plan, 401(k) plan, group life insurance plan and/or other insurance plan or medical expense plan or dental expense plan maintained by the Company for its senior executives generally and, if applicable, their family members.
(c) Directors and Officers Insurance. Executive shall be covered by the Companys Directors and Officers Insurance to the extent that the Company currently has or in the future obtains such insurance, for so long as Executive remains an executive officer or director of the Company.
5. Business Expenses. The Company shall reimburse Executive for all reasonable and necessary business and travel expenses incurred by Executive in the performance of Executives duties under this Agreement. The determination of reasonable and necessary shall be made in the sole discretion of the Board. Such expenses shall be reimbursed in accordance with the Companys business expense guidelines, limits and procedures and upon presentation of proper expense vouchers or receipts; provided however, in no event shall reimbursement of an eligible expense hereunder be made later than the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit.
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6. Termination on Death or Disability. Executives employment will terminate automatically upon Executives death or, upon thirty (30) days prior written notice from the Company, in the event of Disability. For purposes of this Section 6, Disability means that Executive, at the time notice is given, has been unable to substantially perform Executives duties under this Agreement for not less than sixty (60) work days within a six (6) consecutive month period as a result of Executives incapacity due to a physical or mental condition and, if reasonable accommodation is required by law, after reasonable accommodation. Upon any termination for death or Disability, Executive shall be entitled to receive (i) Executives Base Salary through the effective date of termination, (ii) the right to continue health care benefits under COBRA, at Executives cost, to the extent required and available by law, (iii) the right to exercise stock options, if any, subject to and in accordance with the terms of the respective options, (iv) reimbursement of all expenses for which Executive is entitled to be reimbursed pursuant to Section 5 above, but for which Executive has not yet been reimbursed, and (v) no other severance or benefits of any kind.
7. Involuntary Termination Without Cause; Resignation for Good Reason.
(a) Effect of Termination. The Company shall be entitled to terminate Executive with or without notice and with or without Cause (as defined below) and Executive shall be entitled to resign with or without Good Reason (as defined below), in each case at any time; provided, that if Executive is terminated by the Company involuntarily without Cause or Executive resigns with Good Reason, then Executive shall be entitled to receive:
(i) the Base Salary through the date of termination and any compensation earned and unpaid under a Performance Incentive Plan through the date of termination, except and only to the extent that any such Performance Incentive Plan specifically provides otherwise;
(ii) accelerated vesting with respect to all Awards under an Equity Plan held by Executive, such that all Awards under an Equity Plan that would vest based solely on the passage of time (rather than vesting based on performance conditions) and that would vest within the twelve (12) month period following the date of such termination shall vest effective as of the date of termination, except and only to the extent that any Award Agreement specifically provides otherwise;
(iii) continuing severance pay at a rate equal to 100% of Executives Base Salary, as then in effect (less applicable withholding taxes), for a period of six (6) months from the date of such termination, to be paid periodically in accordance with the Companys normal payroll practices (subject to Sections 7(c) and 7(d));
(iv) reimbursement of the health and dental care continuation premiums for Executive and Executives dependents incurred by Executive to effect continuation of health and dental insurance coverage for Executive and Executives dependents on the same basis as active employees, for a period of six (6) months from the date of such termination, to the extent that Executive is eligible for and elects continuation coverage under COBRA; provided however, in no event shall reimbursement of an eligible expense hereunder be made later than the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit;
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(v) reimbursement of all expenses for which Executive is entitled to be reimbursed pursuant to Section 5 above, but for which Executive has not yet been reimbursed; provided however, in no event shall reimbursement of an eligible expense hereunder be made later than the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit; and
(vi) no other severance or benefits of any kind.
(b) Effect of Termination following Change of Control. The Company shall be entitled to terminate Executive with or without notice and with or without Cause (as defined below) and Executive shall be entitled to resign with or without Good Reason (as defined below), in each case at any time; provided, that if Executive is terminated by the Company involuntarily without Cause or Executive resigns with Good Reason upon or after a Change of Control, then Executive shall be entitled to receive:
(i) the Base Salary through the date of termination and any compensation earned and unpaid under a Performance Incentive Plan through the date of termination, except and only to the extent that any such Performance Incentive Plan specifically provides otherwise;
(ii) accelerated vesting with respect to all Awards under an Equity Plan held by Executive, such that all Awards shall vest in full effective as of the date of such termination, except and only to the extent that any Award Agreement specifically provides otherwise and provided, that if a particular Award Agreement has a definition of Change of Control or Change in Control that differs from the definition of Change of Control set forth in this Agreement, such other definition shall apply solely with respect to acceleration of vesting of such Award pursuant to this Section 7(b)(ii);
(iii) continuing severance pay at a rate equal to 100% of Executives Base Salary, as then in effect (less applicable withholding taxes), for a period of six (6) months from the date of such termination, to be paid periodically in accordance with the Companys normal payroll practices (subject to Sections 7(c) and 7(d));
(iv) reimbursement of the health and dental care continuation premiums for Executive and Executives dependents incurred by Executive to effect continuation of health and dental insurance coverage for Executive and Executives dependents on the same basis as active employees, for a period of six (6) months from the date of such termination, to the extent that Executive is eligible for and elects continuation coverage under COBRA; provided however, in no event shall reimbursement of an eligible expense hereunder be made later than the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit;
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(v) reimbursement of all expenses for which Executive is entitled to be reimbursed pursuant to Section 5 above, but for which Executive has not yet been reimbursed; provided however, in no event shall reimbursement of an eligible expense hereunder be made later than the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit; and
(vi) no other severance or benefits of any kind.
(c) Section 409A. Notwithstanding anything to the contrary in this Agreement, no severance pay or benefits to be paid or provided to Executive, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended (the Code), and the final regulations and any guidance promulgated thereunder (Section 409A) (together, the Deferred Payments) will be paid or otherwise provided until Executive has a separation from service within the meaning of Section 409A. Similarly, no severance payable to Executive, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable until Executive has a separation from service within the meaning of Section 409A. If Executive is a specified employee within the meaning of Section 409A at the time of Executives termination (other than due to death), then the Deferred Payments that are payable within the first six (6) months following Executives separation from service will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executives separation from service. All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following Executives separation from service but prior to the six (6) month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executives death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A. References in this Agreement to termination of Executives employment shall mean termination of Executives employment with the Company and all entities required to be aggregated with the Company and treated as one employer under Section 414(b) or (c) of the Code under circumstances that give rise to a separation from service within the meaning given to that term under Section 409A.
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(d) Conditions Precedent. Any severance payments (other than payment of Base Salary pursuant to Section 7), vesting and/or benefits contemplated by Section 7 above are conditional on Executive (i) continuing to comply with all of the provisions of Section 9 below and the terms of the Confidentiality Agreement (as defined below), and (ii) signing and not revoking a separation agreement and release of claims providing for a release of all claims relating to Executives employment and/or this Agreement against the Company or its successor, its subsidiaries and parent company and their respective directors, officers and stockholders, excluding claims for payments and/or benefits the Company is required to pay to Executive that have not been made or delivered in accordance with terms of a written agreement between the Company and Executive or as required by law, in a form satisfactory to the Company, its parent company or its successor (the Release); provided that such Release becomes effective and irrevocable no later than sixty (60) days following the termination date or such earlier date required by the Release (such deadline, the Release Deadline). If the Release does not become effective by the Release Deadline, Executive will forfeit any rights to severance or benefits under this Section 7 or elsewhere in this Agreement. Any severance payments or other benefits under this Agreement that would be considered Deferred Payments (as defined in Section 7(c)) will be paid on, or, in the case of installments, will not commence until, the sixtieth (60th) day following Executives separation from service, or, if later, such time as required by Section 7(c). Except as required by Section 7(c), any installment payments that would have been made to Executive during the sixty (60) day period immediately following Executives separation from service but for the preceding sentence will be paid to Executive on the sixtieth (60th) day following Executives separation from service and the remaining payments will be made as provided in this Agreement, unless subject to the 6-month payment delay described herein. Any severance payments under this Agreement that would not be considered Deferred Payments will be paid on, or, in the case of installments, will not commence until, the first payroll date that occurs on or after the date the Release becomes effective and any installment payments that would have been made to Executive during the period prior to the date the Release becomes effective following Executives separation from service but for the preceding sentence will be paid to Executive on the first payroll date that occurs on or after the date the Release becomes effective.
(e) Definitions.
(i) Cause. For purposes of this Agreement, Cause shall mean: (A) Executives continued failure to substantially perform the principal duties and obligations of Executives position with the Company (other than any such failure resulting from incapacity due to physical or mental illness), which failure is not remedied within ten (10) business days after receipt of written notice from the Company; (B) any willful act of personal dishonesty, fraud or misrepresentation taken by Executive which was intended to result in substantial gain or personal enrichment of Executive at the expense of the Company; (C) Executives willful violation of a federal or state law or regulation applicable to the Companys business which
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violation was or is reasonably likely to be materially and demonstrably injurious to the Company; (D) Executives conviction of a felony or a plea of nolo contendere to a felony charge under the laws of the United States or any State; or (E) Executives willful breach of the terms of Section 9 of this Agreement or Executives Confidentiality Agreement. For the purposes of this subsection 7(e)(i), no act or failure to act shall be considered willful unless done or omitted to be done in bad faith and without reasonable belief that the act or omission was in or not opposed to the best interests of the Company. The Board of Directors (excluding Executive if Executive is at such time a member of the Board) shall make all determinations relating to termination, including without limitation any determination regarding Cause, pursuant to Sections 7(e)(i) and (iii).
(ii) Change of Control. For the purposes of this Agreement, Change of Control shall mean a change in ownership or control of the Company effected through any of the following transactions:
(A) the closing of a merger, consolidation or other reorganization approved by the Companys stockholders in which a change in ownership or control of the Company is effected through the acquisition by any person or group of persons comprising a group within the meaning of Rule 13d-5(b)(1) of the Securities Exchange Act of 1934, as amended (the Exchange Act) (other than the Company or a person that, prior to such transaction, directly or indirectly controls, is controlled by or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Companys outstanding securities (as measured in terms of the power to vote with respect to the election of Board members);
(B) the closing of a sale, transfer or other disposition of all or substantially all of the Companys assets;
(C) the closing of any transaction or series of related transactions pursuant to which any person or any group of persons comprising a group within the meaning of Rule 13d-5(b)(1) of the Exchange Act (other than the Company or a person that, prior to such transaction or series of related transactions, directly or indirectly controls, is controlled by or is under common control with, the Company) acquires directly or indirectly (whether as a result of a single acquisition or by reason of one or more acquisitions within the twelve (12)-month period ending with the most recent acquisition) beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Companys securities (as measured in terms of the power to vote with respect to the election of Board members) outstanding immediately after the consummation of such transaction or series of related transactions, whether such transaction
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involves a direct issuance from the Company or the acquisition of outstanding securities held by one or more of the Companys existing stockholders; or
(D) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases by reason of one or more contested elections for Board membership to be comprised of individuals who either (x) have been Board members continuously since the beginning of such period or (y) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (x) who were still in office at the time the Board approved such election or nomination.
Notwithstanding the foregoing, solely with respect to any Award that is subject to Section 409A and payable upon a Change of Control, the term Change of Control shall mean an event described in one or more of the foregoing provisions of this definition, but only if it also constitutes a change of control event within the meaning of Treas. Reg. §1.409A-3(i)(5).
(iii) Good Reason. For purposes of this Agreement, Good Reason shall mean the occurrence of any of the following without Executives consent: (A) a material reduction of Executives duties or responsibilities, relative to Executives duties or responsibilities as in effect immediately prior to such reduction; (B) except as provided in Section 3(a), a material reduction in the Executives Base Salary as in effect immediately prior to such reduction; (C) except as provided in Section 3(a), a material reduction by the Company in the kind or level of employee benefits, including bonuses, to which the Executive was entitled immediately prior to such reduction, with the result that Executives overall benefits package is materially reduced; or (D) the relocation of Executive to a facility or a location more than fifty (50) miles from Executives then present location.
(f) Amendment to Option Agreements. In the event that Executive is terminated without Cause or resigns for Good Reason, whether prior to or following a Change of Control, at the Executives request, the Company will execute an amendment (the Option Amendment) to each option to purchase capital stock of the Company held by Executive on the date of such termination (collectively, the Stock Options) that will extend the period that Executive has to exercise each such stock option to the date that is one year following the earliest to occur of (i) the consummation of a Change of Control; (ii) the consummation of an initial public offering of the Companys equity securities under the Securities Act of 1933, as amended (an IPO); or (iii) in the event that an IPO or a Change of Control has been consummated prior to the date of such termination, the date of such termination without Cause or resignation for Good Reason. The Option Amendment will also provide that, notwithstanding the foregoing, in the event that during such one-year period Executive is unable to sell any securities issuable upon exercise of the Stock Options because of lock-up, market stand-off or similar restrictions on selling such securities that are applicable to Executive, or Executive refrains from selling such securities at the request of an underwriter of the Company, such one-year period shall be extended for a
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period of time equal to the period the Executive is unable to sell such securities because of lock-up, market stand-off or similar restrictions or Executive refrains from selling such securities at the request of an underwriter of the Company. The Option Amendment will be in a form reasonably satisfactory to the Company and Executive. In no event shall any such extension exceed the original term of any such Stock Option, unless at the time of such Option Amendment the exercise price of the applicable Stock Options is equal to or exceeds the fair market value of the underlying common stock of the Company, and such Option Amendment otherwise complies with the requirement of the applicable Section 409A regulations.
8. Involuntary Termination for Cause; Resignation without Good Reason.
(a) Effectiveness. Notwithstanding any other provision of this Agreement, the Company may terminate Executives employment at any time for Cause, and Executive may at any time voluntarily resign without Good Reason. Termination for Cause shall be effective on the date the Company gives notice to Executive of such termination in accordance with this Agreement unless otherwise agreed by the parties. Resignation by Executive without Good Reason shall be effective on the date Executive gives notice to the Company of such resignation in accordance with this Agreement unless otherwise agreed by the parties.
(b) Effect of Termination. In the case of the Companys termination of Executives employment for Cause or Executives resignation from Executives employment without Good Reason, Executive shall be entitled to receive (i) Base Salary through the effective date of termination of employment, (ii) any benefits payable in connection with such a termination under any standard severance program of the Company then in effect and published in writing, (iii) the right to continue health care benefits under COBRA, at Executives cost, to the extent required and available by law, (iv) the right to exercise any stock options subject to and in accordance with the terms of the respective options, (v) reimbursement of all expenses for which Executive is entitled to be reimbursed pursuant to Section 5 above, but for which Executive has not yet been reimbursed, and (vi) no other severance or benefits of any kind.
9. Company Matters; Restrictive Covenants.
(a) Proprietary Information and Inventions. Executive has signed an Employee Proprietary Information Agreement (Confidentiality Agreement) in the form required to be executed by each employee of the Company.
(b) Confidential Information.
(i) Company Information. Executive agrees at all times during Executives employment and thereafter to hold in strictest confidence, and not to use, except for the benefit of the Company, any of the Companys Confidential Information; or disclose to any person, firm or corporation any of the Companys Confidential Information except as authorized in writing by the Companys Board of Directors or, if expressly authorized by the Companys management, pursuant to a written non-disclosure agreement that sufficiently protects the Confidential Information. Executive understands that Confidential Information means any
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information that relates to the Companys actual or anticipated business or research and development, technical data, trade secrets or know-how, including, but not limited to, research, product plans or other information regarding the Companys products or services and markets therefor, customer lists and customers (including, but not limited to, the Companys customers on whom Executive called or with whom Executive became acquainted during the term of Executives employment), software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances or other business information. Executive further understands that Confidential Information does not include any of the foregoing items that is or becomes publicly known through no wrongful act or omission of Executive or of others who were under confidentiality obligations as to the item or items involved or improvements or new versions thereof.
(ii) Provision of Confidential Information. Prior to the execution of this Agreement the Company has provided, and following the execution of this Agreement, the Company agrees to continue to provide, Executive with Confidential Information regarding the Company that enabled and will continue to enable Executive to optimize the performance of Executives duties to the Company.
(c) Ventures. If, during Executives employment, Executive is engaged in or associated with the planning or implementing of any project, program or venture involving the Company and any third parties, all rights in such project, program or venture shall belong to the Company (or the third party, to the extent provided in any agreement between the Company and the third party). Except as formally approved by the Company, Executive shall not be entitled to any interest in such project, program or venture or to any commission, finders fee or other compensation in connection therewith other than the salary or other compensation to be paid to Executive as provided in this Agreement.
(d) Non-Solicitation.
(i) Non-Solicitation of Employees. During employment and for a period of twelve (12) months following the end of employment, Executive will not (directly or indirectly, on behalf of Executive or any third party) hire any employee, contractor or consultant of the Company or solicit, induce, recruit or encourage any of the Companys employees, contractors or consultants to leave their employment or terminate their relationship with the Company.
(ii) Non-Solicitation of Clients and Prospective Clients. During employment and for a period of twelve (12) months following the end of employment for any reason, Executive agrees to abide by the following restrictions:
(A) Executive shall not interfere with existing client relationships of the Company (i.e., clients for which at least one project has been conducted in the last two years), and shall not solicit or attempt to take away any business of the Company that is either under way or about to begin at the termination of Executives employment.
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(B) Executive shall not interfere or compete in any way with any proposal efforts of the Company already in progress (that is, a proposal sent to or being then currently developed for a specific client or clients, or contemplated to be submitted to a specific client or clients by the Company within twelve (12) months) at the end of employment.
(C) Executive shall not make use of any of Executives personal relationships or business contacts developed during the course of employment with the Company and utilized for business purposes within the two (2) years prior to termination, for the benefit of Executive or another, in a competitive manner with respect to the business of the Company.
(e) Covenant Not to Compete.
(i) Executive agrees that during the course of Executives employment and for a period of twelve (12) months immediately following the termination of Executives relationship with the Company for any reason, whether with or without Cause, at the option either of the Company or Executive, with or without notice, Executive will not, either directly or indirectly, (i) serve as an advisor, agent, consultant, director, employee, officer, partner, proprietor or otherwise of, (ii) have any ownership interest in (except for passive ownership of one percent (1%) or less of any entity whose securities have been registered under the Securities Act of 1933, as amended, or Section 12 of the Exchange Act) or (iii) participate in the organization, financing, operation, management or control of, any business in competition with the Companys business as conducted by the Company during the course of Executives employment with the Company. The foregoing covenant shall cover Executives activities in every part of the Territory. Territory shall mean (i) all counties in the State of Texas, (ii) all other states of the United States of America and (iii) all other countries of the world; provided that, with respect to clauses (ii) and (iii), the Company maintains non-trivial operations, facilities, or customers in such geographic area prior to the date of the termination of Executives relationship with the Company.
(ii) Executive acknowledges that Executives fulfillment of the obligations contained in this Agreement and the Confidentiality Agreement, including, but not limited to, Executives obligation neither to use, except for the benefit of the Company, or to disclose the Companys Confidential Information and Executives obligation not to compete contained in subsection 9(e)(i) above is necessary to protect the Companys Confidential Information and to preserve the Companys value and goodwill. Executive further acknowledges the time, geographic and scope limitations of Executives obligations under subsection 9(e)(i) above are reasonable, especially in light of the Companys desire to protect its Confidential Information, and that Executive will not be precluded from gainful employment if Executive is obligated not to compete with the Company during the period and within the Territory as described above.
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(iii) The covenants contained in subsection 9(e)(i) above shall be construed as a series of separate covenants, one for each city, county and state of any geographic area in the Territory. Except for geographic coverage, each such separate covenant shall be deemed identical in terms to the covenant contained in subsection 9(e)(i). If, in any judicial proceeding, a court refuses to enforce any of such separate covenants (or any part thereof), then such unenforceable covenant (or such part) shall be eliminated from this Agreement to the extent necessary to permit the remaining separate covenants (or portions thereof) to be enforced. In the event the provisions of subsection 9(e)(i) are deemed to exceed the time, geographic or scope limitations permitted by applicable law, then such provisions shall be reformed to the maximum time, geographic or scope limitations, as the case may be, then permitted by such law.
(f) Acknowledgements. Executive acknowledges that the non-solicitation and non-competition covenants Executive is providing in this Agreement are reasonable and necessary to protect the legitimate interests of the Company. Executive further acknowledges that Executives non-disclosure promises contained in this Agreement and the Confidentiality Agreement are in exchange for the Companys promises contained in this Agreement and the Confidentiality Agreement to provide Executive with confidential information and trade secrets of the Company.
(g) Other Obligations Upon Termination. On termination of Executives employment, Executive shall:
(i) immediately (and with contemporaneous effect) resign any directorships, offices or other positions that Executive may hold in the Company or any of its affiliates;
(ii) immediately deliver to the Company all documents, books, materials, records, correspondence, papers and information (on whatever media and wherever located) relating to the business or affairs of the Company or its business contacts, any keys and any other property of the Company, which is in Executives possession or under Executives control;
(iii) irretrievably delete any information relating to the business of the Company stored on any magnetic or optical disk or memory and all matter derived from such sources which is in Executives possession or under Executives control outside the premises of the Company; and
(iv) provide the Company with a signed statement that Executive has complied fully with Executives obligations under this Section 9(g).
(h) Notification of New Employer. In the event that Executive leaves the employ of the Company, Executive grants consent to notification by the Company to Executives new employer about Executives rights and obligations under this Agreement and the Confidentiality Agreement.
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10. Tax. If any portion of the severance benefits, or any other payment under this Agreement, or under any other agreement with, or plan of the Company, including but not limited to restricted stock, stock options, warrants and other long-term incentives (in the aggregate, Total Payments) would be subject to the excise tax imposed by Section 4999 of the Code, as amended, or any similar tax that may hereafter be imposed (such excise tax together with any similar tax are hereinafter collectively referred to as the Excise Tax), then Executive shall be entitled to receive from the Company an additional payment (the Gross-up Payment) (i.e., in addition to such other severance benefits, or any other payments under this Agreement) in an amount such that the net amount of Total Payments and Gross-up Payment retained by the Executive, after the calculation and deduction of all Excise Tax on the Total Payments and all federal, state and local income tax, employment tax and Excise Tax on the Gross-up Payment, shall be equal to the Total Payments. Notwithstanding any other provision of this Section 10 to the contrary, to the extent permitted under Section 409A of the Code or any regulatory guidance issued thereunder by the Internal Revenue Service, the term Excise Tax, as defined above in this Section 10, shall include any interest or penalties imposed with respect to such Excise Tax. Subject to Section 7(c), any Gross-up Payment shall be made as soon as practicable after Executive remits the related taxes, but in all events the Gross-up Payment shall be made within thirty (30) days after Executive remits the related taxes to the taxing authority.
11. Clawback of Incentive Compensation. Executive acknowledges that to the extent required by applicable law or any written Company policy that may, in the discretion of the Board of Directors or a duly authorized committee thereof, be adopted to implement the requirements of such law (including without limitation Section 304 of the Sarbanes Oxley Act of 2002 and Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010), compensation paid to Executive shall be subject to any required clawback, forfeiture, recoupment or similar requirement. Executive agrees that the terms and conditions of this Agreement shall be deemed automatically amended as may be necessary from time to time to ensure compliance by Executive, the Company and this Agreement with such policies or applicable law. No clawback of compensation under any policy adopted as contemplated in this Section 11 shall give rise to Executives right to resign for Good Reason.
12. Miscellaneous.
(a) Withholding Taxes. The Company may withhold from all salary, bonus or other benefits payable under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling.
(b) Entire Agreement; Binding Effect. This Agreement and the Confidentiality Agreement (together with any Equity Plan and any Award Agreement issued as contemplated by Section 3(b) above) set forth the entire understanding between the parties as to the subject matter of this Agreement and supersede all prior agreements, commitments, representations, writings and discussions between them; and neither of the parties shall be bound by any obligations, conditions, warranties or representations with respect to the subject matter of this Agreement, the Confidentiality Agreement, any Equity Plan or any Award Agreement except as expressly
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provided herein or therein or as duly set forth on or subsequent to the date hereof in a written instrument signed by the proper and fully authorized representative of the party to be bound hereby. This Agreement is binding on Executive and on the Company and Executives and the Companys successors and assigns (whether by assignment, by operation of law or otherwise); provided that neither this Agreement nor any rights or obligations hereunder may be assigned by Executive or the Company without the prior written consent of the other party (except that the Company shall be entitled to assign this Agreement in connection with a Change of Control).
(c) Absence of Conflict. Executive represents and warrants that Executives employment by the Company as described herein will not conflict with and will not be constrained by any prior employment or consulting agreement or relationship. Executive further agrees that during Executives employment with the Company, Executive will not improperly use or disclose any proprietary information or trade secrets of any former or concurrent employer or other person or entity and that Executive will not bring onto the premises of the Company any unpublished document or proprietary information belonging to any such employer, person or entity unless consented to in writing by such employer, person or entity.
(d) Arbitration.
(i) General. In consideration of Executives service to the Company, its promise to arbitrate all employment related disputes and Executives receipt of the compensation and other benefits paid to Executive by the Company, at present and in the future, Executive agrees that any and all controversies, claims, or disputes (with the sole exception of those disputes that may arise from the Confidentiality Agreement, which shall be resolved in accordance with the dispute resolution procedures set forth therein) with anyone (including the Company and any employee, officer, director, stockholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from Executives service to the Company under this Agreement or otherwise or the termination of Executives service with the Company, including any breach of this Agreement, shall be subject to binding arbitration under the Arbitration Rules set forth by the American Arbitration Association for the resolution of employment disputes (the Rules) and pursuant to Texas law. Disputes which Executive agrees to arbitrate, and thereby agrees to waive any right to a trial by jury, include any statutory claims under state or federal law. Executive further understands that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive.
(ii) Procedure. Any arbitration will be administered by the American Arbitration Association (AAA) and a neutral arbitrator will be selected in a manner consistent with its National Rules for the Resolution of Employment Disputes. The arbitration proceedings will be conducted in Richardson, Texas, and will allow for discovery according to the rules set forth in the National Rules for the Resolution of Employment Disputes. The arbitrator shall have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. The arbitrator shall issue a written decision including findings of fact and conclusions of law on the merits of its award. The arbitrator shall have the power to award any
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remedies, including attorneys fees and costs, available under applicable law. The Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that Executive shall pay the first $125 of any filing and/or administration fees associated with any arbitration that Executive initiates. The arbitrator shall administer and conduct any arbitration in a manner consistent with the AAAs National Rules for the Resolution of Employment Disputes.
(iii) Remedy. Arbitration shall be the sole, exclusive and final remedy for any dispute (with the sole exception of those disputes that may arise from the Confidentiality Agreement and Section 9 of this Agreement) between Executive and the Company. Accordingly, except as otherwise provided herein, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator shall not order or require the Company to adopt a policy not otherwise required by law, which the Company has not adopted.
(iv) Availability of Injunctive Relief. Any party may also petition the court for injunctive relief where either party alleges or claims a violation of this Agreement or the Confidentiality Agreement, including but not limited to a breach of the restrictive covenants in Section 9 above. In the event that either party seeks injunctive relief, no bond shall be required and the prevailing party shall be entitled to recover reasonable costs and attorneys fees.
(e) Voluntary Nature of Agreement; Legal Rights. Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. Executive acknowledges that Executive has had the opportunity to consult with an attorney regarding the provisions of this Agreement and has either obtained such advice of counsel or knowingly waived the opportunity to seek such advice. Executive has carefully read this Agreement and has asked any questions needed for Executive to understand the terms, consequences and binding effect of this Agreement and fully understand it, including that Executive is waiving Executives right to a jury trial.
(f) Waivers. No party shall be deemed to have waived any right, power or privilege under this Agreement or any provisions hereof unless such waiver shall have been duly executed in writing and acknowledged by the party to be charged with such waiver. The failure of any party at any time to insist on performance of any of the provisions of this Agreement shall in no way be construed to be a waiver of such provisions, nor in any way to affect the validity of this Agreement or any part hereof. No waiver of any breach of this Agreement shall be held to be a waiver of any other subsequent breach.
(g) Reformation. If any sentence, paragraph or clause of this Agreement, or combination of the same, is in violation of any applicable law or regulation, or is unenforceable or void for any reason, such sentence, paragraph, clause or combinations of same shall be modified to the extent necessary to accomplish the intention on such provision without violating applicable law or regulation. Notwithstanding, the remainder of the Agreement shall remain binding upon the parties.
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(h) Notices. All notices, approvals, consents, requests or demands required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficiently given on the earlier of (i) actual receipt, (ii) three business days after being deposited in U.S. mail, registered or certified, postage prepaid, (iii) upon delivery, if delivered by hand (iv) one business day after transmission, if sent by facsimile (confirmation received) or (v) one business day after the business day of deposit with a reputable overnight courier for next business day delivery, freight prepaid. Notice in each case shall be addressed to the party entitled to receive such notice at the following address (or other such addresses as the parties may subsequently designate):
The Company:
Mavenir Systems, Inc.
1700 International Parkway
Suite 200
Richardson, Texas 75081
Fax: 469.916.4397
Attn: Terry Hungle
with a copy to:
(which shall not alone constitute notice)
Alan Bickerstaff
Andrews Kurth LLP
111 Congress Ave., Suite 1700
Austin, TX 78701
Fax: 512.542.5219
Executive:
Pardeep Kohli
3105 Kennison Ct.
Plano, TX 75093
(i) Governing Law; Jurisdiction. This Agreement shall be governed by, and construed and enforced in accordance with, the employment laws and other laws of the State of Texas as they apply to contracts entered into and wholly to be performed therein by residents thereof. In addition, each party hereto irrevocably and unconditionally agrees that any suit, action or other legal proceeding arising out of this Agreement may be brought only in a state or federal court within Texas.
(j) Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable of void, this Agreement shall continue in full force and effect without said provision.
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(k) Effect of Headings. The Section and subsection headings contained herein are for convenience only and shall not affect the construction hereof.
(l) Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, and all such counterparts shall constitute but one instrument.
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IN WITNESS WHEREOF the parties have set their hands and seals as of the year and date first written above.
Mavenir Systems, Inc. | ||
By: | /s/ Terry Hungle | |
Name: | Terry Hungle | |
Title: | Chief Financial Officer | |
Executive: | ||
/s/ Pardeep Kohli | ||
Pardeep Kohli |
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Exhibit 10.19
MAVENIR SYSTEMS, INC.
2005 STOCK PLAN
STOCK OPTION AGREEMENT
(Early Exercise)
Unless otherwise defined herein, the terms defined in the 2005 Stock Plan shall have the same defined meanings in this Stock Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
Pardeep Kohli
The undersigned Optionee has been granted an Option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows:
Date of Grant |
: | |||
Vesting Commencement Date |
: | |||
Exercise Price per Share |
: | |||
Total Number of Shares Granted |
: | |||
Total Exercise Price |
: | |||
Type of Option |
: | x Incentive Stock Option | ||
: | ¨ Nonstatutory Stock Option | |||
Term/Expiration Date |
: | Tenth Anniversary of Date of Grant |
CEO Vesting Schedule: One fourth (1/4th) of the shares of Common Stock subject to the option shall become vested on the first anniversary of the Vesting Commencement Date and an additional one forty-eighth (1/48th) of the shares of Common Stock subject to the option shall become vested on the corresponding day of each calendar month thereafter or, to the extent such calendar month does not have the corresponding day, on the last day of such calendar month, until all such shares are vested and exercisable, provided that the Optionee continues to be a Service Provider (as defined in the Companys 2005 Stock Plan) on such dates. The Optionee shall be entitled to accelerated vesting as set forth in the Optionees employment agreement with the Company and as set forth herein.
Termination Period: This Option shall be exercisable for three (3) months after Optionee ceases to be a Service Provider. Upon Optionees death or Disability, this Option may be exercised for twelve (12) months after Optionee ceases to be a Service Provider. In no event may Optionee exercise this Option after the Term/Expiration Date as provided above.
Accelerated Vesting: Notwithstanding anything herein to the contrary, (i) the Shares subject to the Option shall vest on an accelerated basis in accordance with the terms of the Amended and Restated Employment Agreement dated as of December 31, 2007, by and between the Company the the Optionee, as amended and/or restated from time to time after the date hereof, and (ii) in the event of a Change of Control (as defined in the Plan), all of the Shares subject to the Option shall vest on an accelerated basis as of the date immediately preceding any Involuntary Termination (as defined below) of the Optionee occurring upon or after any such Change of Control.
Stock Option AgreementEarly Exercise
Involuntary Termination shall mean (i) the Companys termination of Optionees status as a Service Provider other than for Cause (as defined below); (ii) without Optionees consent, a material reduction of the Optionees duties, authority or responsibilities, relative to the Optionees duties, authority or responsibilities as in effect immediately prior to such reduction; provided, however, that any reduction in Optionees duties or responsibilities resulting solely from the Company being acquired by and made a part of a larger entity (as, for example, when a chief financial officer becomes an employee of the acquiring corporation following a Change of Control but is not the chief financial officer of the acquiring corporation) shall not constitute an Involuntary Termination; (iii) without Optionees consent, a material reduction in the base salary of the Optionee as in effect immediately prior to such reduction; (iv) without Optionees consent, a material reduction by the Company in the kind or level of employee benefits, including bonuses, to which the Optionee was entitled immediately prior to such reduction, with the result that the Optionees overall benefits package is materially reduced; or (v) without Optionees consent, the relocation of the Optionee to a facility or a location more than fifty (50) miles from the Optionees then present location.
Cause shall mean (i) the Optionees continued failure to substantially perform the principal duties and obligations of his or her position with the Company (other than any such failure resulting from incapacity due to physical or mental illness), which failure is not remedied in a reasonable period of time (but in any event not less than thirty (30) business days) after receipt of written notice from the Company; (ii) any willful act of personal dishonesty, fraud or misrepresentation taken by the Optionee which was intended to result in substantial gain or personal enrichment of the Optionee at the expense of the Company; (iii) the Optionees willful violation of a federal or state law or regulation applicable to the Companys business which violation was or is reasonably likely to be materially and demonstrably injurious to the Company; (iv) the Optionees conviction of a felony or a plea of nolo contendere under the laws of the United States or any State; or (v) the Optionees willful breach of the terms of the Optionees confidentiality and assignment of inventions agreement with the Company, if any. For the purposes hereof, no act or failure to act shall be considered willful unless done or omitted to be done in bad faith and without reasonable belief that the act or omission was in or not opposed to the best interests of the Company.
II. AGREEMENT
1. Grant of Option.
(a) The Administrator hereby grants to the Optionee named in the Notice of Grant (the Optionee), an option (the Option) to purchase the number of Shares set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the Exercise Price), and subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 14(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail.
(b) If designated in the Notice of Grant as an Incentive Stock Option (ISO), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated as a Nonstatutory Stock Option (NSO).
2. Exercise of Option. This Option shall be exercisable during its term in accordance with the provisions of Section 9 of the Plan as follows:
(a) Right to Exercise.
(i) Subject to subsections 2(a)(ii) and 2(a)(iii) below, this Option shall be exercisable cumulatively according to the vesting schedule set forth in the Notice of Grant. Alternatively, at the election of the Optionee, this Option may be exercised in whole or in part at any time as to Shares that have not yet vested. Vested Shares shall not be subject to the Companys repurchase right (as set forth in the Restricted Stock Purchase Agreement, attached hereto as Exhibit C-1).
(ii) As a condition to exercising this Option for unvested Shares, the Optionee shall execute the Restricted Stock Purchase Agreement.
(iii) This Option may not be exercised for a fraction of a Share.
(b) Method of Exercise.
(i) This Option shall be exercisable by delivery of an exercise notice in the form attached as Exhibit A (the Exercise Notice) which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised (the Exercised Shares), and such other representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price.
(ii) No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise comply with Applicable Laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares.
Stock Option AgreementEarly Exercise
3. Optionees Representations. In the event the Shares have not been registered under the Securities Act at the time this Option is exercised, the Optionee shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B.
4. Market Standoff Agreement. Optionee hereby agrees that Optionee shall not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Common Stock (or other securities) of the Company or enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Common Stock (or other securities) of the Company held by Optionee (other than those included in the registration) for a period specified by the representative of the underwriters of Common Stock (or other securities) of the Company not to exceed one hundred eighty (180) days following the effective date of any registration statement of the Company filed under the Securities Act. Optionee agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, Optionee shall provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Companys securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section 4 shall not apply to a registration relating solely to (i) employee benefit plans or (ii) an SEC Rule 145 transaction. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of said one hundred eighty (180) day period. Optionee agrees that any transferee of the Option or shares acquired pursuant to the Option shall be bound by this Section 4.
5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee:
(a) cash or check;
(b) consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or
(c) surrender of other Shares which, (i) in the case of Shares acquired from the Company, either directly or indirectly, have been owned by the Optionee for more than six (6) months on the date of surrender, and (ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Exercised Shares.
6. Restrictions on Exercise. This Option may not be exercised until such time as the Plan has been approved by the stockholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any Applicable Law.
7. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.
Stock Option AgreementEarly Exercise
8. Term of Option. This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option.
9. Tax Obligations.
(a) Withholding Taxes. Optionee agrees to make appropriate arrangements with the Company (or the Parent or Subsidiary employing or retaining Optionee) for the satisfaction of all federal, state, local and foreign income and employment tax withholding requirements applicable to the Option exercise. Optionee acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver the Shares if such withholding amounts are not delivered at the time of exercise.
(b) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (1) the date two years after the Date of Grant, and (2) the date one year after the date of exercise, the Optionee shall immediately notify the Company in writing of such disposition. Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee.
(c) Code Section 409A. Under Code Section 409A, an Option that vests after December 31, 2004 that was granted with a per Share exercise price that is determined by the Internal Revenue Service (the IRS) to be less than the fair market value of a Share on the date of grant (a discount option) is considered deferred compensation. An Option that is a discount option may result in (i) income recognition by the Optionee prior to the exercise of the Option (when the Option vests), (ii) an additional twenty percent (20%) income tax, and (iii) potential interest charges. Optionee acknowledges that the Company cannot and has not guaranteed that the IRS will determine that the per Share exercise price of this Option equals or exceeds the fair market value of a Share on the date of grant. Optionee agrees that if the IRS determines that the Option was granted with a per Share exercise price that was less than the fair market value of a Share on the date of grant, Optionee will be solely responsibly for any of costs related to such a determination.
10. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionees interest except by means of a writing signed by the Company and Optionee. This Option Agreement is governed by the internal substantive laws but not the choice of law rules of Texas.
11. No Guarantee of Continued Service. OPTIONEE AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING
Stock Option AgreementEarly Exercise
SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS OPTION AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEES RIGHT OR THE COMPANYS RIGHT TO TERMINATE OPTIONEES RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated below.
OPTIONEE: |
MAVENIR SYSTEMS, INC. | |||||
By: | ||||||
Signature | ||||||
Its: | ||||||
Pardeep Kohli |
Address*:
Facsimile #: |
||
Email: |
* | Please include address for notice purposes. |
Stock Option AgreementEarly Exercise
EXHIBIT A
2005 STOCK PLAN
EXERCISE NOTICE
Mavenir Systems, Inc.
1651 Glenville Road, Suite 201
Richardson, TX 75081
Attn: Secretary
1. Exercise of Option. Effective as of today, , , the undersigned (Optionee) hereby elects to exercise Optionees option (the Option) to purchase shares of the Common Stock (the Shares) of Mavenir Systems, Inc. (the Company) under and pursuant to the 2005 Stock Plan (the Plan) and the Stock Option Agreement dated , (the Option Agreement).
2. Delivery of Payment. Optionee herewith delivers to the Company the full purchase price of the Shares as set forth in the Option Agreement, and any and all withholding taxes due in connection with the exercise of the Option.
3. Representations of Optionee. Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares shall be issued to the Optionee as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in Section 12 of the Plan.
5. Companys Right of First Refusal. Before any Shares held by Optionee or any transferee (either being sometimes referred to herein as the Holder) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section (the Right of First Refusal).
(a) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the Company a written notice (the Notice) stating: (i) the Holders bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (Proposed Transferee); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the Offered Price), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase up to all of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.
(c) Purchase Price. The purchase price (Purchase Price) for the Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within 30 days after receipt of the Notice or in the manner and at the times set forth in the Notice.
(e) Holders Right to Transfer. To the extent that the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within 120 days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary contained in this Section notwithstanding, the transfer of any or all of the Shares during the Optionees lifetime or on the Optionees death by will or intestacy to the Optionees immediate family or a trust for the benefit of the Optionees immediate family shall be exempt from the provisions of this Section. Immediate Family as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section, and there shall be no further transfer of such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First Refusal shall terminate as to any Shares upon the first sale of Common Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act.
6. Tax Consultation. Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionees purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.
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7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS, IN THE OPINION OF COUNSEL (WHICH MAY BE COUNSEL TO THE CORPORATION) SATISFACTORY TO THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, INCLUDING A 180-DAY MARKET STANDOFF AGREEMENT, AND A RIGHT OF FIRST REFUSAL HELD BY THE CORPORATION AS SET FORTH IN AN EXERCISE NOTICE BETWEEN THE CORPORATION AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate stop transfer instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
8. Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Exercise Notice shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns.
9. Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Optionee or by the Company forthwith to the Administrator which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties.
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10. Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be delivered personally by hand or by courier, mailed by United States first-class mail, postage prepaid, sent by facsimile or sent by electronic mail directed (a) if to the Optionee, at the Optionees address, facsimile number or electronic mail address set forth on the signature page to the Option Agreement, or at such other address, facsimile number or electronic mail address as the Optionee may designate by ten (10) days advance written notice to the Company or (b) if to the Company, to its principal executive office, or at such other address as the Company may designate by ten (10) days advance written notice to the Optionee. All such notices and other communications shall be deemed given upon personal delivery, on the date of mailing, upon confirmation of facsimile transfer or when directed to the electronic mail address set forth on the signature page to the Option Agreement. With respect to any notice given by the Company under any provision of the Texas Business Corporation Act or the Companys charter or bylaws, the Optionee agrees that such notice may given by facsimile or by electronic mail.
11. Governing Law; Severability. This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of Texas. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, the remaining provisions hereof will continue in full force and effect.
12. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. This Exercise Notice, the Plan, the Restricted Stock Purchase Agreement, the Option Agreement and the Investment Representation Statement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionees interest except by means of a writing signed by the Company and Optionee.
Submitted by: | Accepted by: | |||||
OPTIONEE: | MAVENIR SYSTEMS, INC. | |||||
By: | ||||||
Signature | ||||||
Its: | ||||||
Pardeep Kohli | ||||||
Date Received |
-4-
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE |
: | Pardeep Kohli | ||||
COMPANY |
: | MAVENIR SYSTEMS, INC. | ||||
SECURITY |
: | COMMON STOCK | ||||
AMOUNT |
: | |||||
DATE |
: |
In connection with the purchase of the above-listed Securities, the undersigned Optionee represents to the Company the following:
(a) Optionee is aware of the Companys business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Optionee is acquiring these Securities for investment for Optionees own account only and not with a view to, or for resale in connection with, any distribution thereof within the meaning of the Securities Act.
(b) Optionee acknowledges and understands that the Securities constitute restricted securities under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Optionees investment intent as expressed herein. In this connection, Optionee understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Optionees representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Optionee further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Optionee further acknowledges and understands that the Company is under no obligation to register the Securities. Optionee understands that the certificate evidencing the Securities will be imprinted with the legends set forth in Section 7(a) of the Exercise Notice and with any other legend required under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of restricted securities acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to the Optionee, the exercise will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701
may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including (1) the resale being made through a broker in an unsolicited brokers transaction or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than one year after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than two years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph immediately above.
(d) Optionee further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Optionee understands that no assurances can be given that any such other registration exemption will be available in such event.
Signature of Optionee: | ||
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Date: |
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EXHIBIT C-1
MAVENIR SYSTEMS, INC.
2005 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made between (the Purchaser) and Mavenir Systems, Inc. (the Company) or its assignees of rights hereunder as of , .
Unless otherwise defined herein, the terms defined in the 2005 Stock Plan shall have the same defined meanings in this Agreement.
RECITALS
A. Pursuant to the exercise of the option granted to Purchaser under the Plan and pursuant to the Option Agreement dated by and between the Company and Purchaser with respect to such grant (the Option), which Plan and Option Agreement are hereby incorporated by reference, Purchaser has elected to purchase of those shares of Common Stock which have not become vested under the vesting schedule set forth in the Option Agreement (Unvested Shares). The Unvested Shares and the shares subject to the Option Agreement that have become vested are sometimes collectively referred to herein as the Shares.
B. As required by the Option Agreement, as a condition to Purchasers election to exercise the option, Purchaser must execute this Agreement, which sets forth the rights and obligations of the parties with respect to Shares acquired upon exercise of the Option.
1. Repurchase Option.
(a) If Purchasers status as a Service Provider is terminated for any reason, including for death and Disability, the Company shall have the right and option for ninety (90) days from such date to purchase from Purchaser, or Purchasers personal representative, as the case may be, all of the Purchasers Unvested Shares as of the date of such termination at the lower of (i) the fair market value of the Unvested Shares on the date of repurchase and (ii) the price paid by the Purchaser for such Shares (the Repurchase Option).
(b) Upon the occurrence of such termination, the Company may exercise its Repurchase Option by delivering personally or by registered mail, to Purchaser (or his transferee or legal representative, as the case may be) with a copy to the Escrow Agent described in Section 2 below, a notice in writing indicating the Companys intention to exercise the Repurchase Option AND, at the Companys option, (i) by delivering to the Purchaser (or the Purchasers transferee or legal representative) a check in the amount of the aggregate repurchase price, (ii) by the Company canceling an amount of the Purchasers indebtedness to the Company equal to the aggregate repurchase price or (iii) by a combination of (i) and (ii) so that the combined payment and cancellation of indebtedness equals such aggregate repurchase price. Upon delivery of such notice and payment of the aggregate repurchase price in any of the ways described above, the Company
shall become the legal and beneficial owner of the Unvested Shares being repurchased and the rights and interests therein or relating thereto, and the Company shall have the right to retain and transfer to its own name the number of Unvested Shares being repurchased by the Company.
(c) Whenever the Company shall have the right to repurchase Unvested Shares hereunder, the Company may designate and assign one or more employees, officers, directors or stockholders of the Company or other persons or organizations to exercise all or a part of the Companys Repurchase Option under this Agreement and purchase all or a part of such Unvested Shares.
(d) If the Company does not elect to exercise the Repurchase Option conferred above by giving the requisite notice within ninety (90) days following the termination, the Repurchase Option shall terminate.
(e) The Repurchase Option shall terminate in accordance with the vesting schedule contained in Purchasers Option Agreement.
2. Transferability of the Shares; Escrow.
(a) Purchaser hereby authorizes and directs the Secretary of the Company, or such other person designated by the Company, to transfer the Unvested Shares as to which the Repurchase Option has been exercised from Purchaser to the Company.
(b) To insure the availability for delivery of Purchasers Unvested Shares upon repurchase by the Company pursuant to the Repurchase Option under Section 1, Purchaser hereby appoints the Secretary, or any other person designated by the Company as Escrow Agent (the Escrow Agent), as its attorney-in-fact to sell, assign and transfer unto the Company, such Unvested Shares, if any, repurchased by the Company pursuant to the Repurchase Option and shall, upon execution of this Agreement, deliver and deposit with the Escrow Agent, the share certificates representing the Unvested Shares, together with the stock assignment duly endorsed in blank, attached hereto as Exhibit C-2. The Unvested Shares and stock assignment shall be held in escrow by the Escrow Agent, pursuant to the Joint Escrow Instructions of the Company and Purchaser attached as Exhibit C-3 hereto, until the Company exercises its Repurchase Option, until such Unvested Shares are vested, or until such time as this Agreement no longer is in effect. As a further condition to the Companys obligations under this Agreement, the spouse of the Purchaser, if any, shall execute and deliver to the Company the Consent of Spouse attached hereto as Exhibit C-4. Upon vesting of the Unvested Shares, the Escrow Agent shall promptly deliver to the Purchaser the certificate or certificates representing such Shares in the Escrow Agents possession belonging to the Purchaser, and the Escrow Agent shall be discharged of all further obligations hereunder; provided, however, that the Escrow Agent shall nevertheless retain such certificate or certificates as Escrow Agent if so required pursuant to other restrictions imposed pursuant to this Agreement.
(c) Neither the Company nor the Escrow Agent shall be liable for any act it may do or omit to do with respect to holding the Shares in escrow and while acting in good faith and in the exercise of its judgment.
(d) Transfer or sale of the Shares is subject to restrictions on transfer imposed by any applicable state and federal securities laws. Any transferee shall hold such Shares subject to all the provisions hereof and the Exercise Notice executed by the Purchaser with respect to any Unvested Shares purchased by Purchaser and shall acknowledge the same by signing a copy of this Agreement.
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3. Ownership, Voting Rights, Duties. This Agreement shall not affect in any way the ownership, voting rights or other rights or duties of Purchaser, except as specifically provided herein.
4. Legends. The share certificate evidencing the Shares issued hereunder shall be endorsed with the following legend (in addition to any legend required under applicable federal and state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS, IN THE OPINION OF COUNSEL (WHICH MAY BE COUNSEL TO THE CORPORATION) SATISFACTORY TO THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.
5. Adjustment for Stock Split. All references to the number of Shares and the purchase price of the Shares in this Agreement shall be appropriately adjusted to reflect any stock split, stock dividend or other change in the Shares that may be made by the Company pursuant to Section 12 of the Plan after the date of this Agreement.
6. Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be delivered personally by hand or by courier, mailed by United States first-class mail, postage prepaid, sent by facsimile or sent by electronic mail directed (a) if to the Purchaser, at the Purchasers address, facsimile number or electronic mail address set forth on the signature page to the Option Agreement, or at such other address, facsimile number or electronic mail address as the Purchaser may designate by ten (10) days advance written notice to the Company or (b) if to the Company, to the address of its principal executive office, or at such other address as the Company may designate by ten (10) days advance written notice to the Purchaser. All such notices and other communications shall be deemed given upon personal delivery, on the date of mailing, upon confirmation of facsimile transfer or when directed to the electronic mail address set forth on the signature page to the Option Agreement. With respect to any notice given by the Company under any provision of the Texas Business Corporation Act or the Companys charter or bylaws, the Purchaser agrees that such notice may given by facsimile or by electronic mail.
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7. Survival of Terms. This Agreement shall apply to and bind Purchaser and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors.
8. Section 83(b) Election. Purchaser hereby acknowledges that he or she has been informed that, with respect to the exercise of an Option for Unvested Shares, an election (the Election) may be filed by the Purchaser with the Internal Revenue Service, within 30 days of the purchase of the exercised Shares, electing pursuant to Section 83(b) of the Code to be taxed currently on any difference between the purchase price of the exercised Shares and their Fair Market Value on the date of purchase. In the case of a Nonstatutory Stock Option, this will result in a recognition of taxable income to the Purchaser on the date of exercise, measured by the excess, if any, of the Fair Market Value of the exercised Shares, at the time the Option is exercised over the purchase price for the exercised Shares. Absent such an Election, taxable income will be measured and recognized by Purchaser at the time or times on which the Companys Repurchase Option lapses. In the case of an Incentive Stock Option, such an Election will result in a recognition of income to the Purchaser for alternative minimum tax purposes on the date of exercise, measured by the excess, if any, of the Fair Market Value of the exercised Shares, at the time the option is exercised, over the purchase price for the exercised Shares. Absent such an Election, alternative minimum taxable income will be measured and recognized by Purchaser at the time or times on which the Companys Repurchase Option lapses. Purchaser is strongly encouraged to seek the advice of his or her own tax consultants in connection with the purchase of the Shares and the advisability of filing of the Election under Section 83(b) of the Code. A form of Election under Section 83(b) is attached hereto as Exhibit C-5 for reference.
PURCHASER ACKNOWLEDGES THAT IT IS PURCHASERS SOLE RESPONSIBILITY AND NOT THE COMPANYS TO FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON PURCHASERS BEHALF.
9. Representations. Purchaser has reviewed with his own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. Purchaser is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Purchaser understands that he (and not the Company) shall be responsible for his own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.
10. Governing Law. This Agreement shall be governed by the internal substantive laws, but not the choice of law rules, of Texas.
Purchaser represents that he has read this Agreement and is familiar with its terms and provisions. Purchaser hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under this Agreement.
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IN WITNESS WHEREOF, this Agreement is deemed made as of the date first set forth above.
OPTIONEE: | MAVENIR SYSTEMS, INC. | |||||
By: | ||||||
Signature | ||||||
Its: | ||||||
Print Name |
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EXHIBIT C-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, , hereby sell, assign and transfer unto Mavenir Systems, Inc. shares of the Common Stock of Mavenir Systems, Inc. standing in my name of the books of said corporation represented by Certificate No. herewith and do hereby irrevocably constitute and appoint , to transfer the said stock on the books of the within named corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted Stock Purchase Agreement between Mavenir Systems, Inc. and the undersigned dated , .
Dated: , | Signature: |
INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise its repurchase option, as set forth in the Agreement, without requiring additional signatures on the part of the Purchaser.
EXHIBIT C-3
JOINT ESCROW INSTRUCTIONS
,
Mavenir Systems, Inc.
1651 Glenville Road, Suite 201
Richardson, TX 75081
Attn: Secretary
Dear Secretary:
As Escrow Agent for both Mavenir Systems, Inc. (the Company), and the undersigned purchaser of stock of the Company (the Purchaser), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Restricted Stock Purchase Agreement (Agreement) between the Company and the undersigned, in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred to collectively for convenience herein as the Company) exercises the Companys repurchase option set forth in the Agreement, the Company shall give to Purchaser and you a written notice specifying the number of shares of stock to be purchased, the purchase price, and the time for a closing hereunder at the principal office of the Company. Purchaser and the Company hereby irrevocably authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver the stock assignments, together with the certificate evidencing the shares of stock to be transferred, to the Company or its assignee, against the simultaneous delivery to you of the purchase price (by cash, a check, or some combination thereof) for the number of shares of stock being purchased pursuant to the exercise of the Companys repurchase option.
3. Purchaser irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you as Purchasers attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated, including but not limited to the filing with any applicable state blue sky authority of any required applications for consent to, or notice of transfer of, the securities. Subject to the provisions of this paragraph 3, Purchaser shall exercise all rights and privileges of a stockholder of the Company while the stock is held by you.
4. Upon written request of the Purchaser, but no more than once per calendar year, unless the Companys repurchase option has been exercised, you will deliver to Purchaser a certificate or certificates representing so many shares of stock as are not then subject to the Companys repurchase option. Within 120 days after cessation of Purchasers continuous
employment by or services to the Company, or any parent or subsidiary of the Company, you will deliver to Purchaser a certificate or certificates representing the aggregate number of shares held or issued pursuant to the Agreement and not purchased by the Company or its assignees pursuant to exercise of the Companys repurchase option.
5. If at the time of termination of this escrow you should have in your possession any documents, securities or other property belonging to Purchaser, you shall deliver all of the same to Purchaser and shall be discharged of all further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.
10. You shall not be liable for the outlawing of any rights under the Statute of Limitations with respect to these Joint Escrow Instructions or any documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be an officer or agent of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.
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14. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at the following addresses or at such other addresses as a party may designate by ten days advance written notice to each of the other parties hereto.
16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by the internal substantive laws, but not the choice of law rules, of Texas.
PURCHASER: | MAVENIR SYSTEMS, INC. | |
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EXHIBIT C-4
CONSENT OF SPOUSE
I, , spouse of , have read and approve the foregoing Restricted Stock Purchase Agreement (the Agreement). In consideration of granting of the right to my spouse to purchase shares of Mavenir Systems, Inc., as set forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreement and agree to be bound by the provisions of the Agreement insofar as I may have any rights in said Agreement or any shares issued pursuant thereto under the community property laws or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreement.
Dated: , |
Signature: |
EXHIBIT C-5
ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Sections 55 and 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayers gross income or alternative minimum taxable income, as the case may be, for the current taxable year the amount of any compensation taxable to taxpayer in connection with taxpayers receipt of the property described below:
1. | The name, address, taxpayer identification number and taxable year of the undersigned are as follows: |
NAME: | TAXPAYER: | SPOUSE: | ||
ADDRESS: | ||||
IDENTIFICATION NO.: | TAXPAYER: | SPOUSE: | ||
TAXABLE YEAR: |
2. | The property with respect to which the election is made is described as follows: shares (the Shares) of the Common Stock of Mavenir Systems, Inc. (the Company). |
3. | The date on which the property was transferred is: , . |
4. | The property is subject to the following restrictions: |
The Shares may not be transferred and are subject to forfeiture under the terms of an agreement between the taxpayer and the Company. These restrictions lapse upon the satisfaction of certain conditions contained in such agreement.
5. | The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: $ . |
6. | The amount (if any) paid for such property is: $ . |
The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigneds receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.
Dated: , |
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Taxpayer | ||
The undersigned spouse of taxpayer joins in this election. | ||
Dated: , |
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Spouse of Taxpayer |
Exhibit 10.20
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the Agreement) is made as of the 18th day of December, 2012 between Mavenir Systems, Inc., a Delaware corporation (the Company), and Terry Hungle, an individual resident of the State of Texas (Executive).
1. Employment; Duties; Full Time Employment. The Company hereby employs Executive, and Executive hereby accepts employment, as Chief Financial Officer of the Company. In such capacity, Executive shall perform such executive duties and exercise such powers for the Company and its subsidiaries as the Chief Executive Officer and President of the Company may assign to or vest in Executive from time to time and, as such, from and after the date hereof shall report directly to and shall be subject to the direction of the Companys Chief Executive Officer and President. Executive covenants and agrees that, at all times during Executives employment, Executive shall devote Executives full business time and efforts to Executives duties as an employee of the Company and that Executive will not, directly or indirectly, engage or participate in any other business or professional activities during Executives employment, other than activities for non-profit organizations that do not interfere or conflict with Executives obligations hereunder and such other activities approved by the Board of Directors of the Company from time to time.
2. At Will Employment. The Company agrees to employ Executive, and Executive agrees to serve the Company, on an at will basis, which means that either the Company or Executive may terminate Executives employment with the Company at any time and for any or no reason, as provided and subject to in Sections 7 and 8 below.
3. Compensation. During Executives employment, the Company shall pay to Executive the following compensation:
(a) Base Salary. The Company shall pay Executive a base salary (Base Salary) at the rate of $22,500 per month (annualized to $270,000), less applicable withholding taxes, payable in accordance with the Companys normal payroll practices. The Base Salary may be increased by the Board of Directors, or a duly authorized committee thereof, in its sole discretion. In addition, the Board of Directors, or a duly authorized committee thereof, may decrease the Base Salary in the event that the Board or such committee determines that financial exigencies require such decrease, provided that the compensation of all executives of the Company is also reduced at the same time in a substantially commensurate manner. Any increase or decrease in Base Salary (together with the then existing Base Salary) shall serve as the Base Salary for future employment under this Agreement.
(b) Equity Compensation. Executive may be granted stock options, stock appreciation rights, restricted stock units, restricted stock or other stock- or performance-based equity awards (each, an Award), as determined from time to time in the discretion of the
Companys Board of Directors or a duly authorized committee thereof, under the Companys Amended and Restated 2005 Stock Plan or any other equity incentive plan that may be adopted by the Companys Board of Directors (each, an Equity Plan). The terms of any such Award, including the vesting schedule, if any, will be set forth in an award agreement (an Award Agreement) in the form determined by the Companys Board of Directors or a duly authorized committee thereof. The vesting schedule of any such Awards shall be subject to additional acceleration as described in Section 7 of this Agreement, unless otherwise set forth in the applicable Award Agreement.
4. Other Compensation and Benefits. In addition to the compensation specified in Section 3, the Company shall provide the following to Executive:
(a) Incentive Plan Participation. Executive shall be eligible to participate in the Companys management incentive plan, executive bonus plan or any other such incentive plan (each, a Performance Incentive Plan) to the extent determined by the Companys Board of Directors or a duly authorized committee thereof; provided however, that any such participation and payments shall be subject in all respects to the terms of such Performance Incentive Plan and the meeting of performance metrics as determined by the Companys Board of Directors or a duly authorized committee thereof.
(b) Benefits. During Executives employment, Executive shall be entitled to (i) vacation in accordance with the Companys vacation policy, to be taken in accordance with such policy, (ii) holidays and sick leave as made generally available to employees of the Company, and (iii) subject to eligibility therefor, the right to participate in any profit sharing plan, retirement plan, 401(k) plan, group life insurance plan and/or other insurance plan or medical expense plan or dental expense plan maintained by the Company for its senior executives generally and, if applicable, their family members.
(c) Directors and Officers Insurance. Executive shall be covered by the Companys Directors and Officers Insurance to the extent that the Company currently has or in the future obtains such insurance, for so long as Executive remains an executive officer or director of the Company.
5. Business Expenses. The Company shall reimburse Executive for all reasonable and necessary business and travel expenses incurred by Executive in the performance of Executives duties under this Agreement. The determination of reasonable and necessary shall be made in the sole discretion of the Board. Such expenses shall be reimbursed in accordance with the Companys business expense guidelines, limits and procedures and upon presentation of proper expense vouchers or receipts; provided however, in no event shall reimbursement of an eligible expense hereunder be made later than the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit.
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6. Termination on Death or Disability. Executives employment will terminate automatically upon Executives death or, upon thirty (30) days prior written notice from the Company, in the event of Disability. For purposes of this Section 6, Disability means that Executive, at the time notice is given, has been unable to substantially perform Executives duties under this Agreement for not less than sixty (60) work days within a six (6) consecutive month period as a result of Executives incapacity due to a physical or mental condition and, if reasonable accommodation is required by law, after reasonable accommodation. Upon any termination for death or Disability, Executive shall be entitled to receive (i) Executives Base Salary through the effective date of termination, (ii) the right to continue health care benefits under COBRA, at Executives cost, to the extent required and available by law, (iii) the right to exercise stock options, if any, subject to and in accordance with the terms of the respective options, (iv) reimbursement of all expenses for which Executive is entitled to be reimbursed pursuant to Section 5 above, but for which Executive has not yet been reimbursed, and (v) no other severance or benefits of any kind.
7. Involuntary Termination Without Cause; Resignation for Good Reason.
(a) Effect of Termination. The Company shall be entitled to terminate Executive with or without notice and with or without Cause (as defined below) and Executive shall be entitled to resign with or without Good Reason (as defined below), in each case at any time; provided, that if Executive is terminated by the Company involuntarily without Cause or Executive resigns with Good Reason, then Executive shall be entitled to receive:
(i) the Base Salary through the date of termination and any compensation earned and unpaid under a Performance Incentive Plan through the date of termination, except and only to the extent that any such Performance Incentive Plan specifically provides otherwise;
(ii) accelerated vesting with respect to all Awards under an Equity Plan held by Executive, such that all Awards under an Equity Plan that would vest based solely on the passage of time (rather than vesting based on performance conditions) and that would vest within the twelve (12) month period following the date of such termination shall vest effective as of the date of termination, except and only to the extent that any Award Agreement specifically provides otherwise;
(iii) continuing severance pay at a rate equal to 100% of Executives Base Salary, as then in effect (less applicable withholding taxes), for a period of six (6) months from the date of such termination, to be paid periodically in accordance with the Companys normal payroll practices (subject to Sections 7(c) and 7(d));
(iv) reimbursement of the health and dental care continuation premiums for Executive and Executives dependents incurred by Executive to effect continuation of health and dental insurance coverage for Executive and Executives dependents on the same basis as active employees, for a period of six (6) months from the date of such termination, to the extent that Executive is eligible for and elects continuation coverage under COBRA; provided
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however, in no event shall reimbursement of an eligible expense hereunder be made later than the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit;
(v) reimbursement of all expenses for which Executive is entitled to be reimbursed pursuant to Section 5 above, but for which Executive has not yet been reimbursed; provided however, in no event shall reimbursement of an eligible expense hereunder be made later than the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit; and
(vi) no other severance or benefits of any kind.
(b) Effect of Termination following Change of Control. The Company shall be entitled to terminate Executive with or without notice and with or without Cause (as defined below) and Executive shall be entitled to resign with or without Good Reason (as defined below), in each case at any time; provided, that if Executive is terminated by the Company involuntarily without Cause or Executive resigns with Good Reason upon or after a Change of Control, then Executive shall be entitled to receive:
(i) the Base Salary through the date of termination and any compensation earned and unpaid under a Performance Incentive Plan through the date of termination, except and only to the extent that any such Performance Incentive Plan specifically provides otherwise;
(ii) accelerated vesting with respect to all Awards under an Equity Plan held by Executive, such that all Awards shall vest in full effective as of the date of such termination, except and only to the extent that any Award Agreement specifically provides otherwise, provided, that if a particular Award Agreement has a definition of Change of Control or Change in Control that differs from the definition of Change of Control set forth in this Agreement, such other definition shall apply solely with respect to acceleration of vesting of such Award pursuant to this Section 7(b)(ii);
(iii) continuing severance pay at a rate equal to 100% of Executives Base Salary, as then in effect (less applicable withholding taxes), for a period of six (6) months from the date of such termination, to be paid periodically in accordance with the Companys normal payroll practices (subject to Sections 7(c) and 7(d));
(iv) reimbursement of the health and dental care continuation premiums for Executive and Executives dependents incurred by Executive to effect continuation of health and dental insurance coverage for Executive and Executives dependents on the same basis as active employees, for a period of six (6) months from the date of such termination, to the extent that Executive is eligible for and elects continuation coverage under COBRA; provided however, in no event shall reimbursement of an eligible expense hereunder be made later than
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the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit;
(v) reimbursement of all expenses for which Executive is entitled to be reimbursed pursuant to Section 5 above, but for which Executive has not yet been reimbursed; provided however, in no event shall reimbursement of an eligible expense hereunder be made later than the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit; and
(vi) no other severance or benefits of any kind.
(c) Section 409A. Notwithstanding anything to the contrary in this Agreement, no severance pay or benefits to be paid or provided to Executive, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended (the Code), and the final regulations and any guidance promulgated thereunder (Section 409A) (together, the Deferred Payments) will be paid or otherwise provided until Executive has a separation from service within the meaning of Section 409A. Similarly, no severance payable to Executive, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable until Executive has a separation from service within the meaning of Section 409A. If Executive is a specified employee within the meaning of Section 409A at the time of Executives termination (other than due to death), then the Deferred Payments that are payable within the first six (6) months following Executives separation from service will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executives separation from service. All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following Executives separation from service but prior to the six (6) month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executives death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A. References in this Agreement to termination of Executives employment shall mean termination of Executives employment with the Company and all entities required to be aggregated with the Company and treated as one
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employer under Section 414(b) or (c) of the Code under circumstances that give rise to a separation from service within the meaning given to that term under Section 409A.
(d) Conditions Precedent. Any severance payments (other than payment of Base Salary pursuant to Section 7), vesting and/or benefits contemplated by Section 7 above are conditional on Executive (i) continuing to comply with all of the provisions of Section 9 below and the terms of the Confidentiality Agreement (as defined below), and (ii) signing and not revoking a separation agreement and release of claims providing for a release of all claims relating to Executives employment and/or this Agreement against the Company or its successor, its subsidiaries and parent company and their respective directors, officers and stockholders, excluding claims for payments and/or benefits the Company is required to pay to Executive that have not been made or delivered in accordance with terms of a written agreement between the Company and Executive or as required by law, in a form satisfactory to the Company, its parent company or its successor (the Release); provided that such Release becomes effective and irrevocable no later than sixty (60) days following the termination date or such earlier date required by the Release (such deadline, the Release Deadline). If the Release does not become effective by the Release Deadline, Executive will forfeit any rights to severance or benefits under this Section 7 or elsewhere in this Agreement. Any severance payments or other benefits under this Agreement that would be considered Deferred Payments (as defined in Section 7(c)) will be paid on, or, in the case of installments, will not commence until, the sixtieth (60th) day following Executives separation from service, or, if later, such time as required by Section 7(c). Except as required by Section 7(c), any installment payments that would have been made to Executive during the sixty (60) day period immediately following Executives separation from service but for the preceding sentence will be paid to Executive on the sixtieth (60th) day following Executives separation from service and the remaining payments will be made as provided in this Agreement, unless subject to the 6-month payment delay described herein. Any severance payments under this Agreement that would not be considered Deferred Payments will be paid on, or, in the case of installments, will not commence until, the first payroll date that occurs on or after the date the Release becomes effective and any installment payments that would have been made to Executive during the period prior to the date the Release becomes effective following Executives separation from service but for the preceding sentence will be paid to Executive on the first payroll date that occurs on or after the date the Release becomes effective.
(e) Definitions.
(i) Cause. For purposes of this Agreement, Cause shall mean: (A) Executives continued failure to substantially perform the principal duties and obligations of Executives position with the Company (other than any such failure resulting from incapacity due to physical or mental illness), which failure is not remedied within ten (10) business days after receipt of written notice from the Company; (B) any willful act of personal dishonesty, fraud or misrepresentation taken by Executive which was intended to result in substantial gain or personal enrichment of Executive at the expense of the Company; (C) Executives willful violation of a federal or state law or regulation applicable to the Companys business which
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violation was or is reasonably likely to be materially and demonstrably injurious to the Company; (D) Executives conviction of a felony or a plea of nolo contendere to a felony charge under the laws of the United States or any State; or (E) Executives willful breach of the terms of Section 9 of this Agreement or Executives Confidentiality Agreement. For the purposes of this subsection 7(e)(i), no act or failure to act shall be considered willful unless done or omitted to be done in bad faith and without reasonable belief that the act or omission was in or not opposed to the best interests of the Company. The Board of Directors (excluding Executive if Executive is at such time a member of the Board) shall make all determinations relating to termination, including without limitation any determination regarding Cause, pursuant to Sections 7(e)(i) and (iii).
(ii) Change of Control. For the purposes of this Agreement, Change of Control shall mean a change in ownership or control of the Company effected through any of the following transactions:
(A) the closing of a merger, consolidation or other reorganization approved by the Companys stockholders in which a change in ownership or control of the Company is effected through the acquisition by any person or group of persons comprising a group within the meaning of Rule 13d-5(b)(1) of the Securities Exchange Act of 1934, as amended (the Exchange Act) (other than the Company or a person that, prior to such transaction, directly or indirectly controls, is controlled by or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Companys outstanding securities (as measured in terms of the power to vote with respect to the election of Board members);
(B) the closing of a sale, transfer or other disposition of all or substantially all of the Companys assets;
(C) the closing of any transaction or series of related transactions pursuant to which any person or any group of persons comprising a group within the meaning of Rule 13d-5(b)(1) of the Exchange Act (other than the Company or a person that, prior to such transaction or series of related transactions, directly or indirectly controls, is controlled by or is under common control with, the Company) acquires directly or indirectly (whether as a result of a single acquisition or by reason of one or more acquisitions within the twelve (12)-month period ending with the most recent acquisition) beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Companys securities (as measured in terms of the power to vote with respect to the election of Board members) outstanding immediately after the consummation of such transaction or series of related transactions, whether such transaction
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involves a direct issuance from the Company or the acquisition of outstanding securities held by one or more of the Companys existing stockholders; or
(D) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases by reason of one or more contested elections for Board membership to be comprised of individuals who either (x) have been Board members continuously since the beginning of such period or (y) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (x) who were still in office at the time the Board approved such election or nomination.
Notwithstanding the foregoing, solely with respect to any Award that is subject to Section 409A and payable upon a Change of Control, the term Change of Control shall mean an event described in one or more of the foregoing provisions of this definition, but only if it also constitutes a change of control event within the meaning of Treas. Reg. §1.409A-3(i)(5).
(iii) Good Reason. For purposes of this Agreement, Good Reason shall mean the occurrence of any of the following without Executives consent: (A) a material reduction of Executives duties or responsibilities, relative to Executives duties or responsibilities as in effect immediately prior to such reduction; (B) except as provided in Section 3(a), a material reduction in the Executives Base Salary as in effect immediately prior to such reduction; (C) except as provided in Section 3(a), a material reduction by the Company in the kind or level of employee benefits, including bonuses, to which the Executive was entitled immediately prior to such reduction, with the result that Executives overall benefits package is materially reduced; or (D) the relocation of Executive to a facility or a location more than fifty (50) miles from Executives then present location.
(f) Amendment to Option Agreements. In the event that Executive is terminated without Cause or resigns for Good Reason, whether prior to or following a Change of Control, at the Executives request, the Company will execute an amendment (the Option Amendment) to each option to purchase capital stock of the Company held by Executive on the date of such termination (collectively, the Stock Options) that will extend the period that Executive has to exercise each such stock option to the date that is one year following the earliest to occur of (i) the consummation of a Change of Control; (ii) the consummation of an initial public offering of the Companys equity securities under the Securities Act of 1933, as amended (an IPO); or (iii) in the event that an IPO or a Change of Control has been consummated prior to the date of such termination, the date of such termination without Cause or resignation for Good Reason. The Option Amendment will also provide that, notwithstanding the foregoing, in the event that during such one-year period Executive is unable to sell any securities issuable upon exercise of the Stock Options because of lock-up, market stand-off or similar restrictions on selling such securities that are applicable to Executive, or Executive refrains from selling such securities at the request of an underwriter of the Company, such one-year period shall be extended for a
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period of time equal to the period the Executive is unable to sell such securities because of lock-up, market stand-off or similar restrictions or Executive refrains from selling such securities at the request of an underwriter of the Company. The Option Amendment will be in a form reasonably satisfactory to the Company and Executive. In no event shall any such extension exceed the original term of any such Stock Option, unless at the time of such Option Amendment the exercise price of the applicable Stock Options is equal to or exceeds the fair market value of the underlying common stock of the Company, and such Option Amendment otherwise complies with the requirement of the applicable Section 409A regulations.
8. Involuntary Termination for Cause; Resignation without Good Reason.
(a) Effectiveness. Notwithstanding any other provision of this Agreement, the Company may terminate Executives employment at any time for Cause, and Executive may at any time voluntarily resign without Good Reason. Termination for Cause shall be effective on the date the Company gives notice to Executive of such termination in accordance with this Agreement unless otherwise agreed by the parties. Resignation by Executive without Good Reason shall be effective on the date Executive gives notice to the Company of such resignation in accordance with this Agreement unless otherwise agreed by the parties.
(b) Effect of Termination. In the case of the Companys termination of Executives employment for Cause or Executives resignation from Executives employment without Good Reason, Executive shall be entitled to receive (i) Base Salary through the effective date of termination of employment, (ii) any benefits payable in connection with such a termination under any standard severance program of the Company then in effect and published in writing, (iii) the right to continue health care benefits under COBRA, at Executives cost, to the extent required and available by law, (iv) the right to exercise any stock options subject to and in accordance with the terms of the respective options, (v) reimbursement of all expenses for which Executive is entitled to be reimbursed pursuant to Section 5 above, but for which Executive has not yet been reimbursed, and (vi) no other severance or benefits of any kind.
9. Company Matters; Restrictive Covenants.
(a) Proprietary Information and Inventions. Executive has signed an Employee Proprietary Information Agreement (Confidentiality Agreement) in the form required to be executed by each employee of the Company.
(b) Confidential Information.
(i) Company Information. Executive agrees at all times during Executives employment and thereafter to hold in strictest confidence, and not to use, except for the benefit of the Company, any of the Companys Confidential Information; or disclose to any person, firm or corporation any of the Companys Confidential Information except as authorized in writing by the Companys Board of Directors or, if expressly authorized by the Companys management, pursuant to a written non-disclosure agreement that sufficiently protects the
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Confidential Information. Executive understands that Confidential Information means any information that relates to the Companys actual or anticipated business or research and development, technical data, trade secrets or know-how, including, but not limited to, research, product plans or other information regarding the Companys products or services and markets therefor, customer lists and customers (including, but not limited to, the Companys customers on whom Executive called or with whom Executive became acquainted during the term of Executives employment), software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances or other business information. Executive further understands that Confidential Information does not include any of the foregoing items that is or becomes publicly known through no wrongful act or omission of Executive or of others who were under confidentiality obligations as to the item or items involved or improvements or new versions thereof.
(ii) Provision of Confidential Information. Prior to the execution of this Agreement the Company has provided, and following the execution of this Agreement, the Company agrees to continue to provide, Executive with Confidential Information regarding the Company that enabled and will continue to enable Executive to optimize the performance of Executives duties to the Company.
(c) Ventures. If, during Executives employment, Executive is engaged in or associated with the planning or implementing of any project, program or venture involving the Company and any third parties, all rights in such project, program or venture shall belong to the Company (or the third party, to the extent provided in any agreement between the Company and the third party). Except as formally approved by the Company, Executive shall not be entitled to any interest in such project, program or venture or to any commission, finders fee or other compensation in connection therewith other than the salary or other compensation to be paid to Executive as provided in this Agreement.
(d) Non-Solicitation.
(i) Non-Solicitation of Employees. During employment and for a period of twelve (12) months following the end of employment, Executive will not (directly or indirectly, on behalf of Executive or any third party) hire any employee, contractor or consultant of the Company or solicit, induce, recruit or encourage any of the Companys employees, contractors or consultants to leave their employment or terminate their relationship with the Company.
(ii) Non-Solicitation of Clients and Prospective Clients. During employment and for a period of twelve (12) months following the end of employment for any reason, Executive agrees to abide by the following restrictions:
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(A) Executive shall not interfere with existing client relationships of the Company (i.e., clients for which at least one project has been conducted in the last two years), and shall not solicit or attempt to take away any business of the Company that is either under way or about to begin at the termination of Executives employment.
(B) Executive shall not interfere or compete in any way with any proposal efforts of the Company already in progress (that is, a proposal sent to or being then currently developed for a specific client or clients, or contemplated to be submitted to a specific client or clients by the Company within twelve (12) months) at the end of employment.
(C) Executive shall not make use of any of Executives personal relationships or business contacts developed during the course of employment with the Company and utilized for business purposes within the two (2) years prior to termination, for the benefit of Executive or another, in a competitive manner with respect to the business of the Company.
(e) Covenant Not to Compete.
(i) Executive agrees that during the course of Executives employment and for a period of twelve (12) months immediately following the termination of Executives relationship with the Company for any reason, whether with or without Cause, at the option either of the Company or Executive, with or without notice, Executive will not, either directly or indirectly, (i) serve as an advisor, agent, consultant, director, employee, officer, partner, proprietor or otherwise of, (ii) have any ownership interest in (except for passive ownership of one percent (1%) or less of any entity whose securities have been registered under the Securities Act of 1933, as amended, or Section 12 of the Exchange Act) or (iii) participate in the organization, financing, operation, management or control of, any business in competition with the Companys business as conducted by the Company during the course of Executives employment with the Company. The foregoing covenant shall cover Executives activities in every part of the Territory. Territory shall mean (i) all counties in the State of Texas, (ii) all other states of the United States of America and (iii) all other countries of the world; provided that, with respect to clauses (ii) and (iii), the Company maintains non-trivial operations, facilities, or customers in such geographic area prior to the date of the termination of Executives relationship with the Company.
(ii) Executive acknowledges that Executives fulfillment of the obligations contained in this Agreement and the Confidentiality Agreement, including, but not limited to, Executives obligation neither to use, except for the benefit of the Company, or to disclose the Companys Confidential Information and Executives obligation not to compete contained in subsection 9(e)(i) above is necessary to protect the Companys Confidential Information and to preserve the Companys value and goodwill. Executive further acknowledges the time, geographic and scope limitations of Executives obligations under
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subsection 9(e)(i) above are reasonable, especially in light of the Companys desire to protect its Confidential Information, and that Executive will not be precluded from gainful employment if Executive is obligated not to compete with the Company during the period and within the Territory as described above.
(iii) The covenants contained in subsection 9(e)(i) above shall be construed as a series of separate covenants, one for each city, county and state of any geographic area in the Territory. Except for geographic coverage, each such separate covenant shall be deemed identical in terms to the covenant contained in subsection 9(e)(i). If, in any judicial proceeding, a court refuses to enforce any of such separate covenants (or any part thereof), then such unenforceable covenant (or such part) shall be eliminated from this Agreement to the extent necessary to permit the remaining separate covenants (or portions thereof) to be enforced. In the event the provisions of subsection 9(e)(i) are deemed to exceed the time, geographic or scope limitations permitted by applicable law, then such provisions shall be reformed to the maximum time, geographic or scope limitations, as the case may be, then permitted by such law.
(f) Acknowledgements. Executive acknowledges that the non-solicitation and non-competition covenants Executive is providing in this Agreement are reasonable and necessary to protect the legitimate interests of the Company. Executive further acknowledges that Executives non-disclosure promises contained in this Agreement and the Confidentiality Agreement are in exchange for the Companys promises contained in this Agreement and the Confidentiality Agreement to provide Executive with confidential information and trade secrets of the Company.
(g) Other Obligations Upon Termination. On termination of Executives employment, Executive shall:
(i) immediately (and with contemporaneous effect) resign any directorships, offices or other positions that Executive may hold in the Company or any of its affiliates;
(ii) immediately deliver to the Company all documents, books, materials, records, correspondence, papers and information (on whatever media and wherever located) relating to the business or affairs of the Company or its business contacts, any keys and any other property of the Company, which is in Executives possession or under Executives control;
(iii) irretrievably delete any information relating to the business of the Company stored on any magnetic or optical disk or memory and all matter derived from such sources which is in Executives possession or under Executives control outside the premises of the Company; and
(iv) provide the Company with a signed statement that Executive has complied fully with Executives obligations under this Section 9(g).
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(h) Notification of New Employer. In the event that Executive leaves the employ of the Company, Executive grants consent to notification by the Company to Executives new employer about Executives rights and obligations under this Agreement and the Confidentiality Agreement.
10. Tax. If any portion of the severance benefits, or any other payment under this Agreement, or under any other agreement with, or plan of the Company, including but not limited to restricted stock, stock options, warrants and other long-term incentives (in the aggregate, Total Payments) would be subject to the excise tax imposed by Section 4999 of the Code, as amended, or any similar tax that may hereafter be imposed (such excise tax together with any similar tax are hereinafter collectively referred to as the Excise Tax), then Executive shall be entitled to receive from the Company an additional payment (the Gross-up Payment) (i.e., in addition to such other severance benefits, or any other payments under this Agreement) in an amount such that the net amount of Total Payments and Gross-up Payment retained by the Executive, after the calculation and deduction of all Excise Tax on the Total Payments and all federal, state and local income tax, employment tax and Excise Tax on the Gross-up Payment, shall be equal to the Total Payments. Notwithstanding any other provision of this Section 10 to the contrary, to the extent permitted under Section 409A of the Code or any regulatory guidance issued thereunder by the Internal Revenue Service, the term Excise Tax, as defined above in this Section 10, shall include any interest or penalties imposed with respect to such Excise Tax. Subject to Section 7(c), any Gross-up Payment shall be made as soon as practicable after Executive remits the related taxes, but in all events the Gross-up Payment shall be made within thirty (30) days after Executive remits the related taxes to the taxing authority.
11. Clawback of Incentive Compensation. Executive acknowledges that to the extent required by applicable law or any written Company policy that may, in the discretion of the Board of Directors or a duly authorized committee thereof, be adopted to implement the requirements of such law (including without limitation Section 304 of the Sarbanes Oxley Act of 2002 and Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010), compensation paid to Executive shall be subject to any required clawback, forfeiture, recoupment or similar requirement. Executive agrees that the terms and conditions of this Agreement shall be deemed automatically amended as may be necessary from time to time to ensure compliance by Executive, the Company and this Agreement with such policies or applicable law. No clawback of compensation under any policy adopted as contemplated in this Section 11 shall give rise to Executives right to resign for Good Reason.
12. Miscellaneous.
(a) Withholding Taxes. The Company may withhold from all salary, bonus or other benefits payable under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling.
(b) Entire Agreement; Binding Effect. This Agreement and the Confidentiality Agreement (together with any Equity Plan and any Award Agreement issued as contemplated by
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Section 3(b) above) set forth the entire understanding between the parties as to the subject matter of this Agreement and supersede all prior agreements, commitments, representations, writings and discussions between them; and neither of the parties shall be bound by any obligations, conditions, warranties or representations with respect to the subject matter of this Agreement, the Confidentiality Agreement, any Equity Plan or any Award Agreement except as expressly provided herein or therein or as duly set forth on or subsequent to the date hereof in a written instrument signed by the proper and fully authorized representative of the party to be bound hereby. This Agreement is binding on Executive and on the Company and Executives and the Companys successors and assigns (whether by assignment, by operation of law or otherwise); provided that neither this Agreement nor any rights or obligations hereunder may be assigned by Executive or the Company without the prior written consent of the other party (except that the Company shall be entitled to assign this Agreement in connection with a Change of Control).
(c) Absence of Conflict. Executive represents and warrants that Executives employment by the Company as described herein will not conflict with and will not be constrained by any prior employment or consulting agreement or relationship. Executive further agrees that during Executives employment with the Company, Executive will not improperly use or disclose any proprietary information or trade secrets of any former or concurrent employer or other person or entity and that Executive will not bring onto the premises of the Company any unpublished document or proprietary information belonging to any such employer, person or entity unless consented to in writing by such employer, person or entity.
(d) Arbitration.
(i) General. In consideration of Executives service to the Company, its promise to arbitrate all employment related disputes and Executives receipt of the compensation and other benefits paid to Executive by the Company, at present and in the future, Executive agrees that any and all controversies, claims, or disputes (with the sole exception of those disputes that may arise from the Confidentiality Agreement, which shall be resolved in accordance with the dispute resolution procedures set forth therein) with anyone (including the Company and any employee, officer, director, stockholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from Executives service to the Company under this Agreement or otherwise or the termination of Executives service with the Company, including any breach of this Agreement, shall be subject to binding arbitration under the Arbitration Rules set forth by the American Arbitration Association for the resolution of employment disputes (the Rules) and pursuant to Texas law. Disputes which Executive agrees to arbitrate, and thereby agrees to waive any right to a trial by jury, include any statutory claims under state or federal law. Executive further understands that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive.
(ii) Procedure. Any arbitration will be administered by the American Arbitration Association (AAA) and a neutral arbitrator will be selected in a manner consistent with its National Rules for the Resolution of Employment Disputes. The arbitration proceedings will be conducted in Richardson, Texas, and will allow for discovery according to the rules set
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forth in the National Rules for the Resolution of Employment Disputes. The arbitrator shall have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. The arbitrator shall issue a written decision including findings of fact and conclusions of law on the merits of its award. The arbitrator shall have the power to award any remedies, including attorneys fees and costs, available under applicable law. The Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that Executive shall pay the first $125 of any filing and/or administration fees associated with any arbitration that Executive initiates. The arbitrator shall administer and conduct any arbitration in a manner consistent with the AAAs National Rules for the Resolution of Employment Disputes.
(iii) Remedy. Arbitration shall be the sole, exclusive and final remedy for any dispute (with the sole exception of those disputes that may arise from the Confidentiality Agreement and Section 9 of this Agreement) between Executive and the Company. Accordingly, except as otherwise provided herein, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator shall not order or require the Company to adopt a policy not otherwise required by law, which the Company has not adopted.
(iv) Availability of Injunctive Relief. Any party may also petition the court for injunctive relief where either party alleges or claims a violation of this Agreement or the Confidentiality Agreement, including but not limited to a breach of the restrictive covenants in Section 9 above. In the event that either party seeks injunctive relief, no bond shall be required and the prevailing party shall be entitled to recover reasonable costs and attorneys fees.
(e) Voluntary Nature of Agreement; Legal Rights. Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. Executive acknowledges that Executive has had the opportunity to consult with an attorney regarding the provisions of this Agreement and has either obtained such advice of counsel or knowingly waived the opportunity to seek such advice. Executive has carefully read this Agreement and has asked any questions needed for Executive to understand the terms, consequences and binding effect of this Agreement and fully understand it, including that Executive is waiving Executives right to a jury trial.
(f) Waivers. No party shall be deemed to have waived any right, power or privilege under this Agreement or any provisions hereof unless such waiver shall have been duly executed in writing and acknowledged by the party to be charged with such waiver. The failure of any party at any time to insist on performance of any of the provisions of this Agreement shall in no way be construed to be a waiver of such provisions, nor in any way to affect the validity of this Agreement or any part hereof. No waiver of any breach of this Agreement shall be held to be a waiver of any other subsequent breach.
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(g) Reformation. If any sentence, paragraph or clause of this Agreement, or combination of the same, is in violation of any applicable law or regulation, or is unenforceable or void for any reason, such sentence, paragraph, clause or combinations of same shall be modified to the extent necessary to accomplish the intention on such provision without violating applicable law or regulation. Notwithstanding, the remainder of the Agreement shall remain binding upon the parties.
(h) Notices. All notices, approvals, consents, requests or demands required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficiently given on the earlier of (i) actual receipt, (ii) three business days after being deposited in U.S. mail, registered or certified, postage prepaid, (iii) upon delivery, if delivered by hand (iv) one business day after transmission, if sent by facsimile (confirmation received) or (v) one business day after the business day of deposit with a reputable overnight courier for next business day delivery, freight prepaid. Notice in each case shall be addressed to the party entitled to receive such notice at the following address (or other such addresses as the parties may subsequently designate):
The Company:
Mavenir Systems, Inc.
1700 International Parkway
Suite 200
Richardson, Texas 75081
Fax: 416.916.4397
Attn: Pardeep Kohli
with a copy to:
(which shall not alone constitute notice)
Alan Bickerstaff
Andrews Kurth LLP
111 Congress Ave., Suite 1700
Austin, TX 78701
Fax: 512.542.5219
Executive:
Terry Hungle
18780 Wainsborough Lane
Dallas, TX 75287-5525
(i) Governing Law; Jurisdiction. This Agreement shall be governed by, and construed and enforced in accordance with, the employment laws and other laws of the State of Texas as they apply to contracts entered into and wholly to be performed therein by residents thereof. In addition, each party hereto irrevocably and unconditionally agrees that any suit, action or other legal proceeding arising out of this Agreement may be brought only in a state or federal court within Texas.
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(j) Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable of void, this Agreement shall continue in full force and effect without said provision.
(k) Effect of Headings. The Section and subsection headings contained herein are for convenience only and shall not affect the construction hereof.
(l) Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, and all such counterparts shall constitute but one instrument.
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IN WITNESS WHEREOF the parties have set their hands and seals as of the year and date first written above.
Mavenir Systems, Inc. | ||
By: | /s/ Pardeep Kohli | |
Name: | Pardeep Kohli | |
Title: |
President and Chief Executive Officer | |
Executive: | ||
/s/ Terry Hungle | ||
Terry Hungle |
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Exhibit 10.21
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the Agreement) is made as of the 18th day of December, 2012 between Mavenir Systems, Inc., a Delaware corporation (the Company), and Bahram Jalalizadeh, an individual resident of the State of Texas (Executive).
1. Employment; Duties; Full Time Employment. The Company hereby employs Executive, and Executive hereby accepts employment, as Executive Vice President of Business Development and Strategic Accounts of the Company. In such capacity, Executive shall perform such executive duties and exercise such powers for the Company and its subsidiaries as the Chief Executive Officer and President of the Company may assign to or vest in Executive from time to time and, as such, from and after the date hereof shall report directly to and shall be subject to the direction of the Companys Chief Executive Officer and President. Executive covenants and agrees that, at all times during Executives employment, Executive shall devote Executives full business time and efforts to Executives duties as an employee of the Company and that Executive will not, directly or indirectly, engage or participate in any other business or professional activities during Executives employment, other than activities for non-profit organizations that do not interfere or conflict with Executives obligations hereunder and such other activities approved by the Board of Directors of the Company from time to time.
2. At Will Employment. The Company agrees to employ Executive, and Executive agrees to serve the Company, on an at will basis, which means that either the Company or Executive may terminate Executives employment with the Company at any time and for any or no reason, as provided in and subject to Sections 7 and 8 below.
3. Compensation. During Executives employment, the Company shall pay to Executive the following compensation:
(a) Base Salary. The Company shall pay Executive a base salary (Base Salary) at the rate of $20,833.33 per month (annualized to $250,000), less applicable withholding taxes, payable in accordance with the Companys normal payroll practices. The Base Salary may be increased by the Board of Directors, or a duly authorized committee thereof, in its sole discretion. In addition, the Board of Directors, or a duly authorized committee thereof, may decrease the Base Salary in the event that the Board or such committee determines that financial exigencies require such decrease, provided that the compensation of all executives of the Company is also reduced at the same time in a substantially commensurate manner. Any increase or decrease in Base Salary
(together with the then existing Base Salary) shall serve as the Base Salary for future employment under this Agreement.
(b) Equity Compensation. Executive may be granted stock options, stock appreciation rights, restricted stock units, restricted stock or other stock- or performance-based equity awards (each, an Award), as determined from time to time in the discretion of the Companys Board of Directors or a duly authorized committee thereof, under the Companys Amended and Restated 2005 Stock Plan or any other equity incentive plan that may be adopted by the Companys Board of Directors (each, an Equity Plan). The terms of any such Award, including the vesting schedule, if any, will be set forth in an award agreement (an Award Agreement) in the form determined by the Companys Board of Directors or a duly authorized committee thereof. The vesting schedule of any such Awards shall be subject to additional acceleration as described in Section 7 of this Agreement, unless otherwise set forth in the applicable Award Agreement.
4. Other Compensation and Benefits. In addition to the compensation specified in Section 3, the Company shall provide the following to Executive:
(a) Incentive Plan Participation. Executive shall be eligible to participate in the Companys sales incentive plan, sales compensation plan or any other such incentive plan (each, a Sales Incentive Plan) to the extent determined by the Companys Board of Directors or a duly authorized committee thereof; provided however, that any such participation and payments shall be subject in all respects to the terms of such Sales Incentive Plan and the meeting of performance metrics as determined by the Companys Board of Directors or a duly authorized committee thereof.
(b) Benefits. During Executives employment, Executive shall be entitled to (i) vacation in accordance with the Companys vacation policy, to be taken in accordance with such policy, (ii) holidays and sick leave as made generally available to employees of the Company, and (iii) subject to eligibility therefor, the right to participate in any profit sharing plan, retirement plan, 401(k) plan, group life insurance plan and/or other insurance plan or medical expense plan or dental expense plan maintained by the Company for its senior executives generally and, if applicable, their family members.
(c) Directors and Officers Insurance. Executive shall be covered by the Companys Directors and Officers Insurance to the extent that the Company currently has or in the future obtains such insurance, for so long as Executive remains an executive officer or director of the Company.
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5. Business Expenses. The Company shall reimburse Executive for all reasonable and necessary business and travel expenses incurred by Executive in the performance of Executives duties under this Agreement. The determination of reasonable and necessary shall be made in the sole discretion of the Board. Such expenses shall be reimbursed in accordance with the Companys business expense guidelines, limits and procedures and upon presentation of proper expense vouchers or receipts; provided however, in no event shall reimbursement of an eligible expense hereunder be made later than the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit.
6. Termination on Death or Disability. Executives employment will terminate automatically upon Executives death or, upon thirty (30) days prior written notice from the Company, in the event of Disability. For purposes of this Section 6, Disability means that Executive, at the time notice is given, has been unable to substantially perform Executives duties under this Agreement for not less than sixty (60) work days within a six (6) consecutive month period as a result of Executives incapacity due to a physical or mental condition and, if reasonable accommodation is required by law, after reasonable accommodation. Upon any termination for death or Disability, Executive shall be entitled to receive (i) Executives Base Salary through the effective date of termination, (ii) the right to continue health care benefits under COBRA, at Executives cost, to the extent required and available by law, (iii) the right to exercise stock options, if any, subject to and in accordance with the terms of the respective options, (iv) reimbursement of all expenses for which Executive is entitled to be reimbursed pursuant to Section 5 above, but for which Executive has not yet been reimbursed, and (v) no other severance or benefits of any kind.
7. Involuntary Termination Without Cause; Resignation for Good Reason.
(a) Effect of Termination. The Company shall be entitled to terminate Executive with or without notice and with or without Cause (as defined below) and Executive shall be entitled to resign with or without Good Reason (as defined below), in each case at any time; provided, that if Executive is terminated by the Company involuntarily without Cause then Executive shall be entitled to receive:
(i) the Base Salary through the date of termination and any compensation earned under any Sales Incentive Plan through the date of termination, except and only to the extent that any such Sales Incentive Plan specifically provides otherwise;
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(ii) accelerated vesting with respect to all Awards under an Equity Plan held by Executive, such that all Awards under an Equity Plan that would vest based solely on the passage of time (rather than vesting based on performance conditions) and that would vest within the six (6) month period following the date of such termination shall vest effective as of the date of termination, except and only to the extent that any Award Agreement specifically provides otherwise;
(iii) continuing severance pay at a rate equal to 100% of Executives Base Salary, as then in effect (less applicable withholding taxes), for a period of six (6) months from the date of such termination, to be paid periodically in accordance with the Companys normal payroll practices (subject to Sections 7(c) and 7(d));
(iv) reimbursement of the health and dental care continuation premiums for Executive and Executives dependents incurred by Executive to effect continuation of health and dental insurance coverage for Executive and Executives dependents on the same basis as active employees, for a period of six (6) months from the date of such termination, to the extent that Executive is eligible for and elects continuation coverage under COBRA; provided however, in no event shall reimbursement of an eligible expense hereunder be made later than the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit;
(v) reimbursement of all expenses for which Executive is entitled to be reimbursed pursuant to Section 5 above, but for which Executive has not yet been reimbursed; provided however, in no event shall reimbursement of an eligible expense hereunder be made later than the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit; and
(vi) no other severance or benefits of any kind.
(b) Effect of Termination following Change of Control. The Company shall be entitled to terminate Executive with or without notice and with or without Cause (as defined below) and Executive shall be entitled to resign with or without Good Reason (as defined below), in each case at any time; provided, that if Executive is terminated by the Company involuntarily without Cause or Executive resigns with Good Reason upon or after a Change of Control, then Executive shall be entitled to receive:
(i) the Base Salary through the date of termination and any compensation earned under any Sales Incentive Plan through the date of termination, except and only to the extent that any such Sales Incentive Plan specifically provides otherwise;
(ii) accelerated vesting with respect to all Awards under an Equity Plan held by Executive, such that all Awards shall vest in full effective as of the date of such termination, except and only to the extent that any Award Agreement specifically provides
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otherwise, provided, that if a particular Award Agreement has a definition of Change of Control or Change in Control that differs from the definition of Change of Control set forth in this Agreement, such other definition shall apply solely with respect to acceleration of vesting of such Award pursuant to this Section 7(b)(ii);
(iii) reimbursement of the health and dental care continuation premiums for Executive and Executives dependents incurred by Executive to effect continuation of health and dental insurance coverage for Executive and Executives dependents on the same basis as active employees, for a period of six (6) months from the date of such termination, to the extent that Executive is eligible for and elects continuation coverage under COBRA; provided however, in no event shall reimbursement of an eligible expense hereunder be made later than the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit;
(iv) reimbursement of all expenses for which Executive is entitled to be reimbursed pursuant to Section 5 above, but for which Executive has not yet been reimbursed; provided however, in no event shall reimbursement of an eligible expense hereunder be made later than the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit; and
(v) no other severance or benefits of any kind.
(c) Section 409A. Notwithstanding anything to the contrary in this Agreement, no severance pay or benefits to be paid or provided to Executive, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended (the Code), and the final regulations and any guidance promulgated thereunder (Section 409A) (together, the Deferred Payments) will be paid or otherwise provided until Executive has a separation from service within the meaning of Section 409A. Similarly, no severance payable to Executive, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable until Executive has a separation from service within the meaning of Section 409A. If Executive is a specified employee within the meaning of Section 409A at the time of Executives termination (other than due to death), then the Deferred Payments that are payable within the first six (6) months following Executives separation from service will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executives separation from service. All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following Executives separation from service but prior to the six (6) month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executives death and all other Deferred
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Payments will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A. References in this Agreement to termination of Executives employment shall mean termination of Executives employment with the Company and all entities required to be aggregated with the Company and treated as one employer under Section 414(b) or (c) of the Code under circumstances that give rise to a separation from service within the meaning given to that term under Section 409A.
(d) Conditions Precedent. Any severance payments (other than payment of Base Salary pursuant to Section 7), vesting and/or benefits contemplated by Section 7 above are conditional on Executive (i) continuing to comply with all of the provisions of Section 9 below and the terms of the Confidentiality Agreement (as defined below), and (ii) signing and not revoking a separation agreement and release of claims providing for a release of all claims relating to Executives employment and/or this Agreement against the Company or its successor, its subsidiaries and parent company and their respective directors, officers and stockholders, excluding claims for payments and/or benefits the Company is required to pay to Executive that have not been made or delivered in accordance with terms of a written agreement between the Company and Executive or as required by law, in a form satisfactory to the Company, its parent company or its successor (the Release); provided that such Release becomes effective and irrevocable no later than sixty (60) days following the termination date or such earlier date required by the Release (such deadline, the Release Deadline). If the Release does not become effective by the Release Deadline, Executive will forfeit any rights to severance or benefits under this Section 7 or elsewhere in this Agreement. Any severance payments or other benefits under this Agreement that would be considered Deferred Payments (as defined in Section 7(c)) will be paid on, or, in the case of installments, will not commence until, the sixtieth (60th) day following Executives separation from service, or, if later, such time as required by Section 7(c). Except as required by Section 7(c), any installment payments that would have been made to Executive during the sixty (60) day period immediately following Executives separation from service but for the preceding sentence will be paid to Executive on the sixtieth (60th) day following Executives separation from service and the remaining payments will be made as provided in this Agreement, unless subject to the 6-month payment delay described herein. Any severance payments under this Agreement that would not be considered Deferred Payments will be paid on, or, in the case of installments, will not commence until, the first payroll date that occurs on or after the date the Release becomes effective and any installment payments that would have been made to Executive during the period prior to the date the Release becomes effective following Executives separation from service but for the preceding sentence will be paid to Executive on the first payroll date that occurs on or after the date the Release becomes effective.
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(e) Definitions.
(i) Cause. For purposes of this Agreement, Cause shall mean: (A) Executives continued failure to substantially perform the principal duties and obligations of Executives position with the Company (other than any such failure resulting from incapacity due to physical or mental illness), which failure is not remedied within ten (10) business days after receipt of written notice from the Company; (B) any willful act of personal dishonesty, fraud or misrepresentation taken by Executive which was intended to result in substantial gain or personal enrichment of Executive at the expense of the Company; (C) Executives willful violation of a federal or state law or regulation applicable to the Companys business which violation was or is reasonably likely to be materially and demonstrably injurious to the Company; (D) Executives conviction of a felony or a plea of nolo contendere to a felony charge under the laws of the United States or any State; or (E) Executives willful breach of the terms of Section 9 of this Agreement or Executives Confidentiality Agreement. For the purposes of this subsection 7(e)(i), no act or failure to act shall be considered willful unless done or omitted to be done in bad faith and without reasonable belief that the act or omission was in or not opposed to the best interests of the Company. The Board of Directors (excluding Executive if Executive is at such time a member of the Board) shall make all determinations relating to termination, including without limitation any determination regarding Cause, pursuant to Sections 7(e)(i) and (iii).
(ii) Change of Control. For the purposes of this Agreement, Change of Control shall mean a change in ownership or control of the Company effected through any of the following transactions:
(A) the closing of a merger, consolidation or other reorganization approved by the Companys stockholders in which a change in ownership or control of the Company is effected through the acquisition by any person or group of persons comprising a group within the meaning of Rule 13d-5(b)(1) of the Securities Exchange Act of 1934, as amended (the Exchange Act) (other than the Company or a person that, prior to such transaction, directly or indirectly controls, is controlled by or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Companys outstanding securities (as measured in terms of the power to vote with respect to the election of Board members);
(B) the closing of a sale, transfer or other disposition of all or substantially all of the Companys assets;
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(C) the closing of any transaction or series of related transactions pursuant to which any person or any group of persons comprising a group within the meaning of Rule 13d-5(b)(1) of the Exchange Act (other than the Company or a person that, prior to such transaction or series of related transactions, directly or indirectly controls, is controlled by or is under common control with, the Company) acquires directly or indirectly (whether as a result of a single acquisition or by reason of one or more acquisitions within the twelve (12)-month period ending with the most recent acquisition) beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Companys securities (as measured in terms of the power to vote with respect to the election of Board members) outstanding immediately after the consummation of such transaction or series of related transactions, whether such transaction involves a direct issuance from the Company or the acquisition of outstanding securities held by one or more of the Companys existing stockholders; or
(D) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases by reason of one or more contested elections for Board membership to be comprised of individuals who either (x) have been Board members continuously since the beginning of such period or (y) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (x) who were still in office at the time the Board approved such election or nomination.
Notwithstanding the foregoing, solely with respect to any Award that is subject to Section 409A and payable upon a Change of Control, the term Change of Control shall mean an event described in one or more of the foregoing provisions of this definition, but only if it also constitutes a change of control event within the meaning of Treas. Reg. §1.409A-3(i)(5).
(iii) Good Reason. For purposes of this Agreement, Good Reason shall mean the occurrence of any of the following without Executives consent: (A) a material reduction of Executives duties or responsibilities, relative to Executives duties or responsibilities as in effect immediately prior to such reduction; provided, however, that any reduction in Executives duties or responsibilities resulting solely from and occurring concurrently with the Company being acquired by and made a part of a larger entity (as, for example, when a chief financial officer becomes an employee of the acquiring corporation following an acquisition but is not the chief financial officer of the acquiring corporation) shall not constitute Good Reason; (B) except as provided in Section 3(a), a material reduction in the Executives Base Salary as in effect immediately prior to such reduction; (C) except as provided in Section 3, a material reduction by the Company in the kind or level of employee benefits, including compensation under a Sales Incentive Plan (as provided by the terms of such Sales
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Incentive Plan in effect at the time of such material reduction), to which the Executive was entitled immediately prior to such reduction, with the result that Executives overall benefits package is materially reduced; or (D) the relocation of Executive to a facility or a location more than fifty (50) miles from Executives then present location.
8. Involuntary Termination for Cause; Resignation without Good Reason.
(a) Effectiveness. Notwithstanding any other provision of this Agreement, the Company may terminate Executives employment at any time for Cause, and Executive may at any time voluntarily resign without Good Reason. Termination for Cause shall be effective on the date the Company gives notice to Executive of such termination in accordance with this Agreement unless otherwise agreed by the parties. Resignation by Executive without Good Reason shall be effective on the date Executive gives notice to the Company of such resignation in accordance with this Agreement unless otherwise agreed by the parties.
(b) Effect of Termination. In the case of the Companys termination of Executives employment for Cause or Executives resignation from Executives employment without Good Reason, Executive shall be entitled to receive (i) Base Salary through the effective date of termination of employment and any compensation earned under any Sales Incentive Plan through the date of termination, (ii) any benefits payable in connection with such a termination under any standard severance program of the Company then in effect and published in writing, (iii) the right to continue health care benefits under COBRA, at Executives cost, to the extent required and available by law, (iv) the right to exercise any stock options subject to and in accordance with the terms of the respective options, (v) reimbursement of all expenses for which Executive is entitled to be reimbursed pursuant to Section 5 above, but for which Executive has not yet been reimbursed, and (vi) no other severance or benefits of any kind.
9. Company Matters; Restrictive Covenants.
(a) Proprietary Information and Inventions. Executive has signed an Employee Proprietary Information Agreement (Confidentiality Agreement) in the form required to be executed by each employee of the Company.
(b) Confidential Information.
.
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(i) Company Information. Executive agrees at all times during Executives employment and thereafter to hold in strictest confidence, and not to use, except for the benefit of the Company, any of the Companys Confidential Information; or disclose to any person, firm or corporation any of the Companys Confidential Information except as authorized in writing by the Companys Board of Directors or, if expressly authorized by the Companys management, pursuant to a written non-disclosure agreement that sufficiently protects the Confidential Information. Executive understands that Confidential Information means any information that relates to the Companys actual or anticipated business or research and development, technical data, trade secrets or know-how, including, but not limited to, research, product plans or other information regarding the Companys products or services and markets therefor, customer lists and customers (including, but not limited to, the Companys customers on whom Executive called or with whom Executive became acquainted during the term of Executives employment), software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances or other business information. Executive further understands that Confidential Information does not include any of the foregoing items that is or becomes publicly known through no wrongful act or omission of Executive or of others who were under confidentiality obligations as to the item or items involved or improvements or new versions thereof.
(ii) Provision of Confidential Information. Prior to the execution of this Agreement the Company has provided, and following the execution of this Agreement, the Company agrees to continue to provide, Executive with Confidential Information regarding the Company that enabled and will continue to enable Executive to optimize the performance of Executives duties to the Company.
(c) Ventures. If, during Executives employment, Executive is engaged in or associated with the planning or implementing of any project, program or venture involving the Company and any third parties, all rights in such project, program or venture shall belong to the Company (or the third party, to the extent provided in any agreement between the Company and the third party). Except as formally approved by the Company, Executive shall not be entitled to any interest in such project, program or venture or to any commission, finders fee or other compensation in connection therewith other than the salary or other compensation to be paid to Executive as provided in this Agreement.
(d) Non-Solicitation.
(i) Non-Solicitation of Employees. During employment and for a period of twelve (12) months following the end of employment, Executive will not (directly or indirectly, on behalf of Executive or any third party) hire any employee, contractor or consultant
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of the Company or solicit, induce, recruit or encourage any of the Companys employees, contractors or consultants to leave their employment or terminate their relationship with the Company.
(ii) Non-Solicitation of Clients and Prospective Clients. During employment and for a period of twelve (12) months following the end of employment for any reason, Executive agrees to abide by the following restrictions:
(A) Executive shall not interfere with existing client relationships of the Company (i.e., clients for which at least one project has been conducted in the last two years), and shall not solicit or attempt to take away any business of the Company that is either under way or about to begin at the termination of Executives employment.
(B) Executive shall not interfere or compete in any way with any proposal efforts of the Company already in progress (that is, a proposal sent to or being then currently developed for a specific client or clients, or contemplated to be submitted to a specific client or clients by the Company within twelve (12) months) at the end of employment.
(C) Executive shall not make use of any of Executives personal relationships or business contacts developed during the course of employment with the Company and utilized for business purposes within the two (2) years prior to termination, for the benefit of Executive or another, in a competitive manner with respect to the business of the Company.
(e) Covenant Not to Compete.
(i) Executive agrees that during the course of Executives employment and for a period of twelve (12) months immediately following the termination of Executives relationship with the Company for any reason, whether with or without Cause, at the option either of the Company or Executive, with or without notice, Executive will not, either directly or indirectly, (i) serve as an advisor, agent, consultant, director, employee, officer, partner, proprietor or otherwise of, (ii) have any ownership interest in (except for passive ownership of one percent (1%) or less of any entity whose securities have been registered under the Securities Act of 1933, as amended (the Securities Act), or Section 12 of the Exchange Act) or (iii) participate in the organization, financing, operation, management or control of, any business in competition with the Companys business as conducted by the Company during the course of Executives employment with the Company. The foregoing covenant shall cover Executives activities in every part of the Territory. Territory shall mean (i) all counties in the State of Texas, (ii) all other states of the United States of America and (iii) all other countries of the world; provided that, with respect to clauses (ii) and (iii), the Company maintains non-trivial
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operations, facilities, or customers in such geographic area prior to the date of the termination of Executives relationship with the Company.
(ii) Executive acknowledges that Executives fulfillment of the obligations contained in this Agreement and the Confidentiality Agreement, including, but not limited to, Executives obligation neither to use, except for the benefit of the Company, or to disclose the Companys Confidential Information and Executives obligation not to compete contained in subsection 9(e)(i) above is necessary to protect the Companys Confidential Information and to preserve the Companys value and goodwill. Executive further acknowledges the time, geographic and scope limitations of Executives obligations under subsection 9(e)(i) above are reasonable, especially in light of the Companys desire to protect its Confidential Information, and that Executive will not be precluded from gainful employment if Executive is obligated not to compete with the Company during the period and within the Territory as described above.
(iii) The covenants contained in subsection 9(e)(i) above shall be construed as a series of separate covenants, one for each city, county and state of any geographic area in the Territory. Except for geographic coverage, each such separate covenant shall be deemed identical in terms to the covenant contained in subsection 9(e)(i). If, in any judicial proceeding, a court refuses to enforce any of such separate covenants (or any part thereof), then such unenforceable covenant (or such part) shall be eliminated from this Agreement to the extent necessary to permit the remaining separate covenants (or portions thereof) to be enforced. In the event the provisions of subsection 9(e)(i) are deemed to exceed the time, geographic or scope limitations permitted by applicable law, then such provisions shall be reformed to the maximum time, geographic or scope limitations, as the case may be, then permitted by such law.
(f) Acknowledgements. Executive acknowledges that the non-solicitation and non-competition covenants Executive is providing in this Agreement are reasonable and necessary to protect the legitimate interests of the Company. Executive further acknowledges that Executives non-disclosure promises contained in this Agreement and the Confidentiality Agreement are in exchange for the Companys promises contained in this Agreement and the Confidentiality Agreement to provide Executive with confidential information and trade secrets of the Company.
(g) Other Obligations Upon Termination. On termination of Executives employment, Executive shall:
(i) immediately (and with contemporaneous effect) resign any directorships, offices or other positions that Executive may hold in the Company or any of its affiliates;
(ii) immediately deliver to the Company all documents, books, materials, records, correspondence, papers and information (on whatever media and wherever located) relating to the business or affairs of the Company or its business contacts, any keys and
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any other property of the Company, which is in Executives possession or under Executives control;
(iii) irretrievably delete any information relating to the business of the Company stored on any magnetic or optical disk or memory and all matter derived from such sources which is in Executives possession or under Executives control outside the premises of the Company; and
(iv) provide the Company with a signed statement that Executive has complied fully with Executives obligations under this Section 9(g).
(h) Notification of New Employer. In the event that Executive leaves the employ of the Company, Executive grants consent to notification by the Company to Executives new employer about Executives rights and obligations under this Agreement and the Confidentiality Agreement.
10. Tax. If any portion of the severance benefits, or any other payment under this Agreement, or under any other agreement with, or plan of the Company, including but not limited to restricted stock, stock options, warrants and other long-term incentives (in the aggregate, Total Payments) would be subject to the excise tax imposed by Section 4999 of the Code, as amended, or any similar tax that may hereafter be imposed (such excise tax together with any similar tax are hereinafter collectively referred to as the Excise Tax), then Executive shall be entitled to receive from the Company an additional payment (the Gross-up Payment) (i.e., in addition to such other severance benefits, or any other payments under this Agreement) in an amount such that the net amount of Total Payments and Gross-up Payment retained by the Executive, after the calculation and deduction of all Excise Tax on the Total Payments and all federal, state and local income tax, employment tax and Excise Tax on the Gross-up Payment, shall be equal to the Total Payments. Notwithstanding any other provision of this Section 10 to the contrary, to the extent permitted under Section 409A of the Code or any regulatory guidance issued thereunder by the Internal Revenue Service, the term Excise Tax, as defined above in this Section 10, shall include any interest or penalties imposed with respect to such Excise Tax. Subject to Section 7(c), any Gross-up Payment shall be made as soon as practicable after Executive remits the related taxes, but in all events the Gross-up Payment shall be made within thirty (30) days after Executive remits the related taxes to the taxing authority.
11. Clawback of Incentive Compensation. Executive acknowledges that to the extent required by applicable law or any written Company policy that may, in the discretion of the Board of Directors or a duly authorized committee thereof, be adopted to implement the requirements of such law (including without limitation Section 304 of the Sarbanes Oxley Act of 2002 and Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010), compensation paid to Executive
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shall be subject to any required clawback, forfeiture, recoupment or similar requirement. Executive agrees that the terms and conditions of this Agreement shall be deemed automatically amended as may be necessary from time to time to ensure compliance by Executive, the Company and this Agreement with such policies or applicable law. No clawback of compensation under any policy adopted as contemplated in this Section 11 shall give rise to Executives right to resign for Good Reason.
12. Miscellaneous.
(a) Withholding Taxes. The Company may withhold from all salary, bonus or other benefits payable under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling.
(b) Entire Agreement; Binding Effect. This Agreement and the Confidentiality Agreement (together with any Equity Plan and any Award Agreement issued as contemplated by Section 3(b) above) set forth the entire understanding between the parties as to the subject matter of this Agreement and supersede all prior agreements, commitments, representations, writings and discussions between them; and neither of the parties shall be bound by any obligations, conditions, warranties or representations with respect to the subject matter of this Agreement, the Confidentiality Agreement, any Equity Plan or any Award Agreement except as expressly provided herein or therein or as duly set forth on or subsequent to the date hereof in a written instrument signed by the proper and fully authorized representative of the party to be bound hereby. This Agreement is binding on Executive and on the Company and Executives and the Companys successors and assigns (whether by assignment, by operation of law or otherwise); provided that neither this Agreement nor any rights or obligations hereunder may be assigned by Executive or the Company without the prior written consent of the other party (except that the Company shall be entitled to assign this Agreement in connection with a Change of Control).
(c) Absence of Conflict. Executive represents and warrants that Executives employment by the Company as described herein will not conflict with and will not be constrained by any prior employment or consulting agreement or relationship. Executive further agrees that during Executives employment with the Company, Executive will not improperly use or disclose any proprietary information or trade secrets of any former or concurrent employer or other person or entity and that Executive will not bring onto the premises of the Company any unpublished document or proprietary information belonging to any such employer, person or entity unless consented to in writing by such employer, person or entity.
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(d) Arbitration.
(i) General. In consideration of Executives service to the Company, its promise to arbitrate all employment related disputes and Executives receipt of the compensation and other benefits paid to Executive by the Company, at present and in the future, Executive agrees that any and all controversies, claims, or disputes (with the sole exception of those disputes that may arise from the Confidentiality Agreement, which shall be resolved in accordance with the dispute resolution procedures set forth therein) with anyone (including the Company and any employee, officer, director, stockholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from Executives service to the Company under this Agreement or otherwise or the termination of Executives service with the Company, including any breach of this Agreement, shall be subject to binding arbitration under the Arbitration Rules set forth by the American Arbitration Association for the resolution of employment disputes (the Rules) and pursuant to Texas law. Disputes which Executive agrees to arbitrate, and thereby agrees to waive any right to a trial by jury, include any statutory claims under state or federal law. Executive further understands that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive.
(ii) Procedure. Any arbitration will be administered by the American Arbitration Association (AAA) and a neutral arbitrator will be selected in a manner consistent with its National Rules for the Resolution of Employment Disputes. The arbitration proceedings will be conducted in Richardson, Texas, and will allow for discovery according to the rules set forth in the National Rules for the Resolution of Employment Disputes. The arbitrator shall have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. The arbitrator shall issue a written decision including findings of fact and conclusions of law on the merits of its award. The arbitrator shall have the power to award any remedies, including attorneys fees and costs, available under applicable law. The Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that Executive shall pay the first $125 of any filing and/or administration fees associated with any arbitration that Executive initiates. The arbitrator shall administer and conduct any arbitration in a manner consistent with the AAAs National Rules for the Resolution of Employment Disputes.
(iii) Remedy. Arbitration shall be the sole, exclusive and final remedy for any dispute (with the sole exception of those disputes that may arise from the Confidentiality Agreement and Section 9 of this Agreement) between Executive and the Company. Accordingly, except as otherwise provided herein, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator shall not order or require the Company to adopt a policy not otherwise required by law, which the Company has not adopted.
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(iv) Availability of Injunctive Relief. Any party may also petition the court for injunctive relief where either party alleges or claims a violation of this Agreement or the Confidentiality Agreement, including but not limited to a breach of the restrictive covenants in Section 9 above. In the event that either party seeks injunctive relief, no bond shall be required and the prevailing party shall be entitled to recover reasonable costs and attorneys fees.
(e) Voluntary Nature of Agreement; Legal Rights. Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. Executive acknowledges that Executive has had the opportunity to consult with an attorney regarding the provisions of this Agreement and has either obtained such advice of counsel or knowingly waived the opportunity to seek such advice. Executive has carefully read this Agreement and has asked any questions needed for Executive to understand the terms, consequences and binding effect of this Agreement and fully understand it, including that Executive is waiving Executives right to a jury trial.
(f) Waivers. No party shall be deemed to have waived any right, power or privilege under this Agreement or any provisions hereof unless such waiver shall have been duly executed in writing and acknowledged by the party to be charged with such waiver. The failure of any party at any time to insist on performance of any of the provisions of this Agreement shall in no way be construed to be a waiver of such provisions, nor in any way to affect the validity of this Agreement or any part hereof. No waiver of any breach of this Agreement shall be held to be a waiver of any other subsequent breach.
(g) Reformation. If any sentence, paragraph or clause of this Agreement, or combination of the same, is in violation of any applicable law or regulation, or is unenforceable or void for any reason, such sentence, paragraph, clause or combinations of same shall be modified to the extent necessary to accomplish the intention on such provision without violating applicable law or regulation. Notwithstanding, the remainder of the Agreement shall remain binding upon the parties.
(h) Notices. All notices, approvals, consents, requests or demands required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficiently given on the earlier of (i) actual receipt, (ii) three business days after being deposited in U.S. mail, registered or certified, postage prepaid, (iii) upon delivery, if delivered by hand (iv) one business day after transmission, if sent by facsimile (confirmation received) or (v) one business day after the business day of deposit with a reputable overnight courier for next business day delivery, freight prepaid. Notice in each case shall be addressed to the party entitled to receive such notice at the following address (or other such addresses as the parties may subsequently designate):
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The Company:
Mavenir Systems, Inc.
1700 International Parkway
Suite 200
Richardson, Texas 75081
Fax: 469.916.4397
Attn: Terry Hungle
with a copy to:
(which shall not alone constitute notice)
Alan Bickerstaff
Andrews Kurth LLP
111 Congress Ave., Suite 1700
Austin, TX 78701
Fax: 512.542.5219
Executive:
Bahram Jalalizadeh
2319 Highland Heights
Carrollton, TX 75007
(i) Governing Law; Jurisdiction. This Agreement shall be governed by, and construed and enforced in accordance with, the employment laws and other laws of the State of Texas as they apply to contracts entered into and wholly to be performed therein by residents thereof. In addition, each party hereto irrevocably and unconditionally agrees that any suit, action or other legal proceeding arising out of this Agreement may be brought only in a state or federal court within Texas.
(j) Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable of void, this Agreement shall continue in full force and effect without said provision.
(k) Effect of Headings. The Section and subsection headings contained herein are for convenience only and shall not affect the construction hereof.
(l) Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, and all such counterparts shall constitute but one instrument.
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IN WITNESS WHEREOF the parties have set their hands and seals as of the year and date first written above.
Mavenir Systems, Inc. | ||
By: | /s/ Terry Hungle | |
Name: | Terry Hungle | |
Title: |
Chief Financial Officer | |
Executive: | ||
/s/ Bahram Jalalizadeh | ||
Bahram Jalalizadeh |
MAVENIR SYSTEMS, INC.
SIGNATURE PAGE TO EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit 10.22
MAVENIR SOLUTIONS, INC. PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT
This Participation Agreement (the Agreement) is entered into as of 27th, June, 2011, following Mavenir Systems Acquisition of Airwide Solutions on 26th May 2011 (the Effective Date) by and between Mavenir Solutions inc. (on behalf of airwide solutions inc)., a Delaware corporation (the Company), and Terence McCabe (Employee). Attached is a copy of the Companys Incentive Bonus Plan (the Plan). Unless otherwise defined herein, all capitalized terms shall have the meanings ascribed to them in the Plan.
RECITALS:
WHEREAS, the Company employs Employee and desires to provide Employee with certain bonuses payable as described herein; and
WHEREAS, the Company and Employee desire to set forth their understandings with respect to the matters described herein.
NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties, and agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
RETENTION BONUS
1.1 Retention Bonus». Upon the satisfaction of the conditions set forth herein, Employee shall be eligible to receive cash payments (the Cash Payments) totaling $150,000 (the Total Bonus Amount) pursuant to the Plan to be vested as follows: (i) a Cash Payment equaling 30% of the Total Bonus Amount shall be vested on the date that is the six (6) month anniversary of the Effective Date; (ii) a Cash Payment equaling 30% of the Total Bonus Amount shall be vested on the date that is the twelve (12) month anniversary of the Effective Date; and (iii) a Cash Payment equaling 40% of the Total Bonus Amount shall be vested on the date that is the eighteen (18) month anniversary of the Effective Date (the Retention Bonus Period and each vesting date, a Vesting Date). Each Cash Payment shall be paid on the first business day following the date that the Release becomes effective and irrevocable following the applicable Vesting Date. Employee shall only receive a Cash Payment if Employee is in current service to the Company on the date such Cash Payment is to be paid; provided, however, that, if Employee is terminated by the Company Without Cause, or Employee terminates his or her employment with the Company for Good Reason, and in either case such termination constitutes an involuntary separation from service within the meaning of the regulations under Section 409A of the Internal Revenue Code of 1986, as amended (Section 409A), the Company shall pay Employee all remaining Cash Payments to be paid to Employee pursuant to this Agreement within 10 days of the termination date. Good Reason has the meaning given such term in the Plan. Without Cause has the meaning given such term in the Plan.
1.2 Payment». The Cash Payments shall be paid to Employee in accordance with the Companys normal payroll practices.
1.3 Death of Employee». Notwithstanding the foregoing, if Employee dies following the Effective Date while in service to the Company as an employee, the remaining Cash Payments will be paid to Employees estate within ten (10) days of Employees death.
1.4 Invention Assignment Agreement». As of the Effective Date, Employee shall execute and deliver the Companys Invention and Nondisclosure Agreement, a form of which is attached hereto as Exhibit A, if Employee has not already executed and delivered such agreement (whether already executed or to be executed in connection herewith, the INA).
1.5 Release of Claims». (a) Release on Effective Date. In connection with the execution of this Agreement, Employee shall execute and deliver and not revoke the Release and Acknowledgement Agreement, attached hereto as Exhibit B.
(b) Release on Date of Cash Payment. As a condition to Employees receipt of each Cash Payment, Employee agrees to execute and deliver and not revoke a release, substantially in the form attached hereto as Exhibit B, provided that such Release becomes effective and irrevocable no later than sixty (60) days following the Vesting Date (the Release Deadline). The receipt of the Cash Payments will be subject to Employees continued compliance with this Agreement and the INA. If the Release does not become effective and irrevocable by the Release Deadline, Employee will forfeit Employees rights to the applicable Cash Payment under this Agreement. Employee acknowledges and agrees that any material breach of this Agreement, the Release or of the INA, which breach has not been cured within ten (10) days of written notice from the Company, shall entitle the Company immediately to cease providing the Cash Payments under this Agreement, recover any Cash Payments already provided to Employee under this Agreement, and to obtain damages.
ARTICLE II
MISCELLANEOUS
2.1 Confidentiality». Employee understands and acknowledges that any amount payable to Employee pursuant to this Agreement is a highly confidential matter and Employee agrees not to disclose such amount to any person (including other employees of the Company) except as required by law, and that any violation of this covenant by Employee shall result in a forfeiture of all rights Employee may have to receive any bonus hereunder.
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2.2 No Effect on Employment». This Agreement does not constitute a contract of employment or consultancy or impose on either the Employee or the Company, its subsidiaries or its successor any obligation to retain the Employee as an employee, consultant or director. This Agreement does not change the status of the Employee as an employee at will, the policies of the Company regarding termination of employment, nor guarantee further continuing employment.
2.3 Assignability ». The Company shall have the right to assign this Agreement, either in whole or in part, to any Affiliate of the Company. To the maximum extent permitted by law, Employees rights under this Agreement shall not be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of the person entitled to such benefit. As used herein, Affiliate shall mean any person that directly or indirectly controls, is controlled by, or is under common control with, the Company.
2.4 Amendment». No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the parties hereto. No waiver by either party hereto at any time of any breach by the other party hereto of, or in compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or any prior subsequent time. This Agreement is a complete integration of the parties agreement; no agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement.
2.5 Governing Law». The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Texas without reference to principles of conflicts of law.
2.6 Withholding Tax». Any cash payments provided for hereunder shall be paid net of any applicable tax withholding required under federal, state or local law, and the Employee acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Employee any federal, state, local or other taxes of any kind required by law to be withheld.
2.7 No Employment Agreement». This Agreement is not, and shall not be construed as being, an employment agreement between Employee and the Company for any fixed period.
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2.8 Severability». The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
2.9 Successors». This Agreement and all obligations of the parties hereunder shall be binding upon and inure to the benefit of successors and assigns of such parties. This Agreement shall inure to the benefit of and be enforceable by the Employees personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Employee should die while any amount would still be payable to the Employee or his/her family hereunder if the Employee had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Employees estate.
2.10 No Ownership Interest». This Agreement shall not entitle Employee to any right, title or interest as an equity interest owner of the Company.
2.11 Counterparts». This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
2.12 Notices». All notices and demands which any party may be required or desire to serve upon the other party to this Agreement shall be in writing and shall be served upon such other party by mailing a copy, United States Mail, postage prepaid, certified, return receipt requested, or by overnight courier service, addressed to such party at the address set forth on the signature page hereto.
2.13 Acknowledgement». Employee acknowledges that Employee has been advised to consult with an attorney of Employees choice prior to entering into this Agreement. Employee acknowledges that Employee has had an opportunity to consult with legal counsel and tax and other advisors regarding the preparation of this Agreement and the matters related thereto, including the release and waiver provisions. Employee understands and acknowledges that Andrews Kurth LLP has acted solely as legal counsel for Mavenir Systems, Inc. with respect to the preparation of this Agreement and the other matters related thereto, and has not acted as legal counsel for Employee.
2.14 Section 409A». The Cash Payments under this Agreement are intended to be exempt from Section 409A under the short-term deferral exception or to comply with the requirements of Section 409A so as to avoid the imposition of income tax thereunder, and the provisions of this
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Agreement will be administered, interpreted and construed accordingly. The applicable provisions of Section 409A and the regulations and guidelines issued thereunder are hereby incorporated by reference and shall control any provision in this Agreement in conflict therewith.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement effective for all purposes as of the Effective Date.
MAVENIR SYSTEMS, INC. | ||
By: | /s/ Terry Hungle | |
Name | Terry Hungle | |
Title: | Chief Financial Officer | |
EMPLOYEE | ||
/s/ Terence McCabe | ||
Address: | 2936 Chartrand St. | |
Lefaivre, Ontario, K0B1J0 | ||
Canada |
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Exhibit 10.23
Without Prejudice and Subject to Contract
THIS AGREEMENT is made on the 12th August 2013 (Execution Date)
1. | THE PARTIES |
1.1 | The Company: Mavenir Systems UK Limited |
whose address is New Century Place, 20/22 Queens Road, Reading, Berkshire RG1 4AU (and as agent for any and all Group companies and is duly authorised in that behalf) |
1.2 | The Employee: Matt Dunnett |
whose address is 13 Brudenell, Windsor, Berkshire SL4 4UR
2. | THE BACKGROUND |
The Employee is employed by the Company under the terms of a contract dated 17th April 2012, headed Statement of Main Terms of Employment. The Employees employment with the Company will terminate on 4th October 2013, (the Termination Date).
2.1 | Within this Agreement the words Group Company shall mean any company which from time to time is a subsidiary or a holding company of the Company or a subsidiary of such holding company and subsidiary and holding company have the meanings attributed to them by section 1159 of the Companies Act 2006 or any modification or statutory re-enactment of the same. |
2.2 | This Agreement records the entire agreement pursuant to which the Company and the Employee have agreed to settle all claims that the Employee has or may have against the Company or any officer or employee of the Company or against any Group Company or any officer or employee of any such Group Company as stated in Clause 4.1 herein. No variation to these terms is valid unless set out in writing and signed by the Employee and the Company. |
2.3 | The Employee will spend the period from 12th August until the Termination Date on garden leave pursuant to paragraph 9.4 of the Companys Employee Handbook. During this period the Employee will not attend the Companys offices or carry out any duties for the Company, unless specifically requested to do so by the Company, but will be available to answer any queries during this time and will notify the Company or any planned holiday dates. During the garden leave period, the Employee will not have business dealings with the Companys employees, customers or potential customers, agents or distributors and will not take up any other office, employment, consultancy or partnership, or trade on his own account, (referred to collectively as Other Business Interests), without the Companys prior written consent. During the garden leave period the Employees implied duties of loyalty and good faith shall continue to apply and on no account may he undertake any activities which compete directly or indirectly with the Company or any Group Company. Prior to commencing his period of garden leave, the Employee will co-operate with the Company in an orderly handover of his duties and responsibilities to such person or persons as the Company may direct and shall advise the Company of any passwords that he has used on the Companys computer systems. |
2.4 | The Company confirms that the Employees salary in respect of the period up to and including the Termination Date will be paid via the normal August, September and October 2013 payrolls on or around 20th each month subject to all necessary deductions for income tax and employee National Insurance Contributions, and also agrees to maintain all the Employees contractual benefits up to the Termination Date. By the Termination Date the Employee will have taken more holiday than the amount that would have accrued to him. Therefore he will not be due a payment in respect of accrued but untaken holiday |
on termination of employment. The Company will however waive its rights to seek repayment in respect of holiday taken in excess of the Employees accrued entitlement. The Employee will continue to be covered by the Companys private medical plan until 31st December 2013. |
2.5 | The Company confirms that the Employee will be eligible for commission on any orders booked for the International region up to 4th October 2013 and cash collection payments on booked orders for the International region up to 31st December 2013 in accordance with and subject always to the rules of the 2013 Sales Commission Plan (the Plan). Commissions may be reduced, or extinguished in accordance with the said rules in the event of sales credits, cancellations, returns or other adjustments of customer orders as provided for in the Plan and the provisions of the Plan dealing with the same and with any repayments of commission from employees who have left the Company shall continue to apply to the Employee. |
3. | AGREEMENT BY THE COMPANY |
3.1 | The Company hereby agrees to pay to the Employee as compensation for loss of office and in full and final settlement of the particular complaints set out in Clause 4.1 herein: |
3.1.1 | The sum of £49,500 within the period of thirty days after the Termination Date. The payment referred to in Clause 3.1.1 above shall be made (after the Employee has been provided with his P45), without deduction of income tax or National Insurance Contributions in relation to the first £30,000 of the payment, the balance being subject to deduction of tax at the OT rate or such other subsequent tax withholding requirements as required by the Income Tax (Earnings and Pensions) Act 2003 or any modification or statutory re-enactment of the same. The Employee will assume responsibility for the payment of any further tax due and shall account to HM Revenue and Customers in due course for such tax. |
3.2 | A condition of the payment referred to in Clause 3.1.1 is that any liability to income tax or employees National Insurance Contributions in respect of the first £30,000 of this payment and in relation to the other sums paid to the Employee pursuant to this agreement (save where the Employer has agreed to make deductions at source prior to payment to the Employee), shall be the responsibility of the Employee who agrees to indemnify and keep the Company indemnified on demand in respect of such income tax or employee National Insurance Contributions (including any interest or penalties or associated costs). It shall be a condition precedent to the indemnity that the Company agrees to promptly notify the Employee of any claim for income tax or employee national insurance and shall provide the Employee with reasonable assistance (excluding financial assistance but including, if required, the provision of any relevant documentation) in order to enable the Employee to dispute any claim for income tax and the Company further undertakes not to make any payment of income tax or employee national insurance without allowing the Employee a reasonable opportunity to dispute any such claim with HM Revenue & Customs or relevant authorities at his own cost. |
3.3 | The Company and Employee agree that as of the Termination Date the Employee will hold options to purchase an aggregate of 300,000 shares of the Companys Common Stock, 0.001 par value per share and will be vested in and have the right to purchase 175,000 shares of the Companys Common Stock as of October 4, 2013 pursuant to a Stock Option Agreements dated as December 13, 2011, by and between the Company and Employee (the Option Agreement). As part consideration for the Employees execution of this Agreement, the Company agrees that on the Termination Date Employee shall vest in and have the right to exercise an additional 18,750 shares of its Common Stock pursuant to the Option Agreement that would otherwise |
remain unvested and unexercisable, for a total of 193,750 shares of Common Stock exercisable pursuant to the Option Agreement. Furthermore, the Company agrees that the period the Employee has to exercise each such option is extended until June 30th 2014. The Employee acknowledges that any shares of Common Stock acquired by the Employee upon exercise of the Option Agreement shall continue to be subject to the 2005 Stock Plan and the Companys right of first refusal in the Option Agreement and the other restrictions on transfer set forth therein. |
3.4 | The Company will reimburse the Employee for any outstanding business expenses properly due to him from the Company in accordance with the Companys expense claim arrangements, subject to the Employee presenting a claim to the Company by the Termination Date together with all vouchers and receipts that the Company may reasonably require. |
3.5 | The Company will pay to THOMAS MANSFIELD, the Employees Solicitors, as Qualified Lawyers, a sum not exceeding £350 plus VAT as a contribution towards the legal costs incurred by the Employee for advice as to the terms and effect of this Agreement, within fourteen days of receipt of an appropriate invoice from the Employees Solicitors addressed to the Employee, marked payable by the Company and the Companys receipt of two copies of this Agreement signed by the Employee with the Certificate attached to this Agreement at Schedule 1 signed by the Qualified Lawyer. |
4. | IN FULL AND FINAL SETTLEMENT |
4.1 | The terms of this Agreement are without admission of liability on the part of the Company or any Group Company and are in full and final settlement of all claims, whether contractual, statutory or otherwise, which the Employee has against the Company or any officer or employee of the Company or against any Group Company or any officer or employee of any Group Company, arising out of or in connection with the Employees employment or its termination, and without prejudice to the generality of the foregoing, including but not limited to the claims stated in the Sub-Clauses of this Clause 4.1 under English and/or European law and all subsequent amending legislation (the particular complaints) and including any future claims arising between the date of this Agreement and the Termination Date: |
4.1.1 | Any claim for breach of contract including but not limited to any claim in relation to the giving of notice, or payment in lieu of notice, or in relation to wages and future earnings, including holiday pay, commission and/or any claim in relation to any other type of bonus, benefit, carve out payment or provision (whether provided by the Company or any Group company), including Company funded healthcare, life insurance contributions and pension contributions and/or any claim in relation to wrongful dismissal; |
4.1.2 | Any claim for unfair dismissal. |
4.1.3 | Any other claim arising out of any contravention or alleged contravention of the Employment Rights Act 1996 including but not limited to any claim in relation to Part II (Protection of Wages) and Part IX (Termination of Employment); |
4.1.4 | Any claim related to working time, rest periods or breaks or annual leave under the Working Time Regulations 1998. |
4.1.5 | Any claim relating to grievance or grievance procedure (and the Employee hereby acknowledges that he does not have any outstanding grievances against the Company or any Group Company) |
4.1.6 | Any claim for discrimination or harassment on grounds of, or related to, sex, race, nationality, ethnic origins, marital status, disability, religion, belief, sexual orientation age, or transsexuality, whether under the Equality Act 2010 or otherwise |
4.1.7 | Any claim relating to less favourable treatment, discrimination or harassment by reason of part-time or fixed term status |
4.1.8 | Any claim for a redundancy payment |
4.1.9 | Any claim relating to the Employers or any Group Companys shares or securities, including claims relating to any share option scheme operated by or on behalf of the Employer or any Group Company but subject to clause 3.3 above. |
The Employee has either asserted the above claims prior to entering into this Agreement, (and does now assert and agrees to settle under this Agreement a claim for unfair dismissal), or where such claims have not been asserted, the Employee represents to the Employer and the Employer relies on this representation in entering into this Agreement, that, having taken independent legal advice, the Employee is not aware of any facts or matters which might give rise to any such claims.
4.2 | This Agreement does not settle any claim for latent personal injury whether mental or physical unrelated to the termination of the Employees employment or any alleged act of discrimination, of which the Employee is unaware at the date of this Agreement. |
4.3 | This Agreement does not affect any accrued rights that the Employee may have in respect of the Companys pension scheme arrangements. |
4.4 | The Employee will return to the Company by the 12th August 2013 any property belonging to the Company or any Group Company which is in his possession, custody or control including but not limited to any SIM cards, access cards or blackberries, mobile phones, laptop and any other equipment provided to the Employee by the Company together with all papers, correspondence, documents, files, databases or other data whatsoever (whether held on computer or in hardcopy) belonging to the Company, or any Group Company or relating to their respective affairs, including but not limited to customer and price lists and customer contracts and will not retain copies of the same. |
4.5 | From the Termination Date the Employee will not represent himself or permit himself to be held out as being in any way connected with or interested in the Company. |
4.6 | The Employee will keep this Agreement confidential and will not disclose the existence of this Agreement or any of its terms to any person, save (a) to his immediate family, or to his professional advisers for the purposes of receiving professional advice concerning this Agreement or for the purpose of enforcing any term of this Agreement, in which event the person or persons to whom such disclosure is made will have drawn to their attention by the Employee the terms of this confidentiality clause and shall themselves be instructed by the Employee to maintain such confidentiality, or (b) as may be required by law, and save that nothing in this Agreement shall prevent the Employee from disclosing to third parties that his employment terminated by reason of mutual agreement. |
4.7 | In consideration of the payment by the Company to the Employee within the period of fourteen days after the Termination Date of £100 (less deductions for tax and employees National Insurance Contributions) the Employee agrees to abide by those provisions of his contract of employment with the Company that are expressed to apply following the termination of his employment, including but not limited to |
the clauses headed Confidential Information, Inventions/Intellectual Property, Non Solicitation/Employment of Employees, Non Solicitation/Dealing with Customers and the Covenant Not to Compete. However, it is agreed that the Covenant Not to Compete and Non Solicitation/Dealing with Customers will only apply until 24th January 2014. For the purposes of the Confidentiality restriction, confidential information includes but is not limited to company strategy information, product portfolio information and roadmaps, budgets, management accounts, bank account details, sales statistics, price lists, customer lists, marketing and sales collateral and other confidential financial and customer data of the Companys and the terms on which the Company or any Group Company employs or engages employees, officers and contractors or trades with customers and other third parties, The confidentiality clause will not restrict the Employee from making protected disclosures within the meaning of the Public Interest Disclosure Act 1998. |
4.8 | The Employee represents that he has not committed any act of gross misconduct of which the Employer is unaware and which, if disclosed, would have entitled the Employer to summarily dismiss him. |
4.9 | The Company undertakes on its own behalf and on behalf of its officers and employees to keep the circumstances leading up to the termination, this Agreement and all terms of this Agreement confidential save for the purpose of enforcing any term of this Agreement or as may be required by law. Furthermore the Company undertakes, if asked, to inform any third party that the Employees employment was terminated by mutual agreement. |
4.10 | The Employee agrees that he will not make any disparaging comments whether orally or in writing about the Employer, any Group Company or any of their respective officers or employees. The Employer will procure that its officers and those of its employees who have been involved in the preparation and negotiation of this Agreement, will not make any disparaging comments whether orally or in writing about the Employee. |
4.11 | For the avoidance of doubt if, contrary to the views of the parties, the claims set out in clause 4.1 above have not been validly and lawfully excluded by the provisions of this Agreement, and the Employee institutes legal proceedings in respect of any of them, then all sums paid by the Company pursuant to clause 3.1 of this Agreement, shall be immediately repayable by the Employee to the Company as a debt and the agreement to reduce the duration of the Employees Covenant Not to Compete shall no longer apply. Without prejudice to the foregoing, the Employee agrees to indemnify and keep indemnified the Company, any Group Company and any officer or employee of the Company or any Group Company against whom the Employee commences legal proceedings, against all claims, costs, demands, compensation, damages or interest, together with legal costs on a full indemnity basis, incurred by the Company, or such officer or employee, in any such legal proceedings instituted by the Employee |
4.12 | The Employee hereby warrants to the Company that he has received independent legal advice from the Qualified Lawyer as to the terms and effects of this Agreement under English law prior to his executing the same and in particular, as to its effect on the Employees ability to pursue any of the rights or claims set out in clause 4.1 of this Agreement |
4.13 | For the avoidance of doubt, notwithstanding that this Agreement is marked Without Prejudice and Subject to Contract on its first page, the without prejudice nature of it will cease to apply and it will become a binding agreement between the Parties upon this Agreement being signed by the Employee, the Certificate attached to this Agreement at Schedule 1 being signed by the Qualified Lawyer and this Agreement being signed by an authorised representative for and on behalf of the Company |
5 | COMPLIANCE WITH STATUTORY PROVISIONS |
5.1 | The Qualified Lawyer is ANGLE CRUSH of THOMAS MANSFIELD |
5.2 | The Parties hereto believe the following statements to be true: |
5.2.1 | The Qualified Lawyer is a relevant independent adviser as defined under Section 203(4) of the Employment Rights Act, 1996, as amended by the Employment Rights (Dispute Resolution) Act, 1998 and section 147 of the Equality Act 2010 and the other statutes referred to in clause 5 above; and |
5.2.2 | The Employee has received independent legal advice from the Qualified Lawyer holding a current practising certificate (within the meaning of the Employment Rights Act, 1996) as to the terms and effect of this Agreement and in particular its effect on his ability to pursue his rights before an Employment Tribunal and/or Civil Court; and |
5.2.3 | There was in force when the Qualified Lawyer gave the advice referred to in 5.5.2 a contract of insurance or an indemnity insurance policy provided for members of a profession or professional body covering the risk of a claim by the Employee in respect of any loss arising in consequence of the advice. |
5.3 | The Qualified Lawyer by signing the Certificate attached to this Agreement at Schedule 1 confirms that the statements set out in the said Certificate are correct. |
5.4 | The parties hereby acknowledge and agree that the conditions regulating compromise/settlement agreements under section 203(3) of the Employment Rights Act 1996, section 77(4A) of the Sex Discrimination Act 1975, section 72(4A) of the Race Relations Act 1976, section 288(28) of the Trade Union and |
Labour Relations (Consolidation) Act 1992, paragraph 2 of Schedule 3A of the Disability Discrimination Act 1995, Regulation 35(3) of the Working Time Regulations 1998, section 49(4) of the National Minimum Wage Act 1998, regulation 41(4) of the Transnational Information and Consultation of Employee Regulations 1999, Regulation 9 of the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000, regulation 10 of the Fixed Term Employee (Prevention of Less Favourable Treatment) Regulations 2002, regulation 40(4) of the Information and Consultation of Employees Regulations 2004, paragraph 2(2) of Schedule 4 to the Employment Equality (Sexual Orientation) Regulations 2003, paragraph 2(2) of Schedule 4 of the Employment Equality (Religion or Belief) Regulations 2003 and paragraph 2(2) of Schedule 5 of the Employment Equality (Age) Regulations 2006 and section 147 of the Equality Act 2010 are satisfied by the terms of this Agreement. |
5.5 | In this agreement any reference to one gender includes the other. |
The Parties hereto have signed this Agreement the day and year first above written.
Signed for and on behalf of the Company |
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Signed by the Employee |
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SCHEDULE 1
CERTIFICATE
The Qualified Lawyer is ANGLE CRUSH
I, ANGLE CRUSH of THOMAS MANSFIELD confirm that:-
1. | I am a solicitor of the Supreme Court of England and Wales, holding both at the date of this Agreement and at the date the said advice was given, a current practising certificate |
2. | At the date hereof and at all times during which I have advised the Employee on the subject matter of the Agreement I am and have been a Qualified Lawyer as defined by section 203(3A) of the Employment Rights Act 1996, section 77(48) of the Sex Discrimination Act 1975, section 72(48) of the Race Relations Act 1976, section 288(4) of the Trade Union and Labour Relations (Consolidation) Act 1992, section 9(4) of the Disability Discrimination Act 1995, section 35(4) of the Working Time Regulations 1998, section 49(5) of the National Minimum Wage Act 1998, the Employment Equality (Religion or Belief) Regulations 2003, the Employment Equality (Sexual Orientation) Regulations 2003 and Schedule 5 Part I Paragraph 2 of the Employment Equality (Age) Regulations 2006 and the other statutes referred to in clause 5.7 of the Agreement. |
3. | I have given the Employee advice as to the terms and effect of this Agreement, and in particular its effect on his ability to pursue his rights before an Employment Tribunal. |
4. | When I gave the advice I was covered at all times by a contract of insurance or a professional indemnity insurance policy covering the risk of a claim by the Employee in respect of loss arising in consequence of the said advice. |
Signed by Qualified Lawyer, |
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Thomas Mansfield LLP 35 Artillery Lane London E1 7LP |
Exhibit 10.24
MAVENIR SYSTEMS, INC.
EMPLOYMENT, CONFIDENTIAL INFORMATION, AND INVENTION ASSIGNMENT AGREEMENT
As a condition of my employment with Mavenir Systems, Inc., a Delaware corporation, its subsidiaries, affiliates, successors or assigns (collectively, the Company) and in consideration of my receipt of confidential information upon execution of this Agreement and my receipt of the compensation now and hereafter paid to me by the Company, I agree to the following terms and conditions of this Employment, Confidential Information, and Invention Assignment Agreement (the Agreement) which shall be effective as of the date set forth in the signature block (Effective Date):
1. At-Will Employment. I UNDERSTAND AND ACKNOWLEDGE THAT MY EMPLOYMENT WITH THE COMPANY IS FOR AN UNSPECIFIED DURATION AND CONSTITUTES AT-WILL EMPLOYMENT. I ALSO UNDERSTAND THAT ANY REPRESENTATION TO THE CONTRARY IS UNAUTHORIZED AND NOT VALID UNLESS OBTAINED IN WRITING AND SIGNED BY THE COMPANYS CHIEF EXECUTIVE OFFICER OR PRESIDENT. I ACKNOWLEDGE THAT THIS EMPLOYMENT RELATIONSHIP MAY BE TERMINATED AT ANY TIME, WITH OR WITHOUT GOOD CAUSE OR FOR ANY OR NO CAUSE, AT THE OPTION EITHER OF THE COMPANY OR MYSELF, WITH OR WITHOUT NOTICE. I FURTHER ACKNOWLEDGE THAT THE COMPANY MAY MODIFY JOB TITLES, SALARIES, AND BENEFITS FROM TIME TO TIME AS IT DEEMS NECESSARY, AND THAT ANY SUCH CHANGE SHALL NOT ALTER THE AT-WILL NATURE OF MY EMPLOYMENT RELATIONSHIP WITH THE COMPANY.
2. Confidential Information.
(a) Company Information. I agree at all times during the term of my employment and thereafter to hold in strictest confidence, and not to use, except for the benefit of the Company, any of the Companys Confidential Information; or disclose to any person, firm or corporation any of the Companys Confidential Information except as authorized in writing by the Companys Board of Directors or, if expressly authorized by the Companys management, pursuant to a written nondisclosure agreement that sufficiently protects the Confidential Information. I understand that Confidential Information means any information that relates to the Companys actual or anticipated business or research and development, technical data, trade secrets or know-how, including, but not limited to, research, product plans or other information regarding the Companys products or services and markets therefor, customer lists and customers (including, but not limited to, the Companys customers on whom I called or with whom I became acquainted during the term of my employment), software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances or other business information. I further understand that Confidential Information (i) includes the foregoing information even if disclosed to me in connection with the contemplation of my becoming an employee of the Company, i.e., prior to the Effective Date, and (ii) does not include any of the foregoing items that is or becomes publicly known through no wrongful act or omission of mine or of others who were under confidentiality obligations as to the item or items involved or improvements or new versions thereof.
(b) Former Employer Information. I agree that I will not, during my employment with the Company, improperly use, disclose, or induce the Company to use any confidential or proprietary information or trade secrets of any former or concurrent employer or other person or entity and that I will not bring onto the premises of the Company any confidential or proprietary information or trade secrets belonging to any such employer, person or entity unless consented to in writing by both the Company and such employer, person or entity.
(c) Third Party Information. I recognize that the Company has received and in the future will receive from third parties their confidential or proprietary information, subject to a duty on the Companys part to maintain the confidentiality of such information and to use it only for certain limited purposes. I agree to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation or to use it except as necessary in carrying out my work for the Company consistent with the Companys agreement with such third party.
(d) Provision of Confidential Information. The Company agrees to provide me with certain Confidential Information regarding the Company that will enable me to optimize the performance of my duties to the Company. I agree that the Company will have no obligation to make available to me any of its Confidential Information after the termination of my employment.
3. Inventions.
(a) Inventions Retained and Licensed. I have attached hereto as Exhibit A is a list describing all inventions, original works of authorship, developments, improvements and trade secrets that were made by me prior to my employment with the Company, relate to the Companys proposed business, products or research and development, and are owned in whole or in part by me, (Prior Inventions); or, if no such list is attached or if Exhibit A is unsigned, I represent that there are no such Prior Inventions. I agree that I will not incorporate, or permit to be incorporated, any Prior Invention into a Company product, process or service without the Companys prior written consent. Nevertheless, if, in the course of my employment with the Company, I incorporate into a Company product, process or service a Prior Invention, I hereby grant to the Company a nonexclusive, royalty-free, fully paid-up, irrevocable, perpetual, transferable, sublicensable, worldwide license to reproduce, make derivative works of, distribute, perform, display, import, make, have made, modify, use, sell, offer to sell, and exploit in any other way such Prior Invention as part of or in connection with such product, process or service, and to practice any method related thereto.
(b) Assignment of Inventions. I agree that I will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and hereby assign to the Company, or its designee, all my right, title, and interest in and to any and all inventions, original works of authorship, developments, concepts, improvements, designs, discoveries, ideas, trademarks or trade secrets, whether or not patentable or registrable under copyright or similar laws, which I may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time I am in the employ of the Company (collectively, Inventions), except as provided in Section 3(f) below. I further acknowledge that all original works of authorship which are made by me (solely or jointly with others) within the scope of and during the period of my employment with the Company and which are protectable by copyright are works made for hire as that term is defined in the United States Copyright Act. I understand and agree that the decision whether or not to commercialize or market any Invention is within the Companys sole discretion and for the Companys sole benefit and that no royalty will be due to me as a result of the Companys efforts to commercialize or market any such Invention.
(c) Inventions Assigned to the United States. I agree to assign to the United States government all my right, title, and interest in and to any and all Inventions whenever such full title is required to be in the United States by a contract between the Company and the United States or any of its agencies.
(d) Maintenance of Records. I agree to keep and maintain adequate, current, accurate, and authentic written records of all Inventions made by me (solely or jointly with others) during the term of my employment with the Company. The records will be in the form of notes, sketches, drawings, electronic files, reports, or any other format that may be specified by the Company. The records are and will be available to the Company and shall remain the Companys sole property at all times.
(e) Patent and Copyright Registrations. I agree to assist the Company, or its designee, at the Companys expense, in every proper way to secure the Companys rights in any Inventions and any copyrights, patents, mask work rights or other intellectual property rights relating thereto in any and all countries, including, but not limited to, the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments and all other instruments that the Company deems necessary in order to apply for and obtain such rights and in order to assign and convey to the Company, its successors, assigns, and nominees the sole and exclusive rights, title and interest in and to such Inventions, and any copyrights, patents, mask work rights or other intellectual property rights relating thereto. I further agree that my obligation to execute or cause to be executed, when it is in my power to do so, any such instrument or papers shall continue after the termination of this Agreement. If the Company is unable because of my mental or physical incapacity or for any other reason to secure my signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering any Inventions or original works of authorship assigned to the Company as above, then I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, to act for and in my behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or copyright registrations thereon with the same legal force and effect as if executed by me.
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(f) Exception to Assignments. I understand that the provisions of this Agreement requiring assignment of Inventions to the Company do not apply to any Invention that I have developed entirely on my own time without using the Companys equipment, supplies, facilities, trade secret information or Confidential Information (an Other Invention) except for those Other Inventions that either (i) relate at the time of conception or reduction to practice of such Other Invention to the Companys business, or actual or demonstrably anticipated research or development of the Company or (ii) result from any work that I performed for the Company. I will advise the Company promptly in writing of any Invention that I believe constitutes an Other Invention and is not otherwise disclosed on Exhibit A. I agree that I will not incorporate, or permit to be incorporated, any Other Invention owned by me or in which I have an interest into a Company product, process or service without the Companys prior written consent. Notwithstanding the foregoing sentence, if, in the course of my employment with the Company, I incorporate into a Company product, process or service an Other Invention owned by me or in which I have an interest, I hereby grant to the Company a nonexclusive, royalty-free, fully paid-up, irrevocable, perpetual, transferable, sublicensable, worldwide license to reproduce, make derivative works of, distribute, perform, display, import, make, have made, modify, use, sell, offer to sell, and exploit in any other way such Other Invention as part of or in connection with such product, process or service, and to practice any method related thereto.
4. Conflicting Employment.
(a) Current Obligations. I agree that, during the term of my employment with the Company, I will not engage in any other employment, occupation or consulting related to the business in which the Company is now involved, becomes involved or has plans to become involved in during the term of my employment, nor will I engage in any other activities that conflict with my obligations to the Company.
(b) Prior Relationships. Without limiting Section 4(a) above, I represent that I have no other agreements, relationships, or commitments to any other person or entity that conflict with my obligations to the Company under this Agreement or my ability to become employed and perform the services for which I am being hired by the Company. I further agree that if I have signed a confidentiality agreement or similar type of agreement with any former employer or other entity, I will comply with the terms of any such agreement to the extent that its terms are lawful under applicable law. I represent and warrant that after undertaking a careful search (including searches of my computers, cell phones, electronic devices, and documents), I have returned all property and confidential information belonging to all prior employers. Moreover, I agree to fully indemnify the Company, its directors, officers, agents, employees, investors, shareholders, administrators, affiliates, divisions, subsidiaries, predecessor and successor corporations, and assigns for all verdicts, judgments, settlements, and other losses incurred by any of them resulting from my breach of my obligations under any agreement to which I am a party or obligation to which I am bound, as well as any reasonable attorneys fees and costs if the plaintiff is the prevailing party in such an action, except as prohibited by law.
5. Solicitation of Employees. I agree that for a period of one (1) year immediately following the termination of my relationship with the Company for any reason, whether with or without cause, at the option either of the Company or myself, with or without notice, I will not (either directly or indirectly, on behalf of myself or any third party) hire any of the Companys employees, consultants or contractors or solicit, induce, recruit or encourage any of the Companys employees, consultants or contractors to leave their employment or terminate their relationship with the Company.
6. Interference. I agree that during the course of my employment and for a period of one (1) year immediately following the termination of my relationship with the Company for any reason, whether with or without cause, at the option either of the Company or myself, with or without notice, I will not (either directly or indirectly, on behalf of myself or any third party) solicit to the detriment of the Company and/or for the benefit of any competitor of the Company, take away or attempt to take away, in whole or in part, any customer of the Company or otherwise interfere with the Companys customer relationships.
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7. Covenant Not to Compete.
(a) I agree that during the course of my employment and for a period of one (1) year immediately following the termination of my employment with the Company for any reason, whether with or without cause, at the option either of the Company or myself, with or without notice, I will not, either directly or indirectly, (i) serve as an advisor, agent, consultant, director, employee, officer, partner, proprietor or otherwise of, (ii) have any ownership interest in (except for passive ownership of one percent (1%) or less of any entity whose securities have been registered under the Securities Act of 1933, as amended, or Section 12 of the Securities Exchange Act of 1934, as amended) or (iii) participate in the organization, financing, operation, management or control of, any business in competition with the Companys business in the Territory (1) as conducted by the Company during the course of my employment with the Company or (2) planned to be conducted by the Company pursuant to a product or business plan developed prior to the termination of my employment with the Company. Territory shall mean (A) all counties in the State of Texas, (B) all other states of the United States of America, (C) the European Union, (D) Asia, and (E) all other countries of the world in which the Company is then engaged in business. In particular, Territory shall include such geographic areas in which (I) the Companys products and services are then deployed, (II) the Company then has a customer or (III) the Company then has operations or otherwise targets sales and marketing activities or conducts or has plans to conduct business during the course of my employment.
(b) I acknowledge that my fulfillment of the obligations contained in this Agreement, including, but not limited to, my obligation neither to use, except for the benefit of the Company, or to disclose the Companys Confidential Information and my obligation not to compete contained in subsection (a) above is necessary to protect the Companys Confidential Information and to preserve the Companys value and goodwill. I further acknowledge the time, geographic and scope limitations of my obligations under subsection (a) above are reasonable, especially in light of the Companys desire to protect its Confidential Information, and that I will not be precluded from gainful employment if I am obligated not to compete with the Company during the period and within the Territory as described above.
(c) The covenants contained in subsection (a) above shall be construed as a series of separate covenants, one for each city, county and state of any geographic area in the Territory. Except for geographic coverage, each such separate covenant shall be deemed identical in terms to the covenant contained in subsection (a) above. If, in any judicial or arbitration proceeding, a court or arbitrator refuses to enforce any of such separate covenants (or any part thereof), then such unenforceable covenant (or such part) shall be eliminated from this Agreement to the extent necessary to permit the remaining separate covenants (or portions thereof) to be enforced. In the event the provisions of subsection (a) above are deemed to exceed the time, geographic or scope limitations permitted by applicable law, then such provisions shall be reformed to the maximum time, geographic or scope limitations, as the case may be, then permitted by such law.
8. Acknowledgements. I acknowledge that the non-solicitation and non-competition covenants I am providing in this Agreement are reasonable and necessary to protect the legitimate interests of the Company. I further acknowledge that my non-disclosure promises contained in this Agreement is in exchange for the Companys promises contained in this Agreement to provide me with confidential information and trade secrets of the Company.
9. Returning Company Documents, etc. I agree that, upon separation from employment with the Company or on demand by the Company during my employment, I will immediately deliver to the Company (and will not keep in my possession, recreate or deliver to anyone else) any and all Company property, including, but not limited to, the Companys Confidential Information, as well as all devices and equipment belonging to the Company (including computers, handheld electronic devices, telephone equipment, and other electronic devices), Company credit cards, records, data, notes, notebooks, reports, files, proposals, lists, correspondence (including emails and any other electronic correspondence), specifications, drawings, blueprints, sketches, materials, photographs, charts, any other documents and property, and reproductions of any and all of the aforementioned items that were developed by me pursuant to my employment with the Company, obtained by me in connection with my employment with the Company, or otherwise belonging to the Company, its successors, or assigns, including, without limitation, those records maintained pursuant to Section 3(e).Upon separation from employment with the Company, I agree to immediately sign and deliver to the Company the Termination Certification attached hereto as Exhibit B. I also consent to an exit interview to confirm my compliance with this Section 9. I further agree to keep the Company advised of my home and business address for a period of three (3) years after termination of my employment with the Company, so that the Company can contact me regarding my continuing obligations provided by this Agreement.
10. Conflict of Interest Guidelines. I agree to diligently adhere to the Conflict of Interest Guidelines attached hereto as Exhibit C.
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11. Further Assurances; No Conflict. I agree to execute any proper oath or verify any proper document required to carry out the terms of this Agreement. I represent that my performance of all the terms of this Agreement will not breach any agreement to keep in confidence proprietary information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any oral or written agreement in conflict herewith.
12. Violation; Disciplinary Matters. I understand that any breach of this Agreement or violation of Company policies by me, including any unauthorized use or disclosure of Confidential Information of the Company or any third party during my employment may lead to disciplinary action, up to and including immediate termination and may further result in legal action by the Company.
13. Notification to New Employer. In the event that I leave the employ of the Company, I hereby grant consent to notification by the Company to my new employer about my rights and obligations under this Agreement.
14. Arbitration and Equitable Relief.
(a) Arbitration. In consideration of my employment with the Company, its promise to arbitrate all employment-related disputes and my receipt of the compensation, pay raises and other benefits paid to me by the Company, at present and in the future, I agree that, except as provided in subsection (b) below, any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from my employment with the Company or the termination of my employment with the Company, including any breach of this Agreement, shall be subject to binding arbitration shall be settled by arbitration to be held in Dallas, Texas in accordance with the rules then in effect of the American Arbitration Association. Disputes which I agree to arbitrate, and thereby agree to waive any right to a trial by jury, include any statutory claims under state or federal law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the Texas Fair Employment and Housing Act, the Texas Labor Code, claims of harassment, discrimination or wrongful termination and any statutory claims. I further understand that this Agreement to arbitrate also applies to any disputes that the Company may have with me.
(b) Procedure. I agree that any arbitration will be administered by the American Arbitration Association (AAA) and that a neutral arbitrator will be selected in a manner consistent with its National Rules for the Resolution of Employment Disputes. I agree that any arbitration under this section shall be conducted in Dallas, Texas. The arbitration proceedings will allow for discovery according to the AAA National Rules for the Resolution of Employment Disputes. I agree that the arbitrator shall have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. I agree that the arbitrator shall issue a written decision on the merits. I also agree that the arbitrator shall have the power to award any remedies, including attorneys fees and costs, available under applicable law. I understand the Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that I shall pay the first $200.00 of any filing fees associated with any arbitration I initiate. I agree that the arbitrator shall administer and conduct any arbitration in a manner consistent with the AAAs National Rules for the Resolution of Employment Disputes.
(c) Remedy. Arbitration shall be the sole, exclusive and final remedy for any dispute between me and the Company. Accordingly, neither I nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding the foregoing, the arbitrator will not have the authority to disregard or refuse to enforce any lawful company policy, and the arbitrator shall not order or require the Company to adopt a policy not otherwise required by law which the Company has not adopted.
(d) Equitable Remedies. I agree that it would be impossible or inadequate to measure and calculate the Companys damages from my breach of Sections 2, 3, 5, 6 and 7 of this Agreement. Accordingly, I agree that if I breach any such Section, the Company will have available, in addition to any other right or remedy available, the right to obtain an injunction from a court of competent jurisdiction restraining such breach or threatened breach and to specific performance of any such provision of this Agreement. I further agree that no bond or other security shall be required in obtaining such equitable relief and I hereby consent to the issuance of such injunction and to the ordering of specific performance.
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(e) Administrative relief. I understand that this Agreement does not prohibit me from pursuing an administrative claim with a local, state or federal administrative body such as the Equal Employment Opportunity Commission or the Workers Compensation Commission. This Agreement does, however, preclude me from pursuing court action regarding any such claim.
(f) Voluntary nature of agreement. I acknowledge and agree that I am executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. I further acknowledge and agree that I have carefully read this Agreement and that I have asked any questions needed for me to understand the terms, consequences and binding effect of this Agreement and fully understand it, including that I AM WAIVING MY RIGHT TO A JURY TRIAL. Finally, I agree that I have been provided an opportunity to seek the advice of an attorney of my choice before signing this Agreement.
15. General Provisions.
(a) Governing Law; Consent to Personal Jurisdiction. THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD FOR CONFLICTS OF LAWS PRINCIPLES. I HEREBY EXPRESSLY CONSENT TO THE PERSONAL JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN TEXAS FOR ANY LAWSUIT FILED THERE AGAINST ME BY THE COMPANY CONCERNING MY EMPLOYMENT OR THE TERMINATION OF MY EMPLOYMENT OR ARISING FROM OR RELATING TO THIS AGREEMENT.
(b) Entire Agreement. This Agreement, together with the Exhibits herein, sets forth the entire agreement and understanding between the Company and me relating to the subject matter herein and supersedes all prior discussions or representations between us, including, but not limited to, any representations made during my interview(s) or relocation negotiations, whether written or oral, and any previously executed proprietary information agreements. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing signed by the Companys Chief Executive Officer or President and me. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement.
(c) Severability. If one or more of the provisions in this Agreement are deemed void by law then the remaining provisions will continue in full force and effect.
(d) Successors and Assigns. This Agreement will be binding upon my heirs, executors, administrators and other legal representatives and will be for the benefit of the Company, its successors and its assigns.
(e) Waiver. Waiver by the Company of a breach of any provision of this Agreement will not operate as a waiver of any other or subsequent breach.
(f) Survivorship. The rights and obligations of the parties to this Agreement will survive termination of my employment with the Company.
(g) Construction. The language used in this Agreement will be deemed to by the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against either party.
(h) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be enforceable, and all of which together shall constitute one agreement.
16. I acknowledge and agree to each of the following items:
(a) I am executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else; and
(b) I have carefully read this Agreement. I have asked any questions needed for me to understand the terms, consequences and binding effect of this Agreement and fully understand them; and
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(c) I sought the advice of an attorney of my choice if I wanted to before signing this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the day, month and year first set forth below, to be effective as of the Effective Date.
Date: . | . | |||
MAVENIR SYSTEMS, INC. | Employee | |||
By: |
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Signature of Employee | ||||
Its: |
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Type or Print Name of Employee |
MAVENIR SYSTEMS, INC.
EMPLOYMENT, CONFIDENTIAL INFORMATION, AND INVENTION ASSIGNMENT AGREEMENT SIGNATURE PAGE
EXHIBIT A
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
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Date |
Identifying Number or Brief Description |
No inventions or improvements | ||
Additional Sheets Attached |
Signature of Employee: |
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Print Name of Employee: |
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Date: |
EXHIBIT B
MAVENIR SYSTEMS, INC.
TERMINATION CERTIFICATION
I certify that I do not have in my possession, nor have I failed to return, any devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property, or reproductions of any aforementioned items belonging to Mavenir Systems, Inc., its subsidiaries, affiliates, successors or assigns (together, the Company).
I further certify that I have complied with all the terms of the Companys Employment, Confidential Information, and Invention Assignment Agreement signed by me, including, but not limited to, the reporting of any Inventions or Other Inventions (as such terms are defined therein).
I confirm my agreements contained in Section 2 (Confidential Information), Section 3 (Inventions), Section 5 (Solicitation of Employees), Section 6 (Interference), and Section 7 (Covenant Not to Compete) of the Employment, Confidential Information, and Invention Assignment Agreement.
Date: |
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(Employees Signature) | ||
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(Type/Print Employees Name) |
EXHIBIT C
MAVENIR SYSTEMS, INC.
CONFLICT OF INTEREST GUIDELINES
It is the policy of Mavenir Systems, Inc. to conduct its affairs in strict compliance with the letter and spirit of the law and to adhere to the highest principles of business ethics. Accordingly, all officers, employees and independent contractors must avoid activities which are in conflict, or give the appearance of being in conflict, with these principles and with the interests of the Company. The following are potentially compromising situations which must be avoided. Any exceptions must be reported to the Chief Executive Officer or President and written approval for continuation must be obtained
1. Revealing confidential information to outsiders or misusing confidential information. Unauthorized divulging of information is a violation of this policy whether or not for personal gain and whether or not harm to the Company is intended. (The Employment, Confidential Information, and Invention Assignment Agreement elaborates on this principle and is a binding agreement.)
2. Accepting or offering substantial gifts, excessive entertainment, favors or payments which may be deemed to constitute undue influence or otherwise be improper or embarrassing to the Company.
3. Participating in civic or professional organizations that might involve divulging confidential information of the Company.
4. Initiating or approving personnel actions affecting reward or punishment of employees or applicants where there is a family relationship or is or appears to be a personal or social involvement.
5. Initiating or approving any form of personal or social harassment of employees.
6. Investing or holding outside directorship in suppliers, customers, or competing companies, including financial speculations, where such investment or directorship might influence in any manner a decision or course of action of the Company.
7. Borrowing from or lending to employees, customers or suppliers.
8. Acquiring real estate of interest to the Company.
9. Improperly using or disclosing to the Company any proprietary information or trade secrets of any former or concurrent employer or other person or entity with whom obligations of confidentiality exist.
10. Unlawfully discussing prices, costs, customers, sales or markets with competing companies.
11. Making any unlawful agreement with distributors with respect to prices.
12. Improperly using or authorizing the use of any inventions which are the subject of patent claims of any other person or entity.
13. Engaging in any conduct which is not in the best interest of the Company.
Each officer, employee and independent contractor must take every necessary action to ensure compliance with these guidelines and to bring problem areas to the attention of higher management for review. Violations of this conflict of interest policy may result in discharge without warning.
Exhibit 10.25
COMMERCIAL LEASE AGREEMENT
STATE OF TEXAS
COUNTY OF DALLAS
THIS LEASE AGREEMENT, made and entered into as of the 20th day of July, 2012, by and between Landlord and Tenant hereinafter named.
1) DEFINITIONS AND BASIC PROVISIONS. The following definitions and basic provisions shall be used in conjunction with and limited by the reference thereto in the provisions of this Lease.
(a) Landlord Telecom Commerce III, Ltd.
(b) Tenant Mavenir Systems, Inc.
(c) Initial Premises approximately 30,500 square feet within the building or project known as International Business Center II and located on a certain tract of land known as 1700 International Parkway, Suite 200, City of Richardson, Collin County, Texas. A fuller description of the Initial Premises, including a floor plan thereof, is contained in Exhibit A attached hereto.
(d) Expansion Premises is approximately 13,250 square feet within the building or project known as International Business Center II and located on a certain tract of land known as 1700 International Parkway, Suite 200, City of Richardson, Collin County, Texas. The Expansion Premises is contiguous and located next to the Initial Premises. A fuller description of the Expansion Premises, including a floor plan thereof, is contained in Exhibit A attached hereto. Tenant agrees to Lease the Expansion Premises by no later than April 1, 2014; provided, however, that Tenant may Lease such space sooner by providing Landlord with notice of its intent. Prior to Tenants expected move-in date to the Expansion Premises, Landlord shall provide Tenant with a tenant improvements allowance of no less than one hundred thousand dollars ($100,000.00) for the Expansion Premises, such allowance being in addition to the improvements, allowances or the like that Landlord is providing for the Initial Premises as described in this Lease. Following completion of the improvements, such being the Commencement Date for the addition of the Expansion Premises. Beginning on such Commencement Date, Tenant shall pay Rent for both the Initial Premises and the Expansion Premises in accordance with the terms of this Lease.
(e) Premises shall refer to the Initial Premises prior to Tenant expanding to use the Expansion Premises in accordance with the terms of this Lease Agreement. Beginning on the date that Tenant moves into and begins to use the Expansion Premises, Premises shall be deemed to refer to both the Initial Premises and the Expansion Premises as one. In the event that Tenant leases the ROFR Space in the Building in accordance with Exhibit F, the definition of Premises shall be extended to include such ROFR Space upon the date Tenant begins to occupy such (following completion of any premises improvements related to such).
(f) Project shall refer to the land (which is described in the attached Exhibit A), together with the building(s), landscaping, parking and driveway areas, sidewalks, and other improvements thereon including the Initial Premises, Premises and any other such inhabitable spaces located at 1700 International Parkway, Richardson, Collin County, Texas.
(g) Lease Term is the period commencing on October 1 , 2012 or on such later date as may be determined pursuant to the provisions of Paragraph 2 herein (the Commencement Date) and ending the last day of the month following the expiration of Seventy Eight (78) months from the Commencement Date, unless sooner terminated as herein provided (the Expiration Date) .
(h) Maximum Rate is the maximum non-usurious rate of interest permitted by applicable law, including, without limitation, Article 5069-1.04, Vernon Texas Civil Statutes, as the same may be incorporated by reference in other Texas statutes, and, unless otherwise required by law, said rate shall be based upon the indicated rate ceiling.
2) LEASE GRANT. Landlord, in consideration of the rent to be paid and the other covenants and agreements to be performed by Tenant and upon the terms and conditions herein stated, does hereby lease and let unto Tenant the Premises, in their as is condition on the date hereof, unless Landlord is required by the terms of this Lease to perform any work to prepare the Premises for Tenants occupancy, commencing on the Commencement Date (as may be adjusted as hereinafter provided) and ending on the Expiration Date, unless sooner terminated as herein provided. If this Lease is executed before the Premises become vacant, or otherwise available and ready for occupancy, or if any present tenant or occupant of the Premises holds over, and Landlord cannot acquire possession of the Premises prior to the Commencement Date of this Lease or cannot tender possession to Tenant for any reason, except as shall result from any act or omission of Tenant or its agents or employees (in which event the Commencement Date will not be changed and Rental will not be waived), Landlord shall not be deemed to be in default hereunder, and Tenant agrees to accept possession of the Premises at such time as Landlord is able to tender the same in accordance with the terms of this Lease Agreement, such date shall be deemed to be the Commencement Date, this Lease shall continue for the term specified in Paragraph 1 (d) hereof, and Landlord hereby waives the Monthly Rental Payments or portion(s) thereof for such period prior to the tendering of possession of the Premises to Tenant. Should Tenant occupy the Premises prior to the Commencement Date specified in Paragraph 1 (d), the Commencement Date shall be altered to coincide with said occupancy, however, the Expiration Date shall remain unchanged. The taking of possession, or the occupying or assuming control over the Premises by Tenant shall be conclusive evidence (i) that the Premises are suitable for the purpose herein intended and that the Premises comply fully with Landlords covenants and obligations related thereto, except for punchlist items, if any, of which Tenant shall give Landlord written notice within twenty (20) days following such possession, occupancy or assumption of control; and (ii) that Tenant accepts the Building and the Land and each and every part and appurtenance thereof as being in a good and satisfactory condition, and acknowledges that same comply fully with Landlords covenants and obligations. Notwithstanding the foregoing, Landlord and Tenant agree that Tenant may use the Expansion Premises between October 1, 2012 and March 31, 2014 (Interim Use) and such Interim Use shall not be deemed as the Commencement Date for Tenants use of the Expansion Premises nor shall such use be conclusive evidence (i) that the Expansion Premises are suitable for the purpose herein intended and that the Expansion Premises comply fully with Landlords covenants and obligations related thereto, except for punchlist items, if any, of which Tenant shall give Landlord written notice within twenty (20) days following such possession, occupancy or assumption of control; and (ii) that Tenant accepts the Expansion Premises and each and every part and appurtenance thereof as being in a good and satisfactory condition, and acknowledges that same comply fully with Landlords covenants and obligations. Tenant agrees to pay all utilities related to the Expansion Premises (on a prorated basis) that are directly attributable to Tenants Interim Use as well as all Additional Rent (on a prorated Basis) in accordance with this Lease. Tenant shall not be required to pay Basic Monthly Rental during such Interim Use period unless otherwise agreed to herein.
3) BASIC MONTHLY RENTAL AND SECURITY DEPOSIT.
(a) In consideration of this Lease, Tenant promises and agrees to pay Landlord the Basic Monthly Rental *See Below without any abatement, deduction or set off for any reason whatsoever, except as may be expressly provided in this Lease, for each and every
* | Basic Monthly Rental |
October 1, 2012 thru February 28, 2013 |
= | $0.00 per month | ||||
March 1, 2013 thru March 31, 2014 |
= | $23,739.17 per month | ||||
April 1, 2014 thru March 31, 2019 |
= | $32,947.92 per month |
In the event that Tenant decides to accept the Expansion Premises prior to April 1, 2014 in accordance with the terms of Section 1 and 2 of the Lease, then all months prior to April 1, 2014 in which Tenant occupies the Initial Premises and the Expansion Premises (following the Commencement Date for such Expansion Premises), the Base Monthly Rent shall be $32,947.92.
month of the Lease Term. All sums of money, other than Monthly Rental Payments, which become due under this Lease are deemed to be Additional Rent. Monthly Rental Payments and Additional Rent shall collectively constitute the Rent or Rentals due or to become due under this Lease and are herein so called. The nonpayment of any Additional Rent shall afford Landlord all the rights and remedies as are herein provided in the case of nonpayment of any Monthly Rental Payment.
(b) The Security Deposit in the amount of $23,739.17 shall be payable by Tenant to Landlord contemporaneously with the execution hereof, and a like Monthly Rental Payment shall be due and payable on or before the first day of each succeeding calendar month during the Lease Term except for such months where no Rent fee is due as set herein. A Monthly Rental Payment for any fractional month at the beginning or the end of the Lease Term shall be prorated on a daily basis unless such is provided at no charge per the terms of this Lease.
(c) No payment by Tenant, or receipt or acceptance by Landlord of a lesser amount than the correct Basic Annual Rent and/or Additional Rent, shall be deemed to be other than a payment on account, nor shall any endorsement or statement on any check or any letter accompanying any check or payment be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlords right to recover the balance or pursue any other remedies in the Lease or at law or in equity.
(d) Other remedies for nonpayment of Rent notwithstanding, if the monthly Base Rental payment is not received by Landlord on or before the tenth (10th) day of the month for which such rent is due, or if any other payment due Landlord by Tenant hereunder (such sums being deemed to be additional Rent) is not received by Landlord on or before the tenth (10th) day of the month next following the month in which Tenant was invoiced, a service charge of five percent (5%) of such past due amount shall be additionally due and payable by Tenant. Such service charge shall be cumulative of any other remedies Landlord may have for nonpayment of Rent and other sums payable under this Lease. Landlord and Tenant acknowledge and agree that Landlord shall send a monthly invoice to Tenant for the Basic Monthly Rental and the absence of same at any time does not relieve Tenant from its obligation to pay any rental when due per this Lease Agreement.
(e) Upon execution of this Lease, Landlord acknowledges receipt in full of the Security Deposit. The Security Deposit shall be held by Landlord without liability for interest as security for the performance by Tenant of Tenants covenants and obligations under this Lease. It is expressly understood that the Security Deposit shall not be considered an advance payment of Rent or a measure of Landlords damages in case of a default by Tenant. Upon the occurrence of any event of default by Tenant, Landlord may, from time to time, without prejudice to any other remedy, use the Security Deposit to the extent necessary to satisfy any arrearages of Rent and any other damage, injury, expense or liability caused to Landlord by such event of default by Tenant. Following any such application of the Security Deposit, Tenant shall pay to Landlord within ten (10) business days of receipt of written request the amount so applied in order to restore the Security Deposit to its original amount. If Tenant is not then in default hereunder, any remaining balance of the Security Deposit shall be returned by Landlord to Tenant upon the expiration or earlier termination of this Lease. If Landlord transfers its interest in the Premises during the Lease Term, Landlord may assign the Security Deposit to the transferee or return the Security Deposit to Tenant and thereafter shall have no further liability for the return of the Security Deposit.
4) ADDITIONAL RENT.
(a) Taxes and Insurance and Common Area Maintenance (CAM):
(1) Tenant agrees to pay as additional rental Tenants pro rata share of the Tax and Insurance and CAM within ten (10) days following receipt of an invoice from Landlord stating the amount due. The pro rata share to be paid by Tenant is fifty two percent (52%) for the Initial Premises and seventy five percent (75%) at such time as Tenant is using both the Initial Premises and the Expansion Premises following the Commencement Date as discussed herein. Percentage to be attributed to Tenant may be subject, however, to adjustment for any expansion of the Premises outside of the Expansion Premises.
(2) Tax and Insurance Expenses shall mean: (i) all ad valorem, rental, sales, use, and other taxes (other than Landlords income taxes), special assessments, and other governmental charges, and all assessments due to deed restrictions which accrue against the Building during the term of this Lease; and (ii) all reasonable insurance premiums paid by Landlord with respect to the Building including, without limitation, public liability, casualty, rental, and property damage insurance.
(3) Common Area Maintenance Expenses shall mean all expenses (other than the Tax and Insurance Expenses described above) incurred by Landlord for the reasonable maintenance, repair, and operation of the Building,(excluding only structural soundness of the roof, foundation and exterior walls) including, but not limited to, management fees, utility expenses (if not separately metered), maintenance and repair costs, sewer, landscaping, trash and security costs (if furnished by Landlord), wages and fringe benefits payable to employees of Landlord whose duties are connected with the operation and maintenance of the Building, amounts paid to contractors or subcontractors for work or services performed in connection with the operation and maintenance of the Building, all services, supplies, repairs, replacements or other expenses for maintaining, repairing, and operating the Building, including, without limitation common areas and parking areas and roof, exterior wall and foundation work that is not related to structural soundness.
(4) The term Common Area Maintenance Expenses does not include the cost of any capital improvement to the Building other than the reasonably amortized cost of capital improvements which result in the reduction of Insurance Expenses or Common Area Maintenance Expenses. Further, the term Common Area Maintenance Expenses shall not include repair, restoration or other work occasioned by fire, windstorm or other casualty with respect to which Landlord actually receives insurance proceeds, income and franchise taxes of Landlord, expenses incurred in leasing to or the procuring of tenants, leasing commissions, advertising expenses, expenses for the renovating of space for new tenants, interest or principal payments on any mortgage or other indebtedness of Landlord, compensation paid to any employee of Landlord above the grade of building superintendent, or depreciation allowance or expense.
(5) At or prior to the commencement of this Lease and at any time during the Lease term, Landlord may deliver to Tenant a written estimate of any additional rent applicable to the Premises (based on the pro rata share stated above) which may be anticipated for Tax and Insurance and CAM Expenses during the calendar year in which this Lease commences or for any succeeding calendar year, as the case may be. Based upon such written estimate, the Monthly Rental Payment shall be increased by one-twelfth (1/12) of the estimated additional rent.
(6) Statements showing the actual Tax and Insurance Expenses, Common Area Maintenance Expenses and Tenants proportionate share thereof (hereinafter referred to as the Statement of Actual Adjustment) shall be delivered by Landlord to Tenant after any calendar year in which additional rental was paid or due by Tenant. Within ten (10) days after the delivery by Landlord to Tenant of such Statement of Actual Adjustment, Tenant shall pay to Landlord the amount of any additional rental shown on such statement as being due and unpaid. If such Statement of Actual Adjustment shows that Tenant has paid more than the amount of additional rental actually due from Tenant for the preceding calendar year and if Tenant is not then in default under this Lease, Landlord shall credit the amount of such excess to the next Base Rental installment due from Tenant. The amount of the monthly additional rent for the Initial Premises is estimated by the Landlord as follows:
Additional Rent:(2012 Estimates for 30,500 SF) |
1)Tax | $ | 4,066.67 per month | |||
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2) Insurance |
$ | 559.17 per month | ||||
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3) Common Area Maintenance | $ | 1,423.33 per month | ||||
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(b) If the Commencement Date of this Lease is a day other than the first day of a month, or if the Termination Date is a day other than the last day of a month, the amount shown as due by Tenant on the Statement of Actual Adjustment shall reflect a proration based on the ratio that the number of days this Lease was in effect during such month bears to the actual number of days in said month.
(c) The failure of Landlord to exercise its rights hereunder to estimate expenses and require payment of same as additional rental shall not constitute a waiver of such rights which rights may be exercised from time to time at Landlords discretion, provided, however, that in no event shall Tenant be required to pay Additional Rent if such was accrued by Landlord more than six (6) months prior to Landlord requesting payment for such from Tenant.
5) UTILITY SERVICE. Tenant shall pay the cost of the utility services, including, but not limited to, initial connection charges and all charges for gas, water, and electricity used by Tenant on the Premises; provided, however, that Tenant shall not be responsible for initial connection charges if such is already connected on the Commencement Date nor shall Tenant be responsible for any utility charges accrued prior to the Commencement Date unless otherwise agreed to by Tenant in writing. If the Premises are separately metered, Tenant shall pay such costs directly to the appropriate utility company. Otherwise, Tenant shall pay such costs pursuant to Paragraph 4(b) above. Tenant shall pay all costs caused by Tenant introducing excessive pollutants into the sanitary sewer system, including permits, fees and charges levied by any governmental subdivision for any pollutants or solids other than ordinary human waste. If Tenant can be clearly identified as being responsible for obstructions or stoppage of the common sanitary sewage line, Tenant shall pay the entire cost of repair thereof, following receipt of invoice therefore, as Additional Rent. Tenant shall be responsible for the installation and maintenance of any dilution tanks, holding tanks, settling tanks, sewer sampling devices, sand traps, grease traps or similar devices which may be required by the appropriate governmental subdivision for Tenants use of the sanitary sewer system but not if such are already installed in the Premises prior to the Commencement Date or if such are the responsibility of the Landlord in preparation of the Premises prior to the Commencement Date. Tenant shall also pay all surcharges (i.e., charges in excess of normal charges) levied due to Tenants abnormal use of sanitary sewer or waste removal services so that no such surcharges shall affect Landlord or other tenants in the Project under Paragraph 4(b) above.
(6) USE. Tenant shall occupy and use the Premises for the purpose of general office, R & D, assembly and storage space related to the telecommunications industry. Tenant will not occupy or use the Premises, or permit any portion of the Premises to be occupied or used for any business or purpose which is unlawful in part or in whole or deemed to be disreputable in any manner or extra-hazardous on account of fire or other casualty. Tenant shall not permit anything to be done which will in any way increase the rate of fire insurance on the Building or contents, and in the event that, by reason of acts of Tenant, there shall be any increase in the rate of insurance on the Building or contents created by Tenants acts or conduct of business, then such acts of Tenant shall be deemed to be an event of default hereunder, and Tenant hereby agrees to pay to Landlord the actual amount of such increase in accordance with the terms of this Lease Agreement and acceptance of such payment shall not constitute a waiver of any of Landlords other rights provided herein. Tenant will conduct its business and control its agents, employees and invitees in such a manner as not to create any nuisance or interfere with, annoy or disturb other tenants of the Building or Landlord in management of the Building. Tenant will maintain the Premises in a clean, healthful and safe condition and will comply with all applicable laws, ordinances, orders, rules and regulations (state, federal, municipal and other agencies or bodies having any jurisdiction thereof) with reference to the use, condition and/or occupancy of Premises, except to the extent that the responsibility for such is Landlords hereunder.
7) REPAIRS AND MAINTENANCE.
(a) By Landlord: Landlord shall be responsible, at its expense, only for the structural soundness of the roof, foundation and exterior walls of the Building. Any repair to the roof, foundation or exterior walls required due to the fault or omission of Tenant, or its agents, employees, guests or invitees shall be the sole responsibility of Tenant. The term walls as used in this Paragraph 7(a) shall not include windows, glass or plate glass, interior doors, special store fronts, office entries or exterior doors. Landlords liability with respect to any defects, repairs or maintenance for which Landlord is responsible at its expense under this Lease shall be limited to the cost of such repairs or maintenance or the curing of such defect. As expenses included in Common Area Maintenance Expenses, Landlord will be responsible for landscaping and maintenance of common areas and parking areas, exterior painting, and common sewage line plumbing. Tenant shall immediately give Landlord written notice of defects or need for repairs, after which Landlord shall have a reasonable opportunity to repair same or cure such defect. Landlord shall not be required to perform any covenant or obligation of this Lease, or be liable in damages to Tenant, so long as the performance or non-performance of the covenant or obligation is delayed, caused by, or prevented by an act of God or force majeure. An act of God or force majeure is defined for purposes of this Lease as strikes, lockouts, sit-downs, material or labor restrictions by any governmental authority, riots, floods, washouts, explosions, earthquakes, fire, storms, acts of the public enemy, wars, insurrections and any other similar cause not reasonably within the control of Landlord, and which by the exercise of due diligence Landlord is unable, wholly or in part, to prevent or overcome. Notwithstanding the foregoing, Landlord agrees to be monetarily responsible for any repairs/replacements caused by any non- working interior items including but not limited to electrical, plumbing and mechanical equipment within the Premises for the first sixty (60) days following the Commencement Date of the Lease unless the need for such repairs or replacements is caused by Tenant, in which case, Tenant shall be monetarily responsible.
(b) By Tenant:
(1) Tenant shall maintain all parts of the Premises and their appurtenances (except those for which Landlord is expressly responsible under this Lease) in good, clean and sanitary condition at its own expense. Tenant shall promptly make all necessary repairs and replacements to the Premises, including, but not limited to, electric light lamps or tubes, windows, glass and plate glass, interior and exterior doors, any special office entry, interior walls and finish work, floors and floor coverings, downspouts, gutters, heating and air conditioning systems, dock boards, truck doors, dock bumpers, plumbing work and fixtures other than common building sewage lines. Tenant shall be obligated to repair wind damage to glass caused by events other than hurricanes or tornadoes. Otherwise, however, Tenant shall not be obligated to repair any damage caused by fire, hurricane, tornado or other casualty covered by the insurance maintained by Landlord.
(2) Tenant shall not damage or disturb the integrity, structural soundness, or support of any wall, roof, or foundation of the Premises. Any damage to these walls caused by Tenant or its employees, agents or invitees shall be promptly repaired by Tenant at its sole cost and expense.
(3) Tenant shall, at its own cost and expense, enter into a regularly scheduled preventive maintenance/service contract with a licensed maintenance contractor for servicing all heating and air conditioning systems and equipment within the Premises. The maintenance contractor and the contract must be approved by Landlord; such approval not to be unreasonably withheld or delayed. The service contract must include all services suggested by the equipment manufacturer within the operation/maintenance manual and must become effective (and a copy delivered to Landlord) within thirty (30) days of the date Tenant takes possession of the Premises. If Tenant fails to enter into such service contract as required, Landlord shall have the right to do so on Tenants behalf and Tenant agrees to pay Landlord the reasonable cost and expense of same as Additional Rent. Notwithstanding the foregoing, Landlord agrees to deliver all new and existing HVAC units in good working condition prior to the Commencement Date of the Lease. So long as Tenant maintains the preventative maintenance/service contract stated above, then Landlord will warrant all new and existing HVAC units for a period of six (6) months from the Commencement Date. After the six (6) month period from the Commencement Date, Tenant shall be responsible for all costs associated with maintenance, service or repair of all units. In the event, that any HVAC unit cannot be repaired and requires replacement then Landlord and Tenant shall mutually agree on replacement cost prior to installation and Landlord will, upon final installation and receipt of invoice, reimburse Tenant for fifty percent (50%) of the total replacement cost.
(4) Tenant shall pay all charges for pest control and extermination within the Premises.
(5) At the termination of this Lease, Tenant shall deliver the Premises broom clean to Landlord in the same good order and condition as existed at the Commencement Date of this Lease, ordinary wear, natural deterioration beyond the control of Tenant, damage by fire, tornado or other casualty excepted.
(6) Not in limitation on the foregoing, it is expressly understood that Tenant shall repair and pay for all damage caused by the acts or omissions of Tenant, Tenants employees, agents or invitees, or caused by Tenants default hereunder. All requests for repairs or maintenance that are the responsibility of Landlord under this Lease must be made in writing to Landlord at the address set forth below.
8) COMMON AREAS. The use and occupation by Tenant of the Premises shall include the use in common with others entitled thereto of the common areas, parking areas, service roads, loading facilities (except those that are part of the Premises), sidewalk, and other facilities as may be reasonably designated from time to time by Landlord. All such common areas and other areas and facilities shall at all times be subject to the exclusive control and management of Landlord, and Landlord shall have the right to construct, maintain, and operate lighting facilities on all said areas and improvements; to police same; from time to time to change the area, level, location and arrangement of parking areas and other facilities herein above referred to; and to restrict parking by tenants, their officers, agents, and employees to employee parking areas; provided that, in all cases, that such does not unreasonably interfere with the business operations conducted by Tenant in the Building. Landlord may also segregate and/or designate parking spaces for the exclusive use of
customers of other tenants, in which event Tenant and its employees, agents, and invitees shall not make use of same; provided, however, that the number of parking spots available to Tenant shall, in no event, be less than the product of 1 parking space per 360 Sq feet of the Premises. All common areas and facilities not within the Premises, which Tenant may be permitted to use, are to be used under a revocable license, and if the amount of such areas be diminished, Landlord shall not be subject to liability nor shall Tenant be entitled to any compensation or diminution or abatement of Rent, nor shall such diminution of such areas be deemed constructive or actual eviction provided, however, that such does not unreasonably interfere with the business operations conducted by Tenant in the Building.
9) ASSIGNMENT AND SUBLETTING. Tenant shall not assign its interest in this Lease or any part therein, or allow this Lease to be assigned, in whole or in part, by operation of law or otherwise (including, without limitation, by transfer of stock or other transfer of ownership of Tenant, merger, reorganization, dissolution or change in occupancy) or mortgage or pledge the same, or sublet the Premises, or any part thereof, without, in each case, the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed. In no event shall any such assignment or sublease ever release Tenant or Guarantor from any obligation or liability hereunder. No assignee or sublessee of the Premises or any portion thereof may assign or sublet the Premises or any portion thereof without Landlords prior written consent which will not be unreasonably withheld or delayed.
If Tenant desires to assign its interest in the Lease or any part therein, or sublet all or any part of the Premises, it shall so notify Landlord at least sixty (60) days in advance of the date on which Tenant desires to make such assignment or sublease. Tenant shall provide Landlord with a copy of the proposed assignment or sublease (in a form provided by Landlord), and such information as Landlord might reasonably request concerning the proposed sublessee or assignee to allow Landlord to make informed judgments as to the financial condition, reputation, operations and general desirability of the proposed subtenant(s) or assignee(s). Tenant shall reimburse Landlord for the reasonable cost of reviewing the proposed assignment or sublease, as the case may be. Within thirty (30) days after Landlords receipt of Tenants proposed assignment or sublease, and all required information concerning the proposed subtenant(s) or assignee(s), Landlord shall have the option to:
(a) Cancel this Lease with respect to the proposed assignment, provided, however, that Tenant may then withdraw its request for assignment and the Lease shall not be canceled in any part and shall continue with its then current term or;
(b) Cancel this Lease as to that portion of the Premises proposed to be sublet, or;
(c) Sublet (on the terms set forth in the proposed sublease) that portion of the Premises proposed to be sublet, or;
(d) Consent to the proposed assignment or sublease, in which event, however, if the rent due and payable by any sublessee or assignee under any such permitted assignment or sublease (or a combination of the rent payable under such assignment or sublease plus any bonus or any other consideration therefor or any payment, incident thereto) exceeds the Rent payable under this Lease for such space, Tenant shall pay to Landlord fifty (50) percent of all such excess rent remaining after deducting costs (including tenant improvements and commissions, repair and/or improvement costs solely applicable to the assignment or sublease transaction) within ten (10) days following receipt thereof by Tenant, or;
(e) Refuse its consent to the proposed assignment or sublease, and thereafter, this Lease will remain in full force and effect throughout the then-balance of the Lease Term, which option shall be deemed to be elected unless Landlord gives Tenant written notice providing otherwise.
Notwithstanding the foregoing, Landlord shall release Tenant of responsibility for all obligations, terms, duties and conditions of this Lease and allow the Lease to be assigned to a proposed assignee of Tenant if all of the following are met:
(i) The assignee has a current net worth of five (5) million dollars ($5,000,000) or more;
(ii) The intended use of the Premises by the assignee is not inconsistent with the use described in Paragraph 6 (USE) of the Lease, provided that such use does not have to be in the telecommunications industry;
(iii) The intended use of the Premises by the assignee would not materially increase the pedestrian or vehicular traffic to the Premises or the Building; and
(iv) The identity or business reputation of the assignee will not, in the good faith and commercially reasonable judgment of Landlord, tend to damage the goodwill or reputation of the Building or Project.
10) INDEMNITY. Tenant hereby indemnifies and holds Landlord harmless from and against all fines, suits, claims, demands, losses, expenses, costs, fees and actions (including, without limitation, attorneys fees, costs and expenses) with respect to any injury to person or damage to or loss of property on or about the Premises or in the Building or in or on the grounds and parking areas caused by the acts or omissions of Tenant, its agents, employees, subtenants, invitees or by any other person entering the Building, the Premises, or related facilities under express or implied invitation of Tenant, or arising out of the Tenants use of the Building, the Premises, or related facilities. Landlord hereby indemnifies and holds Tenant harmless from and against all fines, suits, claims, demands, losses, expenses, costs, fees and actions (including, without limitation, attorneys fees, costs and expenses) with respect to any injury to person or damage to or loss of property on or about the Premises or in the Building or in or on the grounds and parking areas caused by the acts or omissions of Landlord, its agents, employees, invitees, or by any other person entering the Building, the Premises, or related facilities under express or implied invitation of Landlord, or arising out of the Landlords use or maintenance of the Building, the Premises, or related facilities. Neither party shall be liable or responsible for any loss of, or damage to, any property or death of or injury to any person occasioned by theft, fire, act of God, public enemy, injunction, riot, strike, insurrection, war, or any other matter beyond control of such party.
11) MORTGAGES. Tenant accepts this Lease subject to the liens and substance of any deeds of trust, mortgages, or other such instruments and any security interests and any ground leases which might now or hereafter constitute a lien upon or affect Landlords interest in the Building or improvements therein, the Premises, the Land, or related facilities, and to zoning ordinances and other building and fire ordinances and governmental regulations relating to the use of the Property of which the Premises is a part. This Paragraph 11 is self-operative and no further instrument of subordination shall be required; provided, however, Tenant shall at any time hereafter, on demand, execute any reasonable instruments, releases or other documents that may be required by any mortgagee for the purpose of subjecting and subordinating this Lease to the lien of any such deed of trust, mortgage, or other instruments and to any such security interest and to any ground lease. Tenant shall not be required to execute any such instrument, release or other document that would in any way limit or change its rights in this Lease or impair its ability to use the Premises for its business operations. With respect to any deed of trust, mortgage or other instrument constituting a lien on the Building or improvements therein, the Premises, or related land and facilities, or any security interest with respect thereto, or any ground lease affecting the Land and/or the Building, Landlord, at its sole option, with the approval of the holder of such deed of trust, security interest or mortgage, or ground lease, shall have the right to waive the applicability of this Paragraph 11 so that this Lease will not be subject and subordinate to any such deed of trust, security interest or mortgage, or ground lease. Tenant shall, upon request by Landlord, execute and deliver from time to time, one or more instruments certifying that this Lease is in full force and not in default (or if it is in default, the nature of such default), that it is unmodified (or if modified, stating the date and nature of each modification), the date through which Rent has been paid, the unexpired Lease Term, and such other matters pertaining to this Lease as may be reasonably requested by Landlord; provided, however, that Tenant shall have a reasonable amount of time to review and act on such request from Landlord. If the interests of Landlord under this Lease shall be transferred by reason of foreclosure or other proceedings for enforcement of any mortgage on the Premises, or if Landlord shall sell its interest in the Building and/or the Land, Tenant shall be bound to the transferee (sometimes called the Purchaser) under the terms and conditions of this Lease for the balance of the remaining Lease term, including any extensions or renewals, with the same force and effect as if the Purchaser were Landlord under this Lease. Tenant further agrees to attorn to the Purchaser, including the mortgagee under any such mortgage (or ground lessor under any such ground lease) if it be the Purchaser, as its Landlord. Such attornment shall be effective without the execution of any further instruments upon the Purchaser succeeding to the interest of Landlord under this Lease. The respective rights and obligations of Tenant and Purchaser upon the attornment, to the extent of the then remaining balance of the term of this Lease, and any extensions and renewals that are mutually agreed in writing, shall be and are the same as those set forth in this Lease. Each such holder of any mortgage, deed of trust, lien, or ground lease and each such Purchaser, shall be a third-party beneficiary of the provisions of this Paragraph. Notwithstanding anything to the contrary contained herein, in no event shall Tenant be required to subordinate this Lease or attorn to any other party unless and until Tenant shall receive a Subordination and Non-Disturbance Agreement in form and substance reasonably satisfactory to Tenant and executed by all applicable parties.
12) INSURANCE.
(a) Tenant shall not permit the Premises to be used in any way which would, in the reasonable opinion of Landlord, be hazardous or which would in any way increase the cost of or render void the fire insurance on improvements or contents in the Project belonging to Landlord or other tenants; provided, however, that a Tenant caused increase in the cost of insurance shall not be a breach or act of default of this Lease if Tenant pays 100% of such increase attributable to the increase for such in accordance with the terms of this Lease. If at any time during the term of this Lease the State Board of Insurance or other insurance authority disallows any of Landlords sprinkler credits or imposes an additional penalty or surcharge in Landlords insurance premiums because of Tenants original or subsequent placement or use of storage racks or bins, method of storage or nature of Tenants inventory or any other act of Tenant, Tenant agrees to pay as Additional Rent the increase in Landlords insurance premiums. If an increase in the fire and extended coverage premiums paid by Landlord for the Building is caused by Tenants use or occupancy of the Premises, or if Tenant vacates the Premises in breach of this Lease and causes an increase, then Tenant shall pay as Additional Rent the amount of such increase to Landlord.
(b) Tenant shall procure and maintain throughout the term of this Lease a policy or policies of commercial general liability insurance of the occurrence form and not the claims made form, at Tenants sole cost and expense, insuring both Landlord (as an additional insured) and Tenant against all claims, demands or actions arising out of or in connection with:
(1) the Premises;
(2) the condition of the Premises;
(3) Tenants operations in and maintenance and use of the Premises; and
(4) Tenants liability assumed under this Lease including, but not necessarily limited to, Tenants business interruption insurance policy.
The limits of such policy or policies shall be not less than one million dollars ($1,000,000) combined single limit coverage per occurrence for injury to persons (including death) and/or property damage or destruction, including loss of use. All such policies shall be procured by Tenant from responsible insurance companies. Tenant shall provide a certificate of insurance indicating that all required coverage is in force. All such original and renewal policies shall provide for at least thirty (30) days written notice to Landlord before such policy may be canceled or changed to reduce insurance coverage provided thereby. Upon request by Landlord, Tenant further agrees to complete and return to Landlord an insurance questionnaire (such form to be provided by Landlord) approved in advance by the Texas Department of Insurance regarding Tenants insurance coverage and intended use of the Premises. Tenant warrants and represents that all information contained in such questionnaire shall be true and correct as of the date thereof and shall be updated by Tenant from time to time upon Landlords request.
13) INSPECTION. Landlord or its representatives shall have the right to enter into, and upon any and all parts of the Premises at reasonable hours with prior notice except in the case of an emergency, to (i) inspect same or clean or make repairs or alterations or additions as Landlord may deem necessary (but without any obligation to do so, except as expressly provided for herein), (ii) show the Premises to prospective tenants, purchasers or lenders, or (iii) determine Tenants use of the Premises or determine if an event of default under this Lease has occurred; and Tenant shall not be entitled to any abatement or reduction of Rent by reason thereof, nor shall such be deemed to be an actual or constructive eviction.
14) CONDEMNATION. If, during the Lease Term, all or such lesser portion of the Premises (and Tenants associated parking) that would make the remainder of the Project unfit for Tenants use should be taken for any public or quasi-public use under any governmental law, ordinance or regulation or by right of eminent domain or by private purchase in lieu thereof, this Lease shall terminate and the Monthly Rental Payment and Additional Rent shall be abated during the unexpired portion of this Lease, effective on the date that Tenant must exit and clear the Premises. Tenant shall have no claim against Landlord for the value of any unexpired portion of the Lease Term. Landlord has the duty to give Tenant the notice of any action that may occur pursuant to this section promptly after Landlord receives such notice. In the event of a partial taking of the Premises (and Tenants associated parking) and the remainder is still for Tenants business operations , then the Rent shall be fairly and justly reduced in proportion to the amount remainder under the Lease.
In the event of any condemnation or taking, total or partial, Tenant shall not be entitled to any part of the award or price paid in lieu thereof, and Landlord shall receive the full amount of such award or price, Tenant hereby expressly waiving any right or claim to any part thereof. Notwithstanding the foregoing, Tenant shall be entitled to assert a separate claim against the condemning authority for the moving and relocation expenses incurred as a result of such condemnation; provided such award would not adversely affect Landlords award.
In the event of a temporary taking, the Lease shall remain in full force and effect and Tenant shall continue to be obligated to make all payments required of it under this Lease, provided, however, Tenant shall not be required to pay Monthly Rent payment(s) and/or Additional Rent during the period of such temporary taking.
15) FIRE OR OTHER CASUALTY. In the event that the Premises or any part thereof shall be damaged by fire or other casualty, Tenant shall give prompt written notice thereof to Landlord. In the event the Building shall be damaged by fire or other casualty, and substantial alteration or reconstruction of the Building shall, in Landlords reasonable opinion, be required (whether or not the Premises shall have been damaged by such fire or other casualty), or in the event any mortgagee under a mortgage or deed of trust covering the Building should require that the insurance proceeds payable as a result of any fire or other casualty be applied against the mortgage debt, Landlord may terminate this Lease by notifying Tenant in writing of such termination within ninety (90) days after the date of notification to Landlord of such damage and the Monthly Rental Payment and Additional Rent shall be abated during the unexpired portion of this Lease effective with the date of such damage; provided, however, Tenants obligation to pay any and all Additional Rent under this Lease shall continue and shall cover all periods up to the date of such damage. If Landlord elects not to terminate this Lease, Landlord shall, within ninety (90) days after notification from Tenant of such damage, commence to rebuild or repair the Building and shall proceed with reasonable diligence to restore the Building (except that Landlord shall not be responsible for delays outside its control) to substantially the same condition it was in immediately prior to the happening of the casualty. Landlord shall not be required to rebuild, repair, or replace any part of the furniture, equipment, or other personal property or any fixtures and other improvements which may have been placed by Tenant within the Building or the Premises, or related facilities.
If the Building is to be rebuilt or repaired, Landlord shall allow Tenant a fair and reasonable diminution of Rent during the time and to the extent the Premises are unfit for Tenants intended use. Landlord shall not be liable for any inconvenience or annoyance to Tenant or injury to the business of Tenant resulting in any way from any damage or repair thereof. Any insurance which may be carried by Landlord or Tenant against loss or damage to the Building or, the Premises, therein shall be for the sole benefit of Landlord; provided, however, any insurance payments to Tenant for loss of any furniture, furnishings, fixtures, equipment, alterations, additions or improvements which were to become the property of Landlord upon the expiration or earlier termination of this Lease shall be prorated. Tenant shall receive that portion of the insurance proceeds allocable to the months remaining in the Lease Term, and Landlord shall receive the portion allocable to the months remaining in the useful life of the item lost.
16) HOLDING OVER. Should Tenant, or any of its successors-in-interest, hold over in the Premises, or any part thereof, after the expiration or earlier termination of the Lease Term, unless otherwise agreed in writing, such holding over shall constitute and be construed as tenancy at will, terminable by Landlord on three (3) days notice, at a rental equal to one hundred and fifty percent (150%) of the Base Monthly Rental payment together with the most current rental adjustment which may have been made thereto pursuant to Paragraph 3 hereof. The holding over by Tenant for any part of a month shall entitle Landlord to collect the Rent called for under this Paragraph 16 for the entirety of such month. Nothing contained in this paragraph shall be construed as Landlords consent for the Tenant to hold over. Landlord shall also be entitled to all of its other rights and remedies available at law or in equity, including, without limitation, the right of forcible detainer.
17) TAXES ON TENANTS PROPERTY. Tenant shall be liable for all taxes levied or assessed against personal property or fixtures placed by Tenant in the Premises and/or the Building except to the extent such taxes are levied or assessed on such property after it becomes the property of Landlord. If any taxes for which Tenant is liable pursuant to this Paragraph 17 are levied or assessed against Landlord or Landlords property and if Landlord elects to pay the same or if the assessed value of the Landlords property is increased by inclusion of personal property or fixtures placed by Tenant in the Premises and/or the Building, and Landlord elects to pay the taxes based on such increase, Tenant shall pay to Landlord upon demand that part of such taxes for which Tenant is primarily liable hereunder.
18) EVENT OF DEFAULT. The following shall be events of default by Tenant under this Lease:
(a) Tenant shall fail to pay any Rental, Monthly Rental Payment, Additional Rent, or any other sum due hereunder when due;
(b) Tenant shall fail to comply with any term, provision or covenant of this Lease other than the payment of Rent, and shall not cure such failure within ten (10) days after written notice thereof to Tenant;
(c) Tenant shall make a general assignment for the benefit of creditors;
(d) Tenant shall file a petition under any section or chapter of the United States Bankruptcy Code, as amended, or under any similar law or statute of the United States or any State thereof, or an involuntary bankruptcy shall be filed against the Tenant and such action/filing shall not be dismissed within thirty (30) days thereafter; or
(e) A receiver or Trustee shall be appointed for all or substantially all of the assets of Tenant, and such receivership or trusteeship shall not be terminated or stayed within thirty (30) days;
19) REMEDIES. Upon the occurrence of any event of default specified in Paragraph 18 hereof, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand whatsoever in addition to all other rights or remedies provided herein or at law or in equity:
(a) Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in Rent, enter and take possession and expel or remove Tenant and any other person who may be occupying the Premises or any part thereof, without being liable for prosecution or any claim of damages therefore.
(b) Enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises or any part thereof, without being liable for prosecution or any claim for damages therefor, and if Landlord so elects, relet the Premises on such terms as Landlord shall deem advisable and receive the rent therefrom;
(c) Enter upon the Premises, without being liable for prosecution or any claim for damages therefor, and do whatever Tenant is obligated to do under the terms of this Lease, and Tenant agrees to reimburse Landlord, on demand, for any reasonable expenses which Landlord may incur in thus effecting compliance with Tenants obligations under this Lease;
No re-entry or taking possession of the Premises by Landlord in accordance with the terms of this Lease shall be construed as an election by Landlord on its part to terminate Tenants right to possession under this Lease, unless a written notice of such intention is given by Landlord to Tenant. Notwithstanding any such reletting or re-entry or taking possession, Landlord may at any time thereafter elect to terminate this Lease for a previous event of default. Pursuit of any remedy herein provided shall not constitute a forfeiture or waiver of any Rent due to Landlord hereunder or of any damages accruing to Landlord by reason of the violation of any of the terms, provisions and covenants herein contained. Landlords acceptance of rent following an event of default hereunder shall not be construed as Landlords waiver of such event of default. No waiver by Landlord of any violation or breach of any of the terms, provisions, and covenants herein contained shall be deemed or construed to constitute a waiver of any other violation or breach of any of the terms, provisions, and covenants herein contained. Forbearance by Landlord to enforce one of more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of any other violation or default. The loss or damage that Landlord may suffer by reason of termination of this Lease or the deficiency from any reletting as provided for above shall include the reasonable expense of repossession and any repairs or remodeling reasonably required to be undertaken by Landlord following possession. Should Landlord at any time terminate this Lease for any event of default, in addition to any other remedy Landlord may have, Landlord may recover from Tenant all reasonable damages Landlord may incur by reason of such event of default, including, without limitation, the cost of recovering the Premises and the loss of the Basic Annual Rental remaining unpaid. The use of remedy by Landlord shall not limit Landlords rights with respect to its use of all other remedies available at law and/or in equity. Notwithstanding anything to the contrary, i) Landlord shall use commercially reasonable efforts to mitigate any damages resulting from an Event of Default by Tenant under this Lease; and ii) the actions described in subsections (c), (d) or (e) of Section 18 shall not be considered an event of default for so long as Tenant continues to meet its material commitments in this Lease, including making all payments in accordance with the terms herein, during the period such action(s) is taking place.
20) SURRENDER OF PREMISES.
(a) On the last day of the term of this Lease, or upon any earlier termination of this Lease, or upon any re-entry by Landlord upon the Premises, Tenant shall quit and surrender the Premises to Landlord broom-clean and in good order, condition and repair, except for ordinary wear and tear and such change or destruction as Landlord is required to repair or restore under this Lease, and Tenant shall remove all of Tenants property therefrom, except as otherwise expressly provided in this Lease.
(b) No act or thing done by Landlord or its agents during the Lease Term shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept a surrender of the Premises shall be valid unless the same be made in writing and subscribed by Landlord.
21) ATTORNEYS FEES. In case it should be necessary or proper for Tenant or Landlord to bring any action under this Lease or to consult or place this Lease with an attorney concerning the enforcement of any provision hereof, then Tenant and Landlord agree in each and such case that the prevailing party in such action shall be entitled to recover its reasonable attorneys fees from the losing party.
22) LANDLORDS LIEN. Landlord waives and relinquishes any and all landlords liens that it may have under statute or the Texas constitution, and Landlord acknowledges and agrees that no landlords lien or security interest is granted by Tenant under this Lease Agreement.
23) MECHANICS LIEN. Tenant will not permit any mechanics, materialmans or similar lien or liens to be placed upon the Premises or the Building or improvements thereon caused by or resulting from any work performed, materials furnished or obligation incurred by or at the request of Tenant, and in the case of the filing of any such lien, Tenant will promptly pay or contest same to cause such lien to be released and/or discharged. If default in payment thereof shall continue for thirty (30) days after written notice thereof from Landlord to Tenant, and such claim is not being contested, Landlord shall have the right and privilege, but not the obligation, at Landlords option, of paying the same, or any portion thereof, without inquiry as to the validity thereof, and any amounts so paid, including reasonable, actual expenses, shall constitute Additional Rent hereunder due from Tenant to Landlord and shall be repaid to Landlord in accordance with the terms for payment of Additional Rent hereunder.
24) WAIVER OF SUBROGATION. Landlord and Tenant hereby waive and release any and all rights, claims, demands and causes of action each may have against the other on account of any loss or damage occasioned to Landlord or to Tenant (as the case may be), their respective businesses, real and personal properties, the Premises, the Building, the project of which the Building is a part, or its contents, arising from any risk or peril covered by any insurance policy carried by either party. Inasmuch as the above mutual waivers will preclude the assignment of any such claim by way of subrogation (or otherwise) to an insurance company (or any other person), each party hereto hereby agrees immediately to give to its respective insurance companies written notice of the terms of such mutual waivers and to have their respective insurance policies properly endorsed, if necessary, to prevent the invalidation of such insurance coverages by reason of such waivers. This provision shall be cumulative with Paragraph 11 above.
25) NOTICES. Each provision of this Agreement, or of any applicable governmental laws, ordinances, regulations, and other requirements with reference to the sending, mailing or delivery of any notice, or with reference to the making of any payment by Tenant to Landlord, shall be deemed to be complied with when and if the following steps are taken:
(a) All Monthly Rental Payments and Additional Rent required to be made by Tenant to Landlord hereunder shall be payable to Landlord in Dallas County, Texas, at the address hereinbelow set forth, or at other such address as Landlord may specify from time to time by written notice in accordance herewith;
(b) Any notice or document required to be delivered hereunder shall be deemed to be delivered if actually received in person, sent by electronic means or by facsimile with confirmation or, mailed postage prepaid within the U.S. notice shall be effective five (5) days after mailing and, if sent by overnight courier, then deemed received the next day. Any such notice shall be addressed to the parties hereto at the respective addresses set out opposite their names below, or at such other address as they have heretofore specified by written notice delivered in accordance herewith:
LANDLORD:
Telecom Commerce III, Ltd.
c/o JSC Realty Services, Inc.
2711 LBJ Freeway, Suite 130
Dallas, TX 75234
TENANT:
Mavenir Systems, Inc.
1700 International Parkway, Suite 200
Richardson, TX 75081
Attn: General Counsel
26) FORCE MAJEURE. Whenever a period of time is herein prescribed for action to be taken by Landlord or Tenant (except for the obligation of Tenant to pay the Monthly Rental Payments, Additional Rent or other sums due hereunder), then neither party shall be liable or responsible for, and there shall be excluded from the computation of any such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental laws, regulations or restrictions or any other causes of any kind whatsoever which are beyond the control of such party.
27) SEPARABILITY. If any clause or provision of this Lease is held by a court of competent jurisdiction to be illegal, invalid or unenforceable under present or future laws effective during the Lease Term, then, and in that event, it is the intention of the parties hereto that the remainder of this Lease shall not be affected thereby, and it is also the intention of the parties to this Lease that in lieu of each clause or provision of this Lease that is illegal, invalid, or unenforceable there be added as a part of this Lease a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable.
28) ENTIRE AGREEMENT; AMENDMENTS; BINDING EFFECT. This Lease contains the entire agreement between the parties and may not be amended, supplemented or terminated except by instrument in writing signed by both parties hereto. No provision of this Lease shall be deemed to have been waived by either party unless such waiver be in writing, signed by such party and delivered to the other party in accordance with the notice provision herein, nor shall any custom or practice which may arise between the parties in the administration of the terms hereof be construed to waive or lessen the right of Landlord to insist upon the performance by Tenant in strict adherence with the terms hereof. The terms, provisions, covenants and conditions contained in this Lease shall apply to, inure to the benefit of, and be binding upon the parties hereto, and upon their respective successors-in-interest, permitted assigns and legal representatives, except as otherwise herein expressly provided.
29) QUIET ENJOYMENT. Provided Tenant has performed all of the terms, covenants, agreements and conditions of this Lease, including, without limitation, the payment of Monthly Rental Payments and Additional Rent, to be performed by Tenant, Tenant shall peaceably and quietly hold and enjoy the Premises for the Lease Term, without hindrance from Landlord, subject to the terms and conditions of this Lease.
30) RULES AND REGULATIONS. Tenant and Tenants agents, employees, and invitees will comply fully with all requirements of the Rules and Regulations of the Building and related facilities which are attached hereto as Exhibit D, and made a part hereof as though fully set forth herein. Landlord shall at all times have the right to change or amend such Rules and Regulations or to promulgate other rules and regulations in such reasonable manner as may be deemed advisable for safety, care, or cleanliness of the Building, the Premises, or related land and facilities, and for preservation of good order therein, all of which Rules and Regulations, changes and amendments will be forwarded to Tenant in writing and shall be carried out and observed by Tenant. Tenant shall further be responsible for the compliance with such Rules and Regulations by the employees, servants, agents, visitors and invitees of Tenant. Nothing in this Lease shall be construed to impose upon Landlord any duty or obligation to enforce the Rules and Regulations against any other tenant or any employee or agent of any other tenant and Landlord shall not be liable to Tenant for violation of the Rules and Regulations by any other tenant or its agents, employees, invitees or licensees.
31) BROKERS OR AGENTS COMMISSION. Tenant represents and warrants that it has dealt with no Broker or Agent in connection with this Lease, except as listed below, and Tenant agrees to indemnify and hold Landlord harmless from and against all liabilities and costs arising from a breach of such representation and warranty including, without limitation, attorneys fees, costs and expenses in connection therewith: CBRE, Inc. For clarity, Landlord acknowledges and agrees that it will compensate the Tenants Broker, CBRE, Inc., for its work related to this Lease in accordance with the terms of a separate commission agreement. Additionally, Landlord shall be fully responsible for compensating any Broker or Agent it used in connection with this Lease.
32) GENDER. Words of any gender used in this Lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires.
33) GUARANTY, JOINT AND SEVERAL LIABILITY Intentionally Deleted.
34) CAPTIONS. The captions in this Lease are for convenience of reference only, and in no way limit or enlarge the terms and conditions of this Lease.
35) PLACE OF PERFORMANCE. Tenant shall perform all covenants, conditions and agreements contained herein, including but not limited to payment of the Monthly Rental Payments and Additional Rent, in Dallas County, Texas. Any suit arising from or relating to this Lease shall be brought in Dallas County, Texas.
36) ESTOPPEL CERTIFICATES. Tenant shall at any time and from time to time, upon not less than ten (10) days prior request by Landlord, execute, acknowledge and deliver to Landlord a statement in writing certifying that this Lease is unmodified and in full force and effect (or if there have been any modifications, that the same is in full force and effect as modified and stating the modifications), and the dates to which the Rent and any other charges have been paid, and either stating that to the knowledge of Tenant no default exists hereunder or specifying each such default known to Tenant, and stating such other matters as may be reasonably requested by landlord; it being intended that any such statement delivered pursuant to this paragraph may be relied upon by any prospective purchaser or encumbrancer (including assignees) of the Premises.
37) NOTICE TO LANDLORD. In the event of any act or omission by Landlord which would give Tenant the right to damages from Landlord or the right to terminate this Lease by reason of a constructive or actual eviction from all or part of the Premises or otherwise, Tenant shall not sue for such damages or exercise any such right to terminate until it shall have given written notice of such act or omission to Landlord a reasonable period of time, for remedying such act or omission shall have elapsed following the giving of such notices, during which time Landlord, their agents or employees, shall be entitled to enter upon the Premises and do therein whatever may be necessary to remedy such act or omission. During the period after the giving of such notice, and during the remedying of such act or omission, the Rental payable by tenant for such period as provided in this Lease shall be abated and apportioned only to the extent that any part of the Premises shall be untenantable.
38) LIMITATION ON LANDLORD LIABILITY. The liability of Landlord and its shareholders, officers and directors to Tenant for any default by Landlord under the terms of this Lease shall be limited to the monetary interest of Landlord in the Building and the Land, and Tenant agrees to look solely to Landlords and its shareholders, officers and directors interest in the Building and the Land for the recovery of any judgment from Landlord and its shareholders, officers and directors, it being intended that Landlord and its shareholders, officers and directors shall not be personally liable for any judgment or deficiency.
39) PARKING. During the term of this Lease, Tenant, in common with Landlord and other tenants of the Building and their guests and invitees, and tenants, guests and invitees of owners of property in the area of the Building, shall have the non-exclusive use of the uncovered automobile parking areas serving the Building, subject to the reasonable rules and regulations for the use thereof, as prescribed from time to time by Landlord. Landlord shall not be responsible for security with respect to parking areas and shall not be liable or responsible for any loss of or damage to any car or vehicle or equipment or other property therein or damage to property or injuries (fatal or non-fatal), unless such loss, damage, or injury be proximately caused by the negligence of Landlord or its employees. Landlord may make, modify, and enforce reasonable rules and regulations relating to the parking of automobiles, and Tenant will abide by such reasonable rules and regulations.
40) MISCELLANEOUS.
(a) Each party warrants and represents that it has the right and power to enter into this Lease.
(b) Because the Premises are on the open market and are presently being shown, this Lease shall be treated as an offer to lease only. Unless and until this Lease is accepted by Landlord and Tenant in writing and a fully executed copy delivered to both parties, this offer is subject to withdrawal or non-acceptance by either party and the Premises may be leased to another party or used for another purpose by Landlord without notice.
(c) If Tenant shall fail to pay, when the same is due and payable, any Rent, any Additional Rent, or any other sum due hereunder, such unpaid amount shall bear interest from the due date thereof to the date of payment at the highest non-usurious rate permitted by the then-applicable law.
(d) Landlord does not in any way or for any purpose in connection with this Lease become a partner of Tenant in the conduct of its business or otherwise, nor a member of a joint venture with Tenant.
(e) Time is of the essence in the performance of all the covenants, conditions and agreements contained in this Lease.
(f) This Lease may be executed in one or more counterparts, each of which counterparts shall for all purposes be deemed to be an original, but all such counterparts together shall constitute but one instrument.
41) NO REPRESENTATIONS. Tenant will make no claim on account of any representations whatsoever, whether made by any renting agent, broker, officer or other representative of Landlord or which may be contained in any circular, prospectus or advertisement relating to the Premises or the Building, or otherwise, unless the same is specifically set forth in this Lease.
42) COMPLIANCE WITH LAWS.
(a) Tenant shall give prompt notice to Landlord of any notice it receives of the violation of any law or requirement of any public authority with respect to the Premises or the use or occupation thereof. Tenant shall, at Tenants expense, comply with all laws and requirements of any public authorities which shall, in respect of the Premises or the use and occupation thereof, or the abatement of any nuisance in, on or about the Premises, impose any violation, order or duty on Landlord or Tenant, arising from (i) Tenants use of the Premises, (ii) the manner of conduct of Tenants business or operation of its installations, equipment or other property therein, (iii) any cause or condition created by or at the instance of Tenant, or (iv) breach of any of Tenants obligations hereunder; and Tenant shall pay all the costs, expenses, fines, penalties and damages which may be imposed upon Landlord or any ground lessor of the Landlord or the Building affecting the Premises by reason of or arising out of Tenants failure to fully and promptly comply with and observe the provisions of this section. However, Tenant need not comply with any such law or requirement of any public authority so long as Tenant shall be contesting the validity thereof, or the applicability thereof to the Premises, in accordance with Section 42(b). Subject to the provisions of Section 42(c), Landlord, at its expense, shall comply with all other such laws and requirements of public authorities as shall affect the Premises, but may similarly defer compliance so long as Landlord shall be contesting the validity or applicability thereof.
(b) Tenant, at its expense, after notice to Landlord, may contest, by appropriate proceedings prosecuted diligently and in good faith, the validity, or applicability to the Premises, of any law or requirement of any public authority, provided that (a) Landlord shall not be subject to criminal penalty or to prosecution for a crime, nor shall the Premises or any part thereof be subject to being condemned or vacated, by reason of non-compliance or otherwise by reason of such contest; (b) before the commencement of such contest, Tenant shall furnish to Landlord either (i) the bond of a surety company satisfactory to Landlord, which bond shall be, as to its provisions and form, satisfactory to Landlord, and shall be in an amount at least equal to one hundred twenty-five percent (125%) of the cost of such compliance (as estimated by a reputable contractor designated by Landlord) and shall indemnify Landlord against the cost thereof and against all liability for damages, interest, penalties and expenses (including reasonable attorneys fees and expenses), resulting from or incurred in connection with such contest or non-compliance. or (ii) cash in the amount of such bond or other security reasonably satisfactory to Landlord in place of such bond; and (c) Tenant shall keep Landlord advised as to the status of such proceedings.
(c) Landlord represents and warrants that to the best of its knowledge, the Building is in compliance with all applicable municipal and federal codes, including, but not limited to, the Americans with Disabilities Act.
(d) Landlord represents and warrants that to the best of its knowledge, the Premises, Building and Project do not contain asbestos, hazardous waste, PCBs or underground tanks.
43) MEMORANDUM OF LEASE. Tenant shall not record this Lease. However, at the request of Landlord, Tenant shall promptly execute, acknowledge and deliver to Landlord a memorandum of lease in respect of this Lease sufficient for recording. Such memorandum shall not be deemed to change or otherwise affect any of the obligations or provisions of this Lease.
44) CONSENT TO JURISDICTION. Each party hereby consents to the jurisdiction of the courts of Texas (both Federal and State) in any action brought by the other party.
45) MORTGAGEE MODIFICATION. In the event that a mortgagee of the Building or the Land requires a modification to this Lease, Landlord shall provide notice and content of such modification to Tenant and Tenant shall have thirty (30) days to review such. If Tenant consents to such modification, such consent not to be unreasonably withheld or delayed, then Tenant will execute an amendment in connection therewith, provided such modification does not change the Lease Term, the Basic Annual Rental, the Additional Rent nor does such modification materially adversely affect Tenant.
46) TEXAS LAW. This Lease is governed by and construed in accordance with the laws of the State of Texas.
47) SIGNS. No sign, door plaques or advertisement shall be displayed, painted or affixed by Tenant on any external part of the Project or the Building, parking facilities, or external part of the Premises without the prior written consent of Landlord; such consent not to be unreasonably withheld or delayed. The color, size, character, style, material, and placement of any external signs shall be approved by Landlord, acting reasonably and shall be subject to any applicable governmental laws, ordinances, regulations and mutually agreed project specifications. Signs on external doors and entrances to the Premises, if approved by Landlord, shall be placed thereon by a reasonably qualified contractor and paid for by Tenant. Tenant shall remove all such signs at the expiration or earlier termination of this Lease. Such installations and removals shall be made in such manner as to avoid defacement of the Project and other improvements, and Tenant, at its sole expense, shall repair any defacement caused by such installation and/or removal.
48) HAZARDOUS WASTE. The term Hazardous Substances, as used in this Lease shall mean pollutants, contaminants, toxic or hazardous wastes, or any other substances, the use and/or the removal of which is required or the use of which is restricted, prohibited or penalized by any Environmental Law, which term shall mean any federal, state or local law, ordinance or other statute of a governmental or quasi-governmental authority relating to the pollution or protection of the environment. Tenant hereby agrees that (i) no activity will be conducted on the Premises that will produce any Hazardous Substances; (ii) the Premises will not be used in any manner for the storage of any Hazardous Substances; (iii) no portion of the Premises will be used as a landfill or a dump; (iv) Tenant will not install any underground tanks of any type; (v) Tenant will not allow any surface of subsurface conditions to exist or come into existence
that constitute, or with the passage of time may constitute a public or private nuisance; (vi) Tenant will not permit any hazardous Substances to be brought onto the Premises, and if so brought thereon, then the same shall be immediately removed with proper disposal, and all required clean-up procedures shall be diligently undertaken pursuant to all Environmental Laws. Landlord or Landlords representative shall have the right but not the obligation to enter the Premises upon reasonable notice except in case of an emergency for the purpose of ensuring compliance with all Environmental Laws. If Tenant so contaminates the Premises, then Tenant shall promptly and diligently institute proper and thorough clean-up procedures at Tenants sole cost, and Tenant hereby indemnifies and holds Landlord harmless from and against all claims, demands, actions, liabilities, costs, expenses, damages and obligations of any nature arising from or as a result of Tenants failure to comply with this Paragraph 48. The foregoing indemnification and the responsibilities of Tenant shall survive the expiration or earlier termination of this Lease.
49) INDEPENDENT OBLIGATIONS OF TENANT. The obligation of Tenant to pay all Rental and other sums hereunder provided to be paid by Tenant and the obligation of Tenant to perform Tenants other covenants and duties hereunder constitute independent, unconditional obligations to be performed at all times provided for hereunder, save and except only when an abatement thereof or reduction therein is hereinabove expressly provided for and not otherwise. Tenant waives and relinquishes all rights which Tenant might have to claim any nature of lien against or withhold, or deduct from or offset against any Rental and other sums provided hereunder to be paid Landlord by Tenant. Tenant waives and relinquishes any right to assert, either as a claim or as a defense, that Landlord is bound to perform or is liable for the nonperformance of any implied covenant or implied duty of Landlord not expressly herein set forth.
50) COUNTERPART EXECUTION. This Lease may be executed in multiple counterparts, including fax, electronic mail and other electronic means, each of which shall be deemed to constitute an original, but all of which, when taken together, shall constitute one and the same instrument, with the same effect as if all of the parties to this Lease had executed the same counterpart. The signature pages may be consolidated to form one single instrument.
51) TERMINATION OPTION. Tenant shall have a one-time option to terminate the Lease for the entire 43,750 SF Premises and any additional space that may be leased hereunder or pursuant to this Lease, effective at midnight (CST) February 28, 2018 (the Termination Date). In order for this one-time option to be effective, Tenant must give written notice of its intention to terminate the Lease to Landlord prior to September 1, 2017 and, together with such written notice, provide to Landlord a termination payment equal to the unamortized cost of Tenant Improvements and Commissions at eight percent (8%) amortization rate equaling the amount of $95,100.89 plus five (5) additional months of Basic Monthly and Additional Rental; such Additional Rental to be reasonably approximated if not known for certain. In the event Tenant has leased additional space beyond the 43,750 SF Premises, Tenant shall provide a termination payment equal to the unamortized cost of Tenant Improvements and Commissions at eight percent (8%) amortization rate for the additional space plus five (5) additional months of Basic Monthly and Additional Rental; such Additional Rental to be reasonably approximated if not known for certain.
EXHIBITS:
A. | Legal Description |
B. | Existing Floor Plan |
C. | Leasehold Improvements |
C1. | Preliminary Plan |
D. | Rules & Regulations |
E. | Option To Renew |
F. | Right of First Refusal |
LANDLORD: |
TENANT: | |||||||
Telecom Commerce III, Ltd |
Mavenir Systems, Inc. | |||||||
A Texas Limited Partnership |
||||||||
By: | International at Glenville, Inc. | |||||||
A Texas corporation, its General Partner | ||||||||
By: | /s/ Kenneth W. Shaw |
By: | /s/ Terry Hungle | |||||
Kenneth W. Shaw |
Terry Hungle | |||||||
Its: | President |
Its: | Chief Financial Officer | |||||
Date: | July 20, 2012 |
Date: | July 19, 2012 |
EXHIBIT A
LEGAL DESCRIPTION
BEING a tract of land situated in the Jesse N. Everett Survey, Abstract No. 440, Dallas county, Texas, said tract of land being Lot 1B, Block E, CENTRAL PARK SUBDIVISION, an addition to the city of Richardson, according to the plat recorded in Volume 84124, Page 2041, Map Records, Dallas County, Texas, with Certificate of Correction recorded in Volume 85121, Page 1263 of the Deed Records of Dallas County, Texas, and being more particularly described as follows:
BEGINNING at a found X on a concrete headwall at the intersection of the east line of International Parkway (60 foot right-of-way), with the centerline of a drainage easement (110 feet wide) recorded in Volume 73245, Page 1642 of the Deed Records of Dallas county, Texas, said point also being in the north line of Lot 1, Block F, as recorded in Volume 83118, Page 1449 of the Deed Records of Dallas County, Texas, said point lying on a circular curve to the left having a radius of 3875.00 feet whose center bears North 48 degrees 24 minutes 18 seconds West;
THENCE Northeasterly, along said curve through a central angle of 06 degrees 53 minutes 30 seconds, an arc distance of 466.10 feet to a found iron rod for a corner;
THENCE South 55 degrees 16 minutes 42 seconds East, departing said east line and along the common line between said Lot 1B and Lot 1A, Block E of said Central Park addition, a distance of 298.18 feet to a found V for a corner;
THENCE South 10 degrees 16 minutes 42 seconds East, continuing along said common line, a distance of 77.75 feet to a found X for a corner;
THENCE South 34 degrees 43 minutes 18 seconds West, continuing along said common line, a distance of 410.00 feet to set P.K. nail for a corner, said P.K. nail lying in the north line of said Lot 1, Block F;
THENCE North 55 degrees 16 minutes 42 seconds West, departing said common line and along the north line of said Lot 1, Block F and along the centerline of said 110 foot wide drainage easement, a distance of 381.01 feet to the POINT OF BEGINNING AND CONTAINING 167,000 square feet or 3.834 acres of land, more or less.
EXHIBIT B
EXISTING FLOOR PLAN
The floor plan below is representative of the existing layout of the Premises. It is agreed that the final floor plan shall be mutually agreed to by both Landlord and Tenant, after which it will be incorporated into this Exhibit B.
EXHIBIT C
LEASEHOLD IMPROVEMENTS
Landlord shall construct in the Premises the Leasehold Improvements (including the three (3) alternates) as are described on the Tenant Improvement Summary below dated May 2, 2012 and the Preliminary Plan attached hereto as Exhibit C1. For clarity, the Landlord acknowledges and agrees that at the end of the Lease term (due to expiration or earlier termination in accordance with the terms of the Lease), the generator being provided will be owned in full by Tenant and Tenant may, at the expiration or earlier termination of the Agreement, remove such generator and upon removal Tenant shall repair any damage caused by such removal. In addition to the summary below, Landlord shall provide, based upon mutually acceptable plans, an allowance of One Hundred Thousand dollars ($100,000.00) to be utilized within the 13,250 SF Expansion Premises described on Exhibit B herein, such being the Expansion Premises. This allowance shall be applied to coincide with an April 1, 2014 Base Rental Commencement Date or such earlier date if Tenant gives Landlord written notice of such in accordance with the terms of this Lease. Any modification to this summary shall be mutually agreed to by Landlord and Tenant with the cost difference reflected accordingly on any unamortized cost associated herein.
EXHIBIT C1
Preliminary Plan
EXHIBIT D
RULES AND REGULATIONS
The following Rules and Regulations are prescribed by Landlord in order to provide and maintain, to the best of Landlords ability, orderly, clean and desirable Premises, building and parking facilities for the tenants therein and to regulate conduct in and use of the Premises, the Building and parking facilities in such a manner as to minimize interference by others in the proper use of the Premises by Tenant. In the following Rules and Regulations, all references to Tenant include not only Tenant, but, also, Tenants agents, servants, employees, invitees, licensees, visitors, permitted assignees, and/or sublessees:
1. Tenant shall not block or obstruct any of the entries, passages, doors, hallways, or stairways of the Building or the parking area, or place, empty, or throw any rubbish, litter, trash, or material of any nature into such areas, or permit such areas to be used at any time except for ingress or egress of Tenants.
2. Landlord will not be responsible for lost or stolen personal property, equipment, money, or any article taken from the Premises, Building, or parking facilities, unless or to the extent such is due to the negligence or willful misconduct of Landlord or its employee or contractor.
3. The plumbing facilities shall not be used for any other purpose than that for which they are constructed, and no foreign substance of any kind shall be placed therein, and the expense of any breakage, stoppage, or damage resulting from a violation of this provision by Tenant shall be borne by Tenant.
4. Tenant shall permit Landlord, during the twelve (12) months prior to the expiration of this Lease to show the Premises, with at least twenty-four (24) hour prior written notice, during business or non-business hours to prospective lessees and to advertise the Premises for rent.
5. Any keys required by Tenant during the term of this Lease shall be requested from Landlord and shall be paid for by Tenant upon delivery of keys to the Premises; provided, however, i) Landlord shall present Tenant with a reasonable number of keys to each exterior lock currently serving the Premises upon the Commencement Date of the Initial Premises and as regards the Expansion Premises and, if applicable, the space discussed in Exhibit F; and, ii) Tenant may operate a pass card scanner or related system for entry to the Premises and distribute pass cards or the like as it deems necessary without fee to be paid to Landlord. Prior to or upon the Commencement Date, Landlord shall replace all exterior locks at its expense and the keys provided to Tenant hereunder shall be to such new locks. In the event new locks are requested by Tenant after the Commencement Date, then all costs associated with such request (including hardware, installation and keys) shall be paid by Tenant.
6. The common parking facilities are available for use by any and all Tenants. Landlord reserves the right to assign or allocate parking in the event of conflicts, abuse or improper use of these common parking facilities. It is generally understood that any Tenant should utilize only those parking spaces immediately adjacent to that Tenants specific premises.
Proper use of the common parking facilities is deemed to be that use which is occasioned by the normal in and out traffic required by the Tenant, in the normal course of the Tenants business operations.
Vehicles that are abandoned, disabled, obstructing any means of ingress or egress to the Premises, or are in any way a general nuisance or hazard are subject to removal, without notice by Landlords designated wrecker and towing service. All costs associated with such removal shall be at the Vehicle Owners expense.
7. Tenant shall not use the Building, the Premises, or parking facilities for housing, lodging, or sleeping purposes without express written consent of Landlord.
8. No birds or animals shall be brought into or kept in or about the Premises or any other part of the Building, except animals used to assist impaired individuals.
EXHIBIT E
OPTION TO RENEW
Tenant shall have, and is hereby granted, one (1) option to renew and to extend the term of this Lease for a period of Five (5) years (the Renewal Term), such option to follow consecutively upon the expiration of the initial term of this Lease, provided that at the time such option to renew is exercised, this Lease shall be in full force and effect and Tenant shall not be in default hereunder. Such option shall be exercised, if at all, by Tenant giving written notice of its intention to renew and extend the term of this Lease to Landlord at least six months before the Expiration Date of this Lease. Any assignment or subletting by Tenant in violation or breach of Paragraph 9 of this Lease shall terminate all rights of renewal and extension set forth herein. The renewal, if elected by Tenant, shall unless otherwise mutually agreed in writing be under all of the terms and conditions of this Lease except Basic Rental (below provided) which will be changed in an amount corresponding to the new Basic Rental, and except that no further renewal option shall exist.
Commencing with the first (1st) day of the first (1st) calendar month for the Renewal term, the applicable Basic Annual Rental for each calendar month for the Renewal Term shall be adjusted so that it is equal to the mutually agreed prevailing market rate per annum for comparable space available in buildings of a quality similar to the Building within reasonable proximity thereto at such time. Landlord and Tenant shall, after reviewing market conditions, mutually agree on the Basic Annual Rental to be charged for the Renewal Term and any other incentives or terms related thereto.
EXHIBIT F
RIGHT OF FIRST REFUSAL OPTION
1. The Tenant is hereby granted a continuing right of first refusal (the ROFR) to lease the approximately 14,875 square feet of contiguous space to the south of the Premises also known as Suite 300 (hereinafter sometimes called the ROFR Space) as such space is available.
2. Tenant may exercise a ROFR only if, at the time of such exercise and at the time of Landlords delivery of the ROFR Space to Tenant, (a) no uncured material event of default exists and (b) Tenant (together with any permitted assignees per Paragraph 9) are occupying the Premises. If such condition(s) are not satisfied or waived by Landlord, any purported exercise of the ROFR shall be null and void. No assignee of Tenant (other than an assignee pursuant to Paragraph 9 of the Lease), or sub lessee of the Premises, may exercise a ROFR unless otherwise agreed to in writing by Landlord.
3. If Landlord receives a bona-fide written third-party offer to lease the ROFR Space that Landlord desires to accept, Landlord will contemporaneously submit a proposal to Tenant upon the same terms of this offer (a Refusal Lease Proposal) setting forth, the effective rental rate, tenant improvement allowance, lease term, parking ratios and rates, any free rent, rights and first refusal and expansion rights that are contained in the written third-party offer. Tenant shall have a period of ten (10) business days after receipt of a Refusal Lease Proposal to irrevocably and unconditionally exercise its ROFR to lease the applicable ROFR Space upon the terms of the Refusal Lease Proposal by written notice to Landlord; provided that such is added to this Lease by mutually agreed amendment as discussed herein. If Tenant does not exercise a ROFR within such ten (10) business day period, the ROFR shall be waived with respect to such space. Upon Tenants exercise of a ROFR, Landlord and Tenant shall promptly execute an amendment to this Lease evidencing same.
4. If Landlord does not receive written notice from Tenant of its exercise of the ROFR within said ten (10) business day period, Landlord may proceed to lease the applicable ROFR Space to the third party offeror referred to in paragraph 3, above. If Landlord does not lease such ROFR Space to third party offeror, Tenant shall have a ROFR on any subsequent leasing thereof on the terms set forth above.
5. In addition to the Right of First Refusal Option above, Landlord hereby grants Tenant the option to lease the 14,875 SF at any time prior to April 1, 2014 at the Annual Basic Rental of $8.34 psf plus Additional Rent as defined herein; the term of such Lease shall be for the remainder of the term of this Lease. Landlord shall provide, based upon mutually acceptable plans, an allowance of $112,264.00 to be utilized within the 14,875 SF space.
Exhibit 10.26
SENIOR LOAN AND SECURITY AGREEMENT
THIS SENIOR LOAN AND SECURITY AGREEMENT (this Agreement) dated as of October 18, 2012 (the Effective Date) by and among (i) SILICON VALLEY BANK, a California corporation with a loan production office located at 14185 Dallas Parkway, Suite 760, Dallas TX 75254 (Bank), (ii) MAVENIR SYSTEMS, INC., a Delaware corporation (Mavenir) and (iii) MAVENIR HOLDINGS, INC., a Delaware corporation, (Holdings, and together with Mavenir, individually and collectively, jointly and severally, the Borrower) each with offices located at 1651 North Glenville Drive, Suite 216, Richardson, Texas 75081, provides the terms on which Bank shall lend to Borrower and Borrower shall repay Bank. The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed following GAAP. Calculations and determinations must be made following GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13. All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein.
2 LOAN AND TERMS OF PAYMENT
2.1 Promise to Pay. Borrower hereby unconditionally promises to pay Bank the outstanding principal amount of all Credit Extensions and accrued and unpaid interest thereon as and when due in accordance with this Agreement.
2.1.1 Revolving Advances.
(a) Availability. Subject to the terms and conditions of this Agreement and to deduction of Reserves, Bank shall make Advances not exceeding the Availability Amount. Amounts borrowed under the Revolving Line may be repaid, and prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable terms and conditions precedent herein.
(b) Termination; Repayment. The Revolving Line terminates on the Revolving Line Maturity Date, when the principal amount of all Advances, the unpaid interest thereon, and all other Obligations relating to the Revolving Line shall be immediately due and payable. The Revolving Line may be prepaid at any time in full or in part without prepayment premium or penalty.
2.1.2 Non-formula Revolving Advances.
(a) Availability. Subject to the terms and conditions of this Agreement, Bank shall make Non-formula Advances not exceeding the Non-formula Availability Amount. Amounts borrowed under the Non-formula Revolving Line may be repaid, and prior to the Non-formula Revolving Line Maturity Date, reborrowed, subject to the applicable terms and conditions precedent herein.
(b) Termination; Repayment. The Non-formula Revolving Line terminates on the Non-formula Revolving Line Maturity Date, when the principal amount of all Non-formula Advances, the unpaid interest thereon, and all other Obligations relating to the Non-formula Revolving Line shall be immediately due and payable. The Non-formula Revolving Line may be prepaid at any time in full or in part without prepayment premium or penalty.
2.1.3 Letters of Credit.
(a) Bank shall issue or have issued Letters of Credit denominated in Dollars or a Foreign Currency for Borrowers account. The aggregate Dollar Equivalent of the face amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve) may not exceed Two Million Five Hundred Thousand Dollars ($2,500,000.00), minus (i) the sum of all amounts used for Cash Management Services, and minus (ii) the FX Reduction Amount.
(b) If, on the later of the Non-formula Revolving Line Maturity Date or Revolving Line Maturity Date (or the effective date of any termination of this Agreement), there are any outstanding Letters of Credit, then on such date Borrower shall provide to Bank cash collateral in an amount equal to 105% (110% for Letters of Credit denominated in a currency other than Dollars) of the Dollar Equivalent of the face amount of all such Letters of Credit plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment), to secure all of the Obligations relating to such Letters of Credit. All Letters of Credit shall be in form and substance acceptable to Bank in its sole discretion and shall be subject to the terms and conditions of Banks standard Application and Letter of Credit Agreement (the Letter of Credit Application). Borrower agrees to execute any further documentation in connection with the Letters of Credit as Bank may reasonably request. Borrower further agrees to be bound by the regulations and interpretations of the issuer of any Letters of Credit guarantied by Bank and opened for Borrowers account or by Banks interpretations of any Letter of Credit issued by Bank for Borrowers account, and Borrower understands and agrees that Bank shall not be liable for any error, negligence, or mistake, whether of omission or commission, in following Borrowers instructions or those contained in the Letters of Credit or any modifications, amendments, or supplements thereto.
(c) The obligation of Borrower to immediately reimburse Bank for drawings made under Letters of Credit shall be absolute, unconditional, and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, such Letters of Credit, and the Letter of Credit Application.
(d) Borrower may request that Bank issue a Letter of Credit payable in a Foreign Currency. If a demand for payment is made under any such Letter of Credit, Bank shall treat such demand as an Advance to Borrower of the Dollar Equivalent of the amount thereof (plus fees and charges in connection therewith such as wire, cable, SWIFT or similar charges).
(e) To guard against fluctuations in currency exchange rates, upon the issuance of any Letter of Credit payable in a Foreign Currency, Bank shall create a reserve (the Letter of Credit Reserve) under the Revolving Line in an amount equal to ten percent (10%) of the face amount of such Letter of Credit. The amount of the Letter of Credit Reserve may be adjusted by Bank from time to time to account for fluctuations in the exchange rate. The availability of funds under the Revolving Line shall be reduced by the amount of such Letter of Credit Reserve for as long as such Letter of Credit remains outstanding.
2.1.4 Foreign Exchange. Borrower may enter into foreign exchange contracts with Bank under which Borrower commits to purchase from or sell to Bank a specific amount of Foreign Currency (each, a FX Forward Contract) on a specified date (the Settlement Date). FX Forward Contracts shall have a Settlement Date of at least one (1) FX Business Day after the contract date and shall be subject to a reserve of ten percent (10%) of each outstanding FX Forward Contract. The aggregate amount of FX Forward Contracts at any one time may not exceed ten (10) times Two Million Five Hundred Thousand Dollars ($2,500,000.00) minus (i) the sum of all amounts used for Cash Management Services, and minus (ii) the Dollar Equivalent of the face amount of any outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve). The amount otherwise available shall be reduced by an amount equal to ten percent (10%) of each outstanding FX Forward Contract (the FX Reduction Amount). Any amounts needed to fully reimburse Bank for any amounts not paid by Borrower in connection with FX Forward Contracts will accrue interest at the greater of (i) the interest rate applicable to Advances and (ii) the interest rate applicable to Non-formula Advances.
2.1.5 Cash Management Services. Borrower may use an aggregate amount not to exceed Two Million Five Hundred Thousand Dollars ($2,500,000.00) minus (i) the Dollar Equivalent of the face amount of any outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve), and minus (ii) the FX Reduction Amount for Banks cash management services, which may include merchant services, direct deposit of payroll, business credit card, and check cashing services identified in Banks various cash management services agreements (collectively, the Cash Management Services). Any amounts Bank pays on behalf of Borrower for any Cash Management Services will accrue interest at the greater of (i) the interest rate applicable to Advances and (ii) the interest rate applicable to Non-formula Advances.
2.2 Overadvances. If, at any time, (i) the outstanding principal amount of any Advances exceeds the lesser of either the Revolving Line or the Borrowing Base or (ii) the outstanding principal amount of any Non-Formula Advances exceeds the Non-formula Revolving Line or (iii) the sum of (A) the outstanding principal amount of any Cash Management Services, plus (B) the face amount of any outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve), plus (C) the FX Reduction Amount exceeds Two Million Five Hundred Thousand Dollars ($2,500,000.00) (any such excess amounts referred to in clauses (i), (ii) or (iii) being an Overadvance), Borrower shall, not later than one (1) Business Day, pay to Bank in cash such Overadvance. Without limiting Borrowers obligation to repay Bank any amount of the Overadvance, Borrower agrees to pay Bank interest on the outstanding amount of any Overadvance, on demand, at the Default Rate.
-2-
2.3 Payment of Interest on the Credit Extensions.
(a) Interest Rate.
(i) Advances. Subject to Section 2.3(b), the principal amount outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to the greater of the (i) Prime Rate plus one percent (1.00%) and (ii) four and one-quarter percent (4.25%), which interest shall be payable monthly, in arrears, in accordance with Section 2.3(f) below.
(ii) Non-Formula Advances. Subject to Section 2.3(b), the principal amount outstanding under the Non-formula Revolving Line shall accrue interest at a floating per annum rate equal to the greater of the (i) Prime Rate plus one percent (1.00%) and (ii) four and one-quarter percent (4.25%), which interest shall be payable monthly, in arrears, in accordance with Section 2.3(f) below.
(b) Default Rate. Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is five percentage points (5.00%) above the rate that is otherwise applicable thereto (the Default Rate) unless Bank otherwise elects from time to time in its sole discretion to impose a smaller increase. Fees and expenses which are required to be paid by Borrower pursuant to the Loan Documents (including, without limitation, Bank Expenses) but are not paid when due shall bear interest until paid at a rate equal to the highest rate applicable to the Obligations. Payment or acceptance of the increased interest rate provided in this Section 2.3(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Bank.
(c) Adjustment to Interest Rate. Changes to the interest rate of any Credit Extension based on changes to the Prime Rate shall be effective on the effective date of any change to the Prime Rate and to the extent of any such change.
(d) Computation; 360-Day Year. In computing interest, the date of the making of any Credit Extension shall be included and the date of payment shall be excluded; provided, however, that if any Credit Extension is repaid on the same day on which it is made, such day shall be included in computing interest on such Credit Extension. Interest shall be computed on the basis of a 360-day year for the actual number of days elapsed.
(e) Debit of Accounts. Bank may debit any of Borrowers deposit accounts, including the Designated Deposit Account, for principal and interest payments or any other amounts Borrower owes Bank under the Loan Documents when due. These debits shall not constitute a set-off.
(f) Payment; Interest Computation. Interest is payable monthly, in arrears, on the first calendar day of each month. In computing interest on the Obligations, all Payments received after 12:00 noon Pacific time on any day shall be deemed received on the next Business Day. Bank shall not, however, be required to credit Borrowers account for the amount of any item of payment which is unsatisfactory to Bank in its good faith business judgment, and Bank may charge Borrowers Designated Deposit Account for the amount of any item of payment which is returned to Bank unpaid.
2.4 Fees. Borrower shall pay to Bank:
(a) Commitment Fee. A fully earned, non-refundable commitment fee of Seventy-Five Thousand Dollars ($75,000.00), payable on the Effective Date (which, for the avoidance of doubt, shall be in addition to any fees payable under the Subordinated Loan Agreement);
(b) Good Faith Deposit. Borrower has paid to Bank a deposit of Twenty-Five Thousand Dollars ($25,000.00) (the Good Faith Deposit) to initiate Banks due diligence review process, which Good Faith Deposit net of Bank Expenses will be applied to the commitment fee referenced in Section 2.4(a) herein on the Effective Date.
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(c) Letter of Credit Fee. Banks customary fees and expenses for the issuance or renewal of Letters of Credit, including, without limitation, a letter of credit fee of one and one-half percent (1.50%) per annum of the Dollar Equivalent of the face amount of each Letter of Credit issued, upon the issuance of such Letter of Credit, each anniversary of the issuance during the term of such Letter of Credit, and upon the renewal of such Letter of Credit by Bank;
(d) Unused Facility Fee. A fee (the Unused Facility Fee), payable monthly, in arrears, on a calendar year basis, in an amount equal to one-quarter of one percent (0.25%) per annum of the sum of (i) the average unused portion of the Revolving Line plus (ii) the average unused portion of the Non-formula Revolving Line plus (iii) the average unused portion of the Bank Services Facility. The unused portion of the Revolving Line, for purposes of this calculation, shall equal the difference between (x) the Revolving Line amount (as it may be reduced from time to time, including by any Reserves) and (y) the average for the period of the daily closing balance of the Revolving Line outstanding. The unused portion of the Non-formula Revolving Line, for purposes of this calculation, shall equal the difference between (x) the Non-formula Revolving Line amount (as it may be reduced from time to time) and (y) the average for the period of the daily closing balance of the Non-formula Revolving Line outstanding. The unused portion of the Bank Services Facility for such calculation shall equal the difference between (x) Two Million Five Hundred Thousand Dollars ($2,500,000.00) (as it may be reduced from time to time) and (y) (i) the average Dollar amount for the period of the daily closing amount of issued Letters of Credit (whether or not drawn) plus (ii) the average daily closing balance of the FX Reduction Amount plus (iii) the average daily closing balance of all amounts used for Cash Management Services. Borrower shall not be entitled to any credit, rebate or repayment of any Unused Facility Fee previously earned by Bank pursuant to this Section notwithstanding any termination of the Agreement or the suspension or termination of Banks obligation to make loans and advances or issue Letters of Credit hereunder; and
(e) Bank Expenses. All Bank Expenses (including reasonable attorneys fees and expenses for documentation and negotiation of this Agreement, the Subordinated Loan Agreement and any other Loan Documents) incurred through and after the Effective Date, when due.
2.5 Payments; Application of Payments.
(a) All payments (including prepayments) to be made by Borrower under any Loan Document shall be made in immediately available funds in Dollars, without setoff or counterclaim, before 12:00 noon Pacific time on the date when due. Payments of principal and/or interest received after 12:00 noon Pacific time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment shall be due the next Business Day, and additional fees or interest, as applicable, shall continue to accrue until paid.
(b) Subject to Section 6.3(c), Bank shall apply the whole or any part of collected funds against amounts then due under the Revolving Line with any surplus collected funds being credited to a depository account of Borrower with Bank (or an account of Borrower maintained by an Affiliate of Bank), the order and method of such application shall be in the sole discretion of Bank. Borrower shall have no right to specify the order or the accounts to which Bank shall allocate or apply any payments required to be made by Borrower to Bank or otherwise received by Bank under this Agreement when any such allocation or application is not specified elsewhere in this Agreement.
3 CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. Banks obligation to make the initial Credit Extension is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, such documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate, including, without limitation:
(a) delivery of the Subordinated Loan Agreement and satisfaction of all conditions precedent thereto;
(b) duly executed original signature pages to the Loan Documents;
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(c) Operating Documents for each Borrower and long-form good standing certificates certified by the proper authority for each jurisdiction in which each Borrower is incorporated, organized or is otherwise authorized to do business as a foreign entity (as required by Bank), as of a date no earlier than thirty (30) days prior to the Effective Date;
(d) duly executed original signature pages to the Secretarys Certificate of each Borrower with completed Borrowing Resolutions for each Borrower;
(e) duly executed original signature pages to the Canadian Guaranty, together with Secretarys Certificate and completed Borrowing Resolutions for Canadian Guarantor;
(f) duly executed signature to a payoff letter from Comerica Bank, N.A. (Prior Lender), identifying the amount required to be paid to Prior Lender to fully satisfy outstanding obligations owed by the Borrower to Prior Lender as of the date of the initial Credit Extension;
(g) evidence that (i) the Liens securing Indebtedness owed by the Borrower to Prior Lender will be terminated and (ii) the documents and/or filings evidencing the perfection of such Liens, including without limitation any financing statements and/or control agreements, have or will, concurrently with or promptly following the initial Credit Extension, be terminated;
(h) certified copies, dated as of a recent date, of financing statement searches, as Bank shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;
(i) the Perfection Certificate of each Borrower and Guarantor, together with the duly executed original signature pages thereto;
(j) a bailees/warehousemans waiver executed by each bailee, if any, of Borrower as required by Bank, in favor of Bank;
(k) a legal opinion of Borrowers counsel, in form and substance acceptable to Bank, in its reasonable discretion, dated as of the Effective Date, together with the duly executed original signature pages thereto;
(l) legal opinion of Borrowers Canadian counsel in respect of Canadian Guarantor, in form and substance acceptable to Bank, dated as of the Effective Date, together with the duly executed signatures thereto;
(m) evidence satisfactory to Bank that the insurance policies required by Section 6.7 hereof are in full force and effect, together with appropriate evidence showing lender loss payable and/or additional insured clauses and cancellation notice to Bank (or endorsements reflecting the same) in favor of Bank; and
(n) payment of the fees and Bank Expenses then due as specified in Section 2.4 hereof.
3.2 Conditions Precedent to all Credit Extensions. Banks obligation to make each Credit Extension, including the initial Credit Extension, is subject to the following conditions precedent:
(a) timely receipt of an executed Transaction Report (with respect to the Revolving Line) and/or Payment Advance Form (with respect to the Non-formula Revolving Line);
(b) the representations and warranties in Section 5 of this Agreement shall be true, accurate, and complete in all material respects on the date of the Transaction Report and/or Payment/Advance Form and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Default or Event of Default shall have occurred and be continuing or result from the Credit Extension. Each Credit Extension is Borrowers representation and warranty on that date that the representations and warranties in Section 5 of this Agreement remain true,
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accurate, and complete in all material respects; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; and
(c) in Banks sole discretion, there has not been any material impairment in the general affairs, management, results of operation, financial condition or the prospect of repayment of the Obligations, or any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Bank.
3.3 Covenant to Deliver. Borrower agrees to deliver to Bank each item required to be delivered to Bank under this Agreement as a condition precedent to any Credit Extension. Borrower expressly agrees that a Credit Extension made prior to the receipt by Bank of any such item shall not constitute a waiver by Bank of Borrowers obligation to deliver such item, and the making of any Credit Extension in the absence of a required item shall be in Banks sole discretion.
3.4 Procedures for Borrowing.
(a) Advances; Non-formula Advances. Subject to the prior satisfaction of all other applicable conditions to the making of an Advance or a Non-formula Advance, each as set forth in this Agreement, to obtain an Advance or Non-formula Advance, Borrower shall notify Bank (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 12:00 noon Pacific time on the Funding Date of the Advance or Non-formula Advance, as applicable. Together with any such electronic or facsimile notification, Borrower shall deliver to Bank by electronic mail or facsimile a completed Transaction Report (with respect to Advances) or a Payment/Advance Form (with respect to any Non-formula Advance) executed by a Responsible Officer or his or her designee. Bank may rely on any telephone notice given by a person whom Bank believes is a Responsible Officer or designee. Bank shall credit Advances and Non-formula Advances to the Designated Deposit Account. Bank may make Advances and Non-formula Advances under this Agreement based on instructions from a Responsible Officer or his or her designee or without instructions if the Advances are necessary to meet Obligations which have become due.
(b) Letters of Credit. Subject to the prior satisfaction of all other applicable conditions to the issuance of Letters of Credit set forth in this Agreement, to request the Bank to issue a Letter of Credit, Borrower shall deliver an executed Letter of Credit Application, which, once received, shall be irrevocable. Bank may issue Letters of Credit under this Agreement based on instructions from a Responsible Officer or his or her designee. Bank may rely on any telephone notice/requests for the issuance of a Letter of Credit given by a person whom Bank believes is a Responsible Officer or designee.
(c) FX Forward Contracts; Cash Management Services. Subject to the prior satisfaction of all other applicable conditions to the issuance of FX Forward Contracts or Cash Management Services set forth in this Agreement, to request the Bank to issue a FX Forward Contract or any Cash Management Services, Borrower shall notify Bank (which notice shall be irrevocable) by electronic mail, facsimile, or telephone. Together with any such electronic or facsimile notification, Borrower shall deliver to Bank by electronic mail or facsimile a completed Payment/Advance Form and the applicable foreign exchange forward contract (with respect to FX Forward Contracts) or bank services agreement (with respect to Cash Management Services) provided by Bank executed by a Responsible Officer or his or her designee. Bank may issue FX Forward Contracts or Cash Management Services under this Agreement based on instructions from a Responsible Officer or his or her designee. Bank may rely on any telephone notice/requests for the issuance of any FX Forward Contract or Cash Management Services given by a person whom Bank believes is a Responsible Officer or designee.
4 CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof.
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Regardless of the terms of any agreements related to the Bank Services Facility, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed to be Obligations hereunder and that it is the intent of Borrower and Bank to have all such Obligations secured by the first priority perfected security interest in the Collateral granted herein (subject only to Permitted Liens that expressly or by operation of law have superior priority to Banks Lien in this Agreement).
If this Agreement is terminated, Banks Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are satisfied in full, and at such time, Bank shall, at Borrowers sole cost and expense, terminate its security interest in the Collateral and all rights therein shall revert to Borrower. In the event (a) all Obligations (other than inchoate indemnity obligations), except for any Obligations with respect to the Bank Services Facility, are satisfied in full, and (b) this Agreement is terminated, Bank shall terminate the security interest granted herein upon Borrower providing cash collateral acceptable to Bank in its good faith business judgment for any amounts outstanding under the Bank Services Facility, if any. In the event such amounts under the Bank Services Facility consist of outstanding letters of credit (other than letters of credit issued under the Letters of Credit Facility), Borrower shall provide to Bank cash collateral in an amount equal to 105% (110% for letters of credit denominated in a currency other than Dollars), of the Dollar Equivalent of the face amount of all such letters of credit plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment), to secure all of the Obligations relating to such letters of credit.
4.2 Priority of Security Interest. Borrower represents, warrants, and covenants that the security interest granted herein and shall at all times continue to be a first priority perfected security interest in the Collateral (subject only to Permitted Liens that expressly or by operation of law have superior priority to Banks Lien under this Agreement). If Borrower shall acquire a commercial tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank.
4.3 Authorization to File Financing Statements. Borrower hereby authorizes Bank to file financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Banks interest or rights hereunder, including a notice that any disposition of the Collateral, by either Borrower or any other Person, may be deemed to violate the rights of Bank under the Code. Such financing statements may indicate the Collateral as all assets of the Debtor or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Banks discretion.
4.4 Subsequent Security. At any time following the Effective Date, the Bank may, in its sole discretion, require any Subsidiary to grant the Bank such further security interests over their present and future undertaking and assets as the Bank may require, including for the avoidance of doubt, a fixed charge over all book and other debts and monetary claims due or owing or incurred to any Subsidiary, including all accounts with banks and the moneys deposited therein and interest accruing and arrears and claims arising in respect of accounts, together with the full benefit of all guarantees and securities therefore and indemnities in respect thereof and all liens, reservations of title, rights of tracing and other rights enabling any Subsidiary to enforce any such debts or claims.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization; Authorization; Power and Authority. Borrower and each of its Subsidiaries are duly existing and in good standing, as a Registered Organization in its jurisdiction of formation and each is qualified and licensed to do business and each is in good standing in any jurisdiction in which the conduct of each of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to have a material adverse effect on Borrowers business, taken as a whole. In connection with this Agreement, Borrower has delivered to Bank completed certificates signed by each Borrower and Guarantor, respectively, entitled Perfection Certificate. Borrower represents and warrants to Bank that (a) Borrowers exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; (b) Borrower is an organization of the type and is organized in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth Borrowers organizational identification number or accurately states that Borrower has none; (d) the Perfection Certificate accurately sets forth Borrowers place of business, or, if more than one, its chief executive office as well as Borrowers mailing address (if different than its chief executive office); (e) except as set forth in the Perfection Certificate, Borrower (and each of its predecessors) has not, in the
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five (5) years immediately preceding the Effective Date, changed its jurisdiction of formation, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificate pertaining to Borrower and each of its Subsidiaries is accurate and complete in all material respects (it being understood and agreed that Borrower may from time to time update certain information in the Perfection Certificate after the Effective Date to the extent the event of change reflected in such updated Perfection Certificate is not prohibited by one or more specific provisions in this Agreement, and upon written notification by Borrower to Bank of such event or change, the Perfection Certificate shall be deemed to have been updated to include such information). If Borrower is not now a Registered Organization but later becomes one, Borrower shall promptly notify Bank of such occurrence and provide Bank with Borrowers organizational identification number.
The execution, delivery and performance by Borrower of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrowers organizational documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law, (iii) contravene, conflict or violate any applicable material order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or any of its Subsidiaries or any of their property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect or (v) constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which it is a party or by which it is bound in which the default could reasonably be expected to have a material adverse effect on Borrowers business, taken as a whole.
5.2 Collateral. Borrower has good title to, has rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien hereunder, free and clear of any and all Liens except Permitted Liens. Borrower has no deposit accounts other than the deposit accounts with Bank, the deposit accounts, if any described in the Perfection Certificate delivered to Bank in connection herewith, or of which Borrower has given Bank notice and taken such actions as are necessary to give Bank a perfected security interest therein. The Accounts are bona fide, existing obligations of the Account Debtors.
The Collateral is not in the possession of any third party bailee (such as a warehouse) except as otherwise provided in the Perfection Certificate. None of the components of the Collateral shall be maintained at locations other than as provided in the Perfection Certificate or as permitted pursuant to Section 7.2. In the event that Borrower, after the date hereof, intends to store or otherwise deliver any portion of the Collateral with an aggregate value in excess of $50,000 to a bailee, and such bailee and Bank are not already parties to a bailee agreement covering both the Collateral and the location where the Collateral will be stored, then Borrower will first receive the written consent of Bank and such bailee must execute and deliver a bailee agreement in form and substance satisfactory to Bank in its sole discretion. The provisions of this paragraph shall not apply to Demonstration Systems delivered to Borrowers customers or prospective customers in the ordinary course of business.
All Inventory is in all material respects of good and marketable quality, free from material defects.
Borrower is the sole owner of the Intellectual Property which it owns or purports to own except for (a) non-exclusive licenses granted to its customers in the ordinary course of business, (b) over-the-counter software that is commercially available to the public, and (c) material Intellectual Property licensed to Borrower and noted on the Perfection Certificate. Each Patent which it owns or purports to own and which is material to Borrowers business, taken as a whole, is valid and enforceable, and no part of the Intellectual Property which Borrower owns or purports to own and which is material to Borrowers business, taken as a whole, has been judged invalid or unenforceable, in whole or in part. To the best of Borrowers knowledge, no claim has been made that any part of the Intellectual Property violates the rights of any third party except to the extent such claim would not have a material adverse effect on Borrowers business, taken as a whole.
Except as noted on the Perfection Certificate, Borrower is not a party to, nor is it bound by, any Restricted License.
5.3 Accounts Receivable. For any Eligible Account in any Borrowing Base Certificate, all statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing such Eligible Accounts are and shall be true and correct and all such invoices, instruments and other documents, and all of Borrowers Books are genuine and in all respects what they purport to be. Whether or not an Event of Default
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has occurred and is continuing, Bank may notify any Account Debtor owing Borrower money of Banks security interest in such funds and verify the amount of such Eligible Account. All sales and other transactions underlying or giving rise to each Eligible Account shall comply in all material respects with all applicable laws and governmental rules and regulations. Borrower has no knowledge of any actual or imminent Insolvency Proceeding of any Account Debtor whose accounts are Eligible Accounts in any Borrowing Base Certificate. To the best of Borrowers knowledge, all signatures and endorsements on all documents, instruments, and agreements relating to all Eligible Accounts are genuine, and all such documents, instruments and agreements are legally enforceable in accordance with their terms, subject to bankruptcy, insolvency and other similar laws and general equitable principles.
5.4 Litigation. Except for those actions or proceedings disclosed to Bank in writing, there are no actions or proceedings pending or, to the knowledge of the Responsible Officers, threatened in writing by or against Borrower or any of its Subsidiaries involving more than, individually or in the aggregate, Two Hundred Fifty Thousand Dollars ($250,000.00).
5.5 Financial Condition. All consolidated financial statements for Borrower and any of its Subsidiaries delivered to Bank fairly present in all material respects Borrowers consolidated financial condition and Borrowers consolidated results of operations. There has not been any material deterioration in Borrowers consolidated financial condition since the date of the most recent financial statements submitted to Bank.
5.6 Solvency. The fair salable value of Borrowers assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature.
5.7 Regulatory Compliance. Borrower is not an investment company or a company controlled by an investment company under the Investment Company Act of 1940, as amended. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a holding company or an affiliate of a holding company or a subsidiary company of a holding company as each term is defined and used in the Public Utility Holding Company Act of 2005. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to have a material adverse effect on Borrowers business, taken as a whole. None of Borrowers or any of its Subsidiaries properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrowers knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted.
5.8 Subsidiaries; Investments. Borrower does not own any stock, partnership interest or other equity securities except for Permitted Investments.
5.9 Tax Returns and Payments; Pension Contributions. Borrower has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower. Borrower may defer payment of any contested taxes, provided that Borrower (a) in good faith contests its obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Bank in writing of the commencement of, and any material development in, the proceedings, (c) posts bonds or takes any other steps required to prevent the Governmental Authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a Permitted Lien. Borrower is unaware of any claims or adjustments proposed for any of Borrowers prior tax years which could result in additional taxes becoming due and payable by Borrower. Borrower has paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not withdrawn from participation in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
5.10 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions as working capital and to fund its general business requirements and not for personal, family, household or agricultural purposes.
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5.11 Full Disclosure. No written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to Bank, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).
5.12 Definition of Knowledge. For purposes of the Loan Documents, whenever a representation or warranty is made to Borrowers knowledge or awareness, to the best of Borrowers knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of the Responsible Officers.
5.13 Designated Senior Indebtedness. The Loan Documents and all of the Obligations shall be deemed Designated Senior Indebtedness or a similar concept thereof for purposes of any Indebtedness of the Borrower.
6 AFFIRMATIVE COVENANTS
Borrower shall do all of the following:
6.1 Government Compliance. (a) Maintain its and all its Subsidiaries legal existence and good standing in their respective jurisdictions of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect on Borrowers business or operations, taken as a whole. Borrower shall comply, and have each Subsidiary comply, with all laws, ordinances and regulations to which it is subject, the noncompliance with which could have a material adverse effect on Borrowers business, taken as a whole.
(b) Obtain all of the Governmental Approvals necessary for the performance by Borrower of its obligations under the Loan Documents to which it is a party and the grant of a security interest to Bank in all of its property. Borrower, upon Banks request, shall promptly provide copies of any such obtained Governmental Approvals to Bank.
6.2 Financial Statements, Reports, Certificates.
(a) Borrower shall provide Bank with the following:
(i) (A) weekly, and (B) upon each request for a Credit Extension, a Transaction Report;
(ii) within twenty (20) days after the end of each month, (A) monthly accounts receivable agings, aged by invoice date, (B) monthly accounts payable agings, aged by invoice date, and outstanding or held check registers, if any, and (C) monthly reconciliations of accounts receivable agings (aged by invoice date), transaction reports, Deferred Revenue report and general ledger;
(iii) as soon as available, and in any event within thirty (30) days after the end of each month, monthly unaudited financial statements including balance sheet, income statement and statement of cash flows;
(iv) within thirty (30) days after the end of each month a monthly Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such month, Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as Bank shall reasonably request, including, without limitation, a statement that at the end of such month there were no held checks;
(v) no later than the earlier to occur of (i) fifteen (15) days following approval by Borrowers board of directors and (ii) January 31st of each fiscal year, (A) annual operating budgets (including income statements, balance sheets and cash flow statements, by month) for the upcoming fiscal year of Borrower, and (B) annual financial projections for the following fiscal year (on a quarterly basis) as approved by Borrowers board of directors, together with any related business forecasts used in the preparation of such annual financial projections;
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(vi) as soon as available, and in any event within one hundred fifty (150) days following the end of Borrowers fiscal year, annual audited financial statements certified by, and with an unqualified opinion of, independent certified public accountants acceptable to Bank;
(vii) within five (5) days of delivery, copies of all statements, reports and notices made available to Borrowers security holders or to any holders of Subordinated Debt;
(viii) a prompt report of any legal actions pending or threatened in writing against Borrower or any of its Subsidiaries that could result in damages or costs to Borrower or any of its Subsidiaries of, individually or in the aggregate, Two Hundred Fifty Thousand Dollars ($250,000.00) or more;
Notwithstanding the foregoing, during a Streamline Period, provided no Event of Default has occurred and is continuing, Borrower shall be required to provide Bank with the reports and schedules required pursuant to clause (a)(i)(A) above monthly, within twenty (20) days after the end of each month.
(b) In the event that Borrower is or becomes subject to the reporting requirements under the Securities Exchange Act of 1934, as amended, within five (5) days after filing, all reports on Form 10-K, 10-Q and 8-K filed with the SEC or a link thereto on Borrowers or another website on the Internet.
(c) Borrower shall provide Bank with prompt written notice of (i) any material change in the composition of the Intellectual Property, (ii) the registration of any Copyright (including any subsequent ownership right of Borrower in or to any Copyright), Patent or Trademark not previously disclosed to Bank, or (iii) Borrowers knowledge of an event that materially adversely affects the value of the Intellectual Property.
6.3 Accounts Receivable.
(a) Schedules and Documents Relating to Accounts. Borrower shall deliver to Bank transaction reports and schedules of collections, as provided in Section 6.2, on Banks standard forms; provided, however, that Borrowers failure to execute and deliver the same shall not affect or limit Banks Lien and other rights in all of Borrowers Accounts, nor shall Banks failure to advance or lend against a specific Account affect or limit Banks Lien and other rights therein. If requested by Bank, Borrower shall furnish Bank with copies (or, at Banks request, originals) of all contracts, orders, invoices, and other similar documents, and all shipping instructions, delivery receipts, bills of lading, and other evidence of delivery, for any goods the sale or disposition of which gave rise to such Accounts. In addition, Borrower shall deliver to Bank, on its request, the originals of all instruments, chattel paper, security agreements, guarantees and other documents and property evidencing or securing any Accounts, in the same form as received, with all necessary endorsements, and copies of all credit memos.
(b) Disputes. Borrower shall promptly notify Bank of all disputes or claims relating to Accounts involving more than, individually or in the aggregate, Fifty Thousand Dollars ($50,000.00). Borrower may forgive (completely or partially), compromise, or settle any Account for less than payment in full, or agree to do any of the foregoing so long as (i) Borrower does so in good faith, in a commercially reasonable manner, in the ordinary course of business, in arms-length transactions, and reports the same to Bank in the regular reports provided to Bank; (ii) no Default or Event of Default has occurred and is continuing; and (iii) after taking into account all such discounts, settlements and forgiveness, the total outstanding Advances will not exceed the Availability Amount.
(c) Collection of Accounts. Borrower shall have the right to collect all Accounts, unless and until a Default or an Event of Default has occurred and is continuing. All payments on, and proceeds of, Accounts shall be deposited directly by the applicable Account Debtor into a lockbox account, or such other blocked account as Bank may specify, pursuant to a blocked account agreement in form and substance satisfactory to Bank in its sole discretion. Whether or not an Event of Default has occurred and is continuing, Borrower shall immediately deliver all payments on and proceeds of Accounts to an account maintained with Bank to be applied (i) prior to an Event of Default, to the Revolving Line and Non-formula Revolving Line pursuant to the terms of
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Section 2.5(b) hereof, and (ii) after the occurrence and during the continuance of an Event of Default, pursuant to the terms of Section 9.4 hereof; provided, however, during a Streamline Period, such payments and proceeds shall be transferred to an account of Borrower maintained at Bank.
(d) Returns. Provided no Event of Default has occurred and is continuing, if any Account Debtor returns any Inventory to Borrower, Borrower shall promptly (i) determine the reason for such return, (ii) issue a credit memorandum to the Account Debtor in the appropriate amount, and (iii) provide a copy of such credit memorandum to Bank, upon request from Bank. In the event any attempted return occurs after the occurrence and during the continuance of any Event of Default, Borrower shall immediately notify Bank of the return of the Inventory.
(e) Verification. Bank may, from time to time, verify directly with the respective Account Debtors the validity, amount and other matters relating to the Accounts, either in the name of Borrower or Bank or such other name as Bank may choose.
(f) No Liability. Bank shall not be responsible or liable for any shortage or discrepancy in, damage to, or loss or destruction of, any goods, the sale or other disposition of which gives rise to an Account, or, after the occurrence and during the continuation of an Event of Default, for any error, act, omission, or delay of any kind occurring in the settlement, failure to settle, collection or failure to collect any Account, or for settling any Account in good faith for less than the full amount thereof, nor shall Bank be deemed to be responsible for any of Borrowers obligations under any contract or agreement giving rise to an Account. Nothing herein shall, however, relieve Bank from liability for its own gross negligence or willful misconduct.
6.4 Remittance of Proceeds. Except as otherwise provided in Section 6.3(c), deliver, in kind, all proceeds arising from the disposition of any Collateral to Bank in the original form in which received by Borrower not later than the following Business Day after receipt by Borrower, to be applied to the Obligations (1) prior to an Event of Default, pursuant to the terms of Section 2.5(b) hereof, and (2) after the occurrence and during the continuance of an Event of Default, pursuant to the terms of Section 9.4 hereof; provided that, if no Event of Default has occurred and is continuing, Borrower shall not be obligated to remit to Bank the proceeds of the sale of surplus, worn out or obsolete Equipment disposed of by Borrower in good faith in an arms length transaction for an aggregate purchase price of Two Hundred Thousand Dollars ($200,000) or less (for all such transactions in any fiscal year). Borrower agrees that it will maintain all proceeds of Collateral in an account maintained with Bank. Nothing in this Section limits the restrictions on disposition of Collateral set forth elsewhere in this Agreement.
6.5 Taxes; Pensions. Timely file, and require each of its Subsidiaries to timely file, all required tax returns and reports and timely pay, and require each of its Subsidiaries to timely pay, all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower and each of its Subsidiaries, except for deferred payment of any taxes contested pursuant to the terms of Section 5.9 hereof, and shall deliver to Bank, on demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms.
6.6 Access to Collateral; Books and Records. At reasonable times, on not less than five (5) Business Days notice (provided no notice is required if an Event of Default has occurred and is continuing), Bank, or its agents, shall have the right to inspect the Collateral and the right to audit and copy Borrowers Books. The foregoing inspections and audits shall be at Borrowers expense, and the charge therefor shall be $850 per person per day (or such higher amount as shall represent Banks then-current standard charge for the same), plus reasonable out-of-pocket expenses. In the event Borrower and Bank schedule an audit more than ten (10) days in advance, and Borrower cancels or seeks to reschedule the audit with less than ten (10) days written notice to Bank, then (without limiting any of Banks rights or remedies), Borrower shall pay Bank a fee of $1,000 plus any out-of-pocket expenses incurred by Bank to compensate Bank for the anticipated costs and expenses of the cancellation or rescheduling.
6.7 Insurance. Keep its business and the Collateral insured for risks and in amounts standard for companies in Borrowers industry and location and as Bank may reasonably request. Insurance policies shall be in a form, with companies, and in amounts that are satisfactory to Bank, in its reasonable discretion. Bank hereby confirms that Borrowers insurance in effect on the Effective Date is acceptable to Bank as of the Effective Date. All property policies shall have a lenders loss payable endorsement showing Bank as a lender loss payee and waive subrogation against Bank. All liability policies of Borrower shall show, or have endorsements showing, Bank as an additional insured. All policies (or their respective endorsements) shall provide that the insurer shall give Bank at
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least twenty (20) days notice before canceling, amending, or declining to renew its policy. At Banks request, Borrower shall deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any policy shall, at Banks option, be payable to Bank on account of the Obligations. Notwithstanding the foregoing, (a) so long as no Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy up to Two Hundred Fifty Thousand Dollars ($250,000.00) with respect to any loss, but not exceeding Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate for all losses under all casualty policies in any one fiscal year, toward the replacement or repair of destroyed or damaged property; provided, that any such replaced or repaired property (i) shall be of materially equal or like value as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which Bank has been granted a first priority security interest, and (b) after the occurrence and during the continuance of an Event of Default, all proceeds payable under such casualty policy shall, at the option of Bank, be payable to Bank on account of the Obligations. If Borrower fails to obtain insurance as required under this Section 6.7 or to pay any amount or furnish any required proof of payment to third persons and Bank, Bank may make all or part of such payment or obtain such insurance policies required in this Section 6.7, and take any action under the policies Bank deems prudent.
6.8 Operating Accounts.
(a) Maintain its (i) depository accounts and operating accounts and (ii) securities accounts (which such accounts shall represent at least eighty-five percent (85%) of the dollar value of Borrowers securities accounts at all financial institutions worldwide), each with Bank and Banks affiliates with all excess funds maintained at or invested through Bank or an affiliate of Bank, excluding however, cash collateral held at other financial institutions used to secure letters of credit or cash held as lease deposits, in each case as described in the Perfection Certificate.
(b) Provide Bank five (5) days prior-written notice before establishing any Collateral Account at or with any bank or financial institution other than Bank or Banks Affiliates. For each Collateral Account that Borrower at any time maintains (excluding however, cash collateral held at other financial institutions used to secure letters of credit or cash held as lease deposits, in each case as described in the Perfection Certificate), Borrower shall cause the applicable bank or financial institution (other than Bank) at or with which any Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Banks Lien in such Collateral Account in accordance with the terms hereunder which Control Agreement may not be terminated without the prior written consent of Bank. The provisions of the previous sentence shall not apply to (i) deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrowers employees and identified to Bank by Borrower as such and (ii) Collateral Accounts existing on the Effective Date but solely for a period of sixty (60) days following the Effective Date.
6.9 Tangible Net Worth. Borrower shall maintain at all times, to be tested as of the last day of each month, on a consolidated basis with respect to Borrower and its Subsidiaries, a Tangible Net Worth of at least Eleven Million Five Hundred Thousand Dollars ($11,500,000), increasing by (i) fifty percent (50%) of the net proceeds from the issuance of equity, and (ii), twenty-five percent (25%) of quarterly Net Income.
6.10 Protection and Registration of Intellectual Property Rights.
(a)(i) Protect, defend and maintain the validity and enforceability of its Intellectual Property; (ii) promptly advise Bank in writing of material infringements of its Intellectual Property; and (iii) not allow any Intellectual Property material to Borrowers business, taken as a whole, to be abandoned, forfeited or dedicated to the public without Banks written consent.
(b) If Borrower (i) obtains any Patent, registered Trademark, registered Copyright, registered mask work, or any pending application for any of the foregoing, whether as owner, licensee or otherwise, or (ii) applies for any Patent or the registration of any Trademark, then Borrower shall immediately provide written notice thereof to Bank and shall execute such intellectual property security agreements and other documents and take such other actions as Bank shall request in its good faith business judgment to perfect and maintain a first priority perfected security interest in favor of Bank in such property. If Borrower decides to register any Copyrights or mask works in the United States Copyright Office, Borrower shall: (x) provide Bank with at least fifteen (15) days prior written notice of Borrowers intent to register such Copyrights or mask works together with a copy of the application it intends to file with the United States Copyright Office (excluding exhibits thereto); (y) execute an
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intellectual property security agreement and such other documents and take such other actions as Bank may request in its good faith business judgment to perfect and maintain a first priority perfected security interest in favor of Bank in the Copyrights or mask works intended to be registered with the United States Copyright Office; and (z) record such intellectual property security agreement with the United States Copyright Office contemporaneously with filing the Copyright or mask work application(s) with the United States Copyright Office. Borrower shall promptly provide to Bank copies of all applications that it files for Patents or for the registration of Trademarks, Copyrights or mask works, together with evidence of the recording of the intellectual property security agreement necessary for Bank to perfect and maintain a first priority security interest in such property.
(c) Provide written notice to Bank within ten (10) days of entering or becoming bound by any Restricted License (other than over-the-counter software that is commercially available to the public). Borrower shall take such steps as Bank reasonably requests to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for (i) any Restricted License to be deemed Collateral and for Bank to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such Restricted License, whether now existing or entered into in the future, and (ii) Bank to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Banks rights and remedies under this Agreement and the other Loan Documents.
6.11 Litigation Cooperation. From the date hereof and continuing through the termination of this Agreement, make available to Bank, without expense to Bank, Borrower and its officers, employees and agents and Borrowers Books, to the extent that Bank may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or against Bank with respect to any Collateral or relating to Borrower.
6.12 Creation/Acquisition of Subsidiaries. Notwithstanding and without limiting the negative covenant contained in Section 7.3 hereof, in the event Borrower or any Subsidiary creates or acquires any Subsidiary, Borrower and such Subsidiary shall promptly notify Bank of the creation or acquisition of such new Subsidiary and, at Banks request, in its sole discretion, take all such action as may be reasonably required by Bank to cause each such Subsidiary to, in Banks sole discretion, become a co-Borrower or Guarantor under the Loan Documents and grant a continuing pledge and security interest in and to the assets of such Subsidiary (substantially as defined as Collateral herein and as described on Exhibit A hereto); and Borrower shall grant and pledge to Bank a perfected security interest in the stock, units or other evidence of ownership of each Subsidiary.
6.13 Further Assurances. Execute any further instruments and take further action as Bank reasonably requests to perfect or continue Banks Lien in the Collateral or to effect the purposes of this Agreement. Borrower shall deliver to Bank, within five (5) days after the same are sent or received, copies of all correspondence, reports, documents and other filings with any Governmental Authority regarding compliance with or maintenance of Governmental Approvals or Requirements of Law or that could reasonably be expected to have a material effect on any of the Governmental Approvals or otherwise on the operations of Borrower or any of its Subsidiaries.
6.14 Post-closing Obligations.
(a) Within ninety (90) days following the Effective Date (or such later date as Bank shall determine in its sole discretion), Borrower take all such action as may be reasonably required by Bank to cause each of MAVENIR SYSTEMS HOLDINGS LIMITED (U.K. Holdings), MAVENIR SYSTEMS UK LIMITED (Mavenir U.K.) and MAVENIR SYSTEMS PTE LTD. (Mavenir Singapore) to become a co-Borrower under the Loan Documents and grant a continuing pledge and security interest in and to the assets of each such entity (substantially as described on Exhibit A hereto), including, without limitation, delivery of the following, in each case in form and substance acceptable to Bank, in its sole discretion:
(i) duly executed original signature pages to the applicable joinder agreement;
(ii) duly executed original signature pages to mortgage debentures granted by each of Mavenir U.K. and U.K. Holdings in favor of Bank;
(iii) duly executed original signature pages to (A) a first charge over the entire issued share capital of U.K. Holdings granted by U.S. Holdings as the shareholder of U.K. Holdings to Bank and (B) a first charge over the entire issued share capital Mavenir U.K. granted by U.K. Holdings as the shareholder of Mavenir U.K. to Bank dated as of the Effective Date;
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(iv) original share certificates representing the shares in each of Mavenir U.K. and U.K. Holdings charged in favor of Bank pursuant to the terms of the charges referenced in item (iii) above, together with duly executed blank stock transfer forms in respect of such shares;
(v) duly executed original signature pages to a debenture by Mavenir Singapore in favor of Bank;
(vi) evidence of the establishment of blocked account(s) (as appropriate) established with Royal Bank of Scotland plc or such other designated account(s) with such bank(s) as Bank may stipulate or reasonably approve from time to time, or to wire any other transfer payments to a cash collateral account that Bank controls;
(vii) duly executed original certificate of the Secretary or a Director of each of U.K. Holdings and Mavenir U.K. certifying the memorandum and articles of association, register of charges, specimen signatures, board minutes authorizing the execution and delivery of any Loan Documents to which it is a party, and (if required) written resolutions of the sole shareholder of each U.K. Holdings and Mavenir U.K. amending its articles of association;
(viii) duly executed original certificate of the Secretary or a Director of Mavenir Singapore certifying the certificate of incorporation, memorandum and articles of association, register of members, specimen signatures and directors resolutions authorizing the execution and delivery of any Loan Documents to which it is a party, and shareholders resolutions of the Mavenir Singapore (and if required, amending its constitution documents);
(ix) duly executed original signature to a payoff letter from The Hong Kong and Shanghai Banking Corporation Limited, as necessary, evidencing repayment in full of all obligations owed by the Mavenir Singapore to such entity;
(x) evidence that, (i) the Liens securing Indebtedness owed by the Mavenir Singapore to The Hong Kong and Shanghai Banking Corporation Limited (including, without limitation, the Security over Deposits with the Bank dated 30 July 2003 granted by the Mavenir Singapore to such entity) will be terminated and (ii) the documents and/or filings evidencing the perfection of such Liens, including without limitation any financing statements and/or control agreements have been terminated, in each case, as necessary;
(xi) certified copies, dated as of a recent date, of financing statement searches, as Bank shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been terminated or released;
(xii) an updated Perfection Certificate of each Borrower and Guarantor, together with the duly executed original signature pages thereto;
(xiii) a legal opinion of Banks UK counsel (authority/enforceability) in respect of each of Mavenir U.K. and U.K. Holdings, in form and substance acceptable to Bank, together with the duly executed signatures thereto; and
(xiv) a legal opinion of Borrowers Singapore counsel in respect of Mavenir Singapore, in form and substance acceptable to Bank, dated as of the Effective Date, together with the duly executed signatures thereto.
(b) Within fifteen (15) days following the Effective Date (or such later date as Bank shall determine in its sole discretion), Borrower shall deliver to Bank evidence of recordation of releases of any security agreement or other filings recorded with the U.S. Patent and Trademark Office with respect to the security granted to Prior Lender.
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(c) Completion of the Initial Audit with results satisfactory to Bank in its sole and absolute discretion within thirty (30) days following the Effective Date (provided that, completion of such Initial Audit shall not be condition precedent to any Credit Extension under the Non-formula Revolving Line or the Bank Services Facility.
(d) Within thirty (30) days following the Effective Date (or such later date as Bank shall determine in its sole discretion), Borrower shall cause Mavenir Systems IP Holdings, LLC (Mavenir IP), a Delaware corporation and a direct subsidiary of Mavenir, to join the Loan Documents as a Borrower and granting to Bank a continuing, first-priority security interest in and to all assets of Mavenir IP.
(e) Within sixty (60) days following the Effective Date (or such later date as Bank shall determine in its sole discretion), Borrower shall deliver a landlords consent in favor of Bank for Borrowers leased location at 1700 International Parkway, Suite 200, Richardson, Texas 75081 by the respective landlord thereof, together with the duly executed original signature pages thereto.
(f) Within sixty (60) days following the Effective Date (or such later date as Bank shall determine in its sole discretion), Borrower shall deliver to Bank duly executed original signature pages to the Control Agreements for Collateral Accounts existing on the Effective Date, as required pursuant to Section 6.8(b).
(g) Within ninety (90) days following the Effective Date (or such later date as Bank shall determine in its sole discretion), Borrower shall deliver to Bank duly executed original signature pages to the Australian Guaranty, together with Secretarys Certificate and completed Borrowing Resolutions for Australian Guarantor.
7 NEGATIVE COVENANTS
Borrower shall not do any of the following without Banks prior written consent:
7.1 Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, Transfer), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of Equipment or other property which is worn out, obsolete, being replaced by Equipment or property of reasonably equivalent or better value or usefulness, or no longer necessary for the business of Borrower or such Subsidiary; (c) in connection with Permitted Liens and Permitted Investments, (d) of non-exclusive licenses for the use of the property of Borrower or any of its Subsidiaries in the ordinary course of business and consistent with past practice; (e) of Demonstration Systems to customers or prospective customers in the ordinary course of business and consistent with past practice; (f) of property from one Borrower to another Borrower; and (g) otherwise expressly permitted pursuant to this Agreement.
7.2 Changes in Business, Management, Ownership, or Business Locations. (a) Engage in or permit any of its Subsidiaries, if any, to engage in any material line of business other than those lines of business currently engaged in by Borrower and its Subsidiaries, or business reasonably related, complimentary or incidental thereto; (b) liquidate or dissolve; or (c) (i) have a change in the Chief Executive Officer or Chief Financial Officer of Mavenir and replacements satisfactory to Mavenirs board of directors are not made within sixty (60) days after their departure from Mavenir; or (ii) enter into any transaction or series of related transactions in which the stockholders of such Borrower who were not stockholders immediately prior to the first such transaction own more than 49.00% of the voting stock of such Borrower immediately after giving effect to such transaction or related series of such transactions (other than by the sale of Borrowers equity securities in a public offering or to venture capital investors so long as Borrower identifies to Bank the venture capital investors prior to the closing of the transaction and provides to Bank a description of the material terms of the transaction).
Borrower shall not, without at least thirty (30) days prior written notice to Bank: (1) add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than Fifty Thousand Dollars ($50,000.00) in Borrowers assets or property) or deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Fifty Thousand Dollars ($50,000.00) to a bailee at a location other than to a bailee and at a location already disclosed in the Perfection Certificate, (2) change its jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal name, or (5) change any organizational number (if any) assigned by its jurisdiction of organization. If Borrower intends to deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Fifty Thousand Dollars ($50,000.00) to a bailee, and Bank and such bailee are not already parties to a bailee agreement governing both the Collateral and the location to which Borrower intends to deliver the Collateral, then Borrower will first receive the written consent of Bank, and such bailee shall execute and deliver a bailee agreement in form and substance satisfactory to Bank in its sole discretion.
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7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person. A Subsidiary may merge or consolidate into another Subsidiary or into Borrower.
7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of the Collateral, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, permit any Collateral not to be subject to the first priority security interest granted herein, or enter into any agreement, document, instrument or other arrangement (except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrowers or any Subsidiarys Intellectual Property, except as is otherwise permitted in Section 7.1 hereof and the definition of Permitted Liens herein.
7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms of Section 6.8(b) hereof.
7.7 Distributions; Investments. (a) Pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock provided that (i) Borrower may convert any of its convertible securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange thereof, (ii) Borrower may pay dividends solely in common stock; and (iii) Borrower may repurchase the stock of former directors, employees or consultants pursuant to stock repurchase agreements or similar agreements so long as an Event of Default does not exist at the time of such repurchase and would not exist after giving effect to such repurchase, provided such repurchase does not exceed in the aggregate of One Hundred Thousand Dollars ($100,000.00) per fiscal year; or (b) directly or indirectly make any Investment (including, without limitation, any additional Investment in any Subsidiary) other than Permitted Investments, or permit any of its Subsidiaries to do so.
7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower, except for transactions that are in the ordinary course of Borrowers business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arms length transaction with a non-affiliated Person.
7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof or adversely affect the subordination thereof to Obligations owed to Bank. Notwithstanding the foregoing, so long as no Event of Default has occurred and is continuing or would result from such payment, Bank consents to payments made in respect of Indebtedness described under clause (f) of the definition of Permitted Indebtedness.
7.10 Compliance. Become an investment company or a company controlled by an investment company, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or non-exempt Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrowers business, taken as a whole, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
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8 EVENTS OF DEFAULT
Any one of the following shall constitute an event of default (an Event of Default) under this Agreement:
8.1 Payment Default. Borrower fails to (a) make any payment of principal or interest on any Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business Day cure period shall not apply to payments due on the Revolving Line Maturity Date or Non-formula Revolving Line Maturity Date, as applicable); provided that no Event of Default under this Section 8.1 shall occur as a result of the failure by Bank to timely debit Borrowers account for any such payments of principal and/or interest. During the cure period, the failure to make or pay any payment specified under clause (a) or (b) hereunder is not an Event of Default (but no Credit Extension will be made during the cure period);
8.2 Covenant Default.
(a) Borrower fails or neglects to perform any obligation in Sections 2.2, 6.2, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9, 6.10, or 6.11, or violates any covenant in Section 7; or
(b) Borrower fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such cure period). Cure periods provided under this section shall not apply, among other things, to financial covenants or any other covenants set forth in clause (a) above;
8.3 Material Adverse Change. A Material Adverse Change occurs;
8.4 Attachment; Levy; Restraint on Business.
(a) (i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or of any entity under the control of Borrower (including a Subsidiary) on deposit or otherwise maintained with Bank or any Bank Affiliate, or (ii) a notice of lien or levy is filed against any of Borrowers assets by any government agency, and the same under subclauses (i) and (ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any ten (10) day cure period; or
(b)(i) any material portion of Borrowers assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower from conducting any material part of its business;
8.5 Insolvency. (a) Borrower is unable to pay its debts (including trade debts) as they become due or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within thirty (30) days (but no Credit Extensions shall be made while of any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed);
8.6 Other Agreements. There is, under any agreement to which Borrower or any Guarantor is a party with a third party or parties (other than the Subordinated Loan Agreement), (a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount individually or in the aggregate in excess of Two Hundred Fifty Thousand Dollars ($250,000.00); or (b) any default under any material agreement of Borrower or Guarantor that could have a material adverse effect on Borrowers or Guarantors business, taken as a whole;
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8.7 Judgments. One or more final judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least Five Hundred Thousand Dollars ($500,000.00) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower and the same are not, within ten (10) days after the entry thereof, discharged or execution thereof stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of any such stay (provided that no Credit Extensions will be made prior to the discharge, stay, or bonding of such judgment, order, or decree);
8.8 Misrepresentations. Borrower or any Person acting for Borrower makes any representation, warranty, or other statement now or later in this Agreement, any Loan Document or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made;
8.9 Subordinated Debt. Any document, instrument, or agreement evidencing any Subordinated Debt shall for any reason be revoked or invalidated or otherwise cease to be in full force and effect, any Person shall be in breach thereof or contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Obligations shall for any reason be subordinated or shall not have the priority contemplated by this Agreement;
8.10 Governmental Approvals. Any Governmental Approval shall have been (a) revoked, rescinded, suspended, modified in a material adverse manner or not renewed in the ordinary course for a full term or (b) subject to any decision by a Governmental Authority that designates a hearing with respect to any applications for renewal of any of such Governmental Approval or that could result in the Governmental Authority taking any of the actions described in clause (a) above, and such decision or such revocation, rescission, suspension, modification or non-renewal (i) has, or could reasonably be expected to have, a Material Adverse Change, or (ii) adversely affects the legal qualifications of Borrower or any of its Subsidiaries to hold such Governmental Approval in any applicable jurisdiction and such revocation, rescission, suspension, modification or non-renewal could reasonably be expected to affect the status of or legal qualifications of Borrower or any of its Subsidiaries to hold any Governmental Approval in any other jurisdiction;
8.11 Subordinated Loan Agreement. (a) The occurrence of an Event of Default (as defined in the Subordinated Loan Agreement) resulting from Borrowers failure to comply with Section 2.1.1(b) of the Subordinated Loan Agreement or (b) Banks exercise of remedies pursuant to Section 9.1(a) of the Subordinated Loan Agreement; or
8.12 Guaranty. (a) Any guaranty of any Obligations terminates or ceases for any reason to be in full force and effect; (b) any Guarantor does not perform any obligation or covenant relating to the Obligations under any guaranty of the Obligations; (c) any circumstance described in Sections 8.3, 8.4, 8.5, 8.7, or 8.8. occurs with respect to any Guarantor, or (d) the liquidation, winding up, or termination of existence of any Guarantor; or (e) a material adverse change in the general affairs, management, results of operation, condition (financial or otherwise) or the prospect of repayment of the Obligations occurs with respect to any Guarantor.
9 BANKS RIGHTS AND REMEDIES
9.1 Rights and Remedies. While an Event of Default occurs and continues Bank may, without notice or demand, do any or all of the following:
(a) declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank);
(b) stop advancing money or extending credit for Borrowers benefit under this Agreement or under any other agreement between Borrower and Bank;
(c) for any Letters of Credit, whether issued under the Bank Services Facility, or otherwise, demand that Borrower (i) deposit cash with Bank in an amount equal to 105% (110% for Letters of Credit issued in a currency other than Dollars), of the Dollar Equivalent of the aggregate face amount of all Letters of Credit remaining undrawn plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment), to secure all of the Obligations relating to such Letters of Credit, as
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collateral security for the repayment of any future drawings under such Letters of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in advance all Letter of Credit fees scheduled to be paid or payable over the remaining term of any Letters of Credit; provided, however, if an Event of Default described in Section 8.5 occurs, the obligation of Borrower to cash collateralize all Letters of Credit remaining undrawn shall automatically become effective without any action by Bank;
(d) terminate any FX Forward Contracts;
(e) settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Bank considers advisable, notify any Person owing Borrower money of Banks security interest in such funds, and verify the amount of such account;
(f) make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the Collateral. Borrower shall assemble the Collateral if Bank requests and make it available as Bank designates. Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Banks rights or remedies;
(g) apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or the account of Borrower;
(h) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Bank is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrowers labels, Patents, Copyrights, mask works, rights of use of any name, trade secrets, trade names, Trademarks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Banks exercise of its rights under this Section, Borrowers rights under all licenses and all franchise agreements inure to Banks benefit;
(i) place a hold on any account maintained with Bank and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;
(j) demand and receive possession of Borrowers Books; and
(k) exercise all rights and remedies available to Bank under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof).
9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse Borrowers name on any checks or other forms of payment or security; (b) sign Borrowers name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle, and adjust all claims under Borrowers insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Bank or a third party as the Code permits. Borrower hereby appoints Bank as its lawful attorney-in-fact to sign Borrowers name on any documents necessary to perfect or continue the perfection of Banks security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations have been satisfied in full and Bank is under no further obligation to make Credit Extensions hereunder. Banks foregoing appointment as Borrowers attorney in fact, and all of Banks rights and powers, being coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and Banks obligation to provide Credit Extensions terminates.
9.3 Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.7 or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other Loan Document, Bank may obtain such insurance or make such payment, and all amounts so paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then highest rate
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applicable to the Obligations, and secured by the Collateral. Bank will make reasonable efforts to provide Borrower with notice of Bank obtaining such insurance at the time it is obtained or within a reasonable time thereafter. No payments by Bank are deemed an agreement to make similar payments in the future or Banks waiver of any Event of Default.
9.4 Application of Payments and Proceeds. If an Event of Default has occurred and is continuing, Bank may apply any funds in its possession, whether from Borrower account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of the Collateral, or otherwise, to the Obligations in such order as Bank shall determine in its sole discretion. Any surplus shall be paid to Borrower or to other Persons legally entitled thereto; Borrower shall remain liable to Bank for any deficiency. If Bank, in its good faith business judgment, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Bank shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Bank of cash therefor.
9.5 Banks Liability for Collateral. So long as Bank complies with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Bank, Bank shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage or destruction of the Collateral.
9.6 No Waiver; Remedies Cumulative. Banks failure, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Bank thereafter to demand strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by the party granting the waiver and then is only effective for the specific instance and purpose for which it is given. Banks rights and remedies under this Agreement and the other Loan Documents are cumulative. Bank has all rights and remedies provided under the Code, by law, or in equity. Banks exercise of one right or remedy is not an election and shall not preclude Bank from exercising any other remedy under this Agreement or other remedy available at law or in equity, and Banks waiver of any Event of Default is not a continuing waiver. Banks delay in exercising any remedy is not a waiver, election, or acquiescence.
9.7 Demand Waiver. Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable.
9.8 Borrower Liability. Any Borrower may, acting singly, request Credit Extensions hereunder. Each Borrower hereby appoints the other as agent for the other for all purposes hereunder, including with respect to requesting Credit Extensions hereunder. Each Borrower hereunder shall be jointly and severally obligated to repay all Credit Extensions made hereunder, regardless of which Borrower actually receives said Credit Extension, as if each Borrower hereunder directly received all Credit Extensions. Each Borrower waives (a) any suretyship defenses available to it under the Code or any other applicable law, and (b) any right to require Bank to: (i) proceed against any Borrower or any other person; (ii) proceed against or exhaust any security; or (iii) pursue any other remedy. Bank may exercise or not exercise any right or remedy it has against any Borrower or any security it holds (including the right to foreclose by judicial or non-judicial sale) without affecting any Borrowers liability. Notwithstanding any other provision of this Agreement or other related document, so long as any Obligation remains outstanding, each Borrower irrevocably subordinates in priority and payment to the indefeasible repayment in full in cash of the Obligations all rights that it may have at law or in equity (including, without limitation, any law subrogating Borrower to the rights of Bank under this Agreement) to seek contribution, indemnification or any other form of reimbursement from any other Borrower, or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise. Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section shall be null and void. If any payment is made to a Borrower in contravention of this Section, such Borrower shall hold such payment in trust for Bank and such payment shall be promptly delivered to Bank for application to the Obligations, whether matured or unmatured.
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10 NOTICES
All notices, consents, requests, approvals, demands, or other communication (collectively, Communication), other than Advance requests made pursuant to Section 3.4, by any party to this Agreement or any other Loan Document must be in writing and be delivered or sent by facsimile at the addresses or facsimile numbers listed below. Bank or Borrower may change its notice address by giving the other party written notice thereof. Each such Communication shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S mail, registered or certified mail, return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by facsimile transmission (with such facsimile promptly confirmed by delivery of a copy by personal delivery or United States mail as otherwise provided in this Section 10); (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address or facsimile number indicated below. Advance requests made pursuant to Section 3.4 must be in writing and may be in the form of electronic mail, delivered to Bank by Borrower at the e-mail address of Bank provided below and shall be deemed to have been validly served, given, or delivered when sent (with such electronic mail promptly confirmed by delivery of a copy by personal delivery or United States mail as otherwise provided in this Section 10). Bank or Borrower may change its address, facsimile number, or electronic mail address by giving the other party written notice thereof in accordance with the terms of this Section 10.
If to Borrower: |
Mavenir Systems, Inc. | |
1651 North Glenville Drive, Suite 216 | ||
Richardson, Texas 75081 | ||
Attn: Sam Garrett, General Counsel | ||
Fax: (469) 916-4397 | ||
Email: sam@mavenir.com | ||
with a copy to: |
Andrews Kurth LLP | |
111 Congress Avenue, Suite 1700 | ||
Austin, Texas 78701 | ||
Attn: Alan D. Bickerstaff | ||
Fax: (512) 542-5219 | ||
Email: abickerstaff@andrewskurth.com | ||
If to Bank: |
Silicon Valley Bank | |
14185 Dallas Parkway, Suite 780 | ||
Dallas, Texas 75254 | ||
Attn: Jennifer Bentley | ||
Fax: (972) 212-7289 | ||
Email: jbentley@svb.com | ||
with a copy to: |
Riemer & Braunstein LLP | |
Three Center Plaza | ||
Boston, Massachusetts 02108 | ||
Attn: Charles W. Stavros, Esquire | ||
Fax: (617) 880-3456 | ||
Email: cstavros@riemerlaw.com |
11 CHOICE OF LAW, VENUE, AND JURY TRIAL WAIVER
New York law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in New York; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Bank. Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that
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it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrowers actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH HEREINABOVE, BANK SHALL SPECIFICALLY HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE BANKS RIGHTS AGAINST BORROWER OR ITS PROPERTY.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 [Reserved].
12.2 Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights or obligations under it without Banks prior written consent (which may be granted or withheld in Banks discretion). Bank has the right, without the consent of or notice to Borrower, to sell, transfer, assign, negotiate, or grant participation in all or any part of, or any interest in, Banks obligations, rights, and benefits under this Agreement and the other Loan Documents.
12.3 Indemnification. Borrower agrees to indemnify, defend and hold Bank and its directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Bank (each, an Indemnified Person) harmless against: (a) all obligations, demands, claims, and liabilities (collectively, Claims) claimed or asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or expenses (including Bank Expenses) in any way suffered, incurred, or paid by such Indemnified Person as a result of, following from, consequential to, or arising from transactions between Bank and Borrower contemplated by the Loan Documents (including reasonable attorneys fees and expenses), except for Claims and/or losses directly caused by such Indemnified Persons gross negligence or willful misconduct.
12.4 Time of Essence. Time is of the essence for the performance of all Obligations in this Agreement.
12.5 Correction of Loan Documents. Bank may correct patent errors and fill in any blanks in the Loan Documents consistent with the agreement of the parties.
12.6 Severability of Provisions. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.
12.7 Amendments in Writing; Waiver; Integration. No purported amendment or modification of any Loan Document, or waiver, discharge or termination of any obligation under any Loan Document, shall be enforceable or admissible unless, and only to the extent, expressly set forth in a writing signed by the party against which enforcement or admission is sought. Without limiting the generality of the foregoing, no oral promise or statement, nor any action, inaction, delay, failure to require performance or course of conduct shall operate as, or evidence, an amendment, supplement or waiver or have any other effect on any Loan Document. Any waiver granted shall be limited to the specific circumstance expressly described in it, and shall not apply to any subsequent or other circumstance, whether similar or dissimilar, or give rise to, or evidence, any obligation or commitment to grant any further waiver. The Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of the Loan Documents merge into the Loan Documents.
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12.8 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.
12.9 Survival. All covenants, representations and warranties made in this Agreement continue in full force until this Agreement has terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been paid in full and satisfied. Without limiting the foregoing, except as otherwise provided in Section 4.1, the grant of security interest by Borrower in Section 4.1 shall survive until the termination of all agreements under the Bank Services Facility. The obligation of Borrower in Section 12.3 to indemnify Bank shall survive until the statute of limitations with respect to such claim or cause of action shall have run.
12.10 Confidentiality. In handling any confidential information, Bank shall exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made: (a) to Banks Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together with Bank, collectively, Bank Entities); (b) to prospective transferees or purchasers of any interest in the Credit Extensions (provided, however, Bank shall use commercially reasonable efforts to obtain any prospective transferees or purchasers agreement to the terms of this provision); (c) as required by law, regulation, subpoena, or other order; (d) to Banks regulators or as otherwise required in connection with Banks examination or audit; (e) as Bank considers appropriate in exercising remedies under the Loan Documents; and (f) to third-party service providers of Bank so long as such service providers have executed a confidentiality agreement with Bank with terms no less restrictive than those contained herein. Confidential information does not include information that is either: (i) in the public domain or in Banks possession when disclosed to Bank, or becomes part of the public domain after disclosure to Bank; or (ii) disclosed to Bank by a third party if Bank does not know that the third party is prohibited from disclosing the information.
Bank Entities may use the confidential information for reporting purposes and the development and distribution of databases and market analyses so long as such confidential information is aggregated and anonymized prior to distribution, unless otherwise expressly permitted by Borrower. The provisions of the immediately preceding sentence shall survive the termination of this Agreement.
12.11 Attorneys Fees, Costs and Expenses. In any action or proceeding between Borrower and Bank arising out of or relating to the Loan Documents, Bank shall be entitled to recover its reasonable attorneys fees and other costs and expenses incurred, in addition to any other relief to which it may be entitled.
12.12 Right of Set Off. Borrower hereby grants to Bank, a lien, security interest and right of set off as security for all Obligations to Bank, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity under the control of Bank (including a Bank subsidiary) or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Bank may set off the same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
12.13 Electronic Execution of Documents. The words execution, signed, signature and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.
12.14 Captions. The headings used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.
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12.15 Construction of Agreement. The parties mutually acknowledge that they and their attorneys have participated in the preparation and negotiation of this Agreement. In cases of uncertainty this Agreement shall be construed without regard to which of the parties caused the uncertainty to exist.
12.16 Relationship. The relationship of the parties to this Agreement is determined solely by the provisions of this Agreement. The parties do not intend to create any agency, partnership, joint venture, trust, fiduciary or other relationship with duties or incidents different from those of parties to an arms-length contract.
12.17 Third Parties. Nothing in this Agreement, whether express or implied, is intended to: (a) confer any benefits, rights or remedies under or by reason of this Agreement on any Persons other than the express parties to it and their respective permitted successors and assigns; (b) relieve or discharge the obligation or liability of any Person not an express party to this Agreement; or (c) give any Person not an express party to this Agreement any right of subrogation or action against any party to this Agreement.
12.18 Aylus Acquisition. The Bank hereby consents to the acquisition by Borrower or a Subsidiary of Borrower of Aylus Networks, Inc., a Delaware corporation; provided that, Borrower or such Subsidiary shall comply with the provisions of Section 6.12 hereof.
13 DEFINITIONS
13.1 Definitions. As used in the Loan Documents, the word shall is mandatory, the word may is permissive, the word or is not exclusive, the words includes and including are not limiting and the singular includes the plural. As used in this Agreement, the following capitalized terms have the following meanings:
Account is any account as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to Loan Party.
Account Debtor is any account debtor as defined in the Code with such additions to such term as may hereafter be made.
Advance or Advances means an advance (or advances) under the Revolving Line.
Affiliate is, with respect to any Person, each other Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Persons senior executive officers, directors, partners and, for any Person that is a limited liability company or limited liability partnership, that Persons managers and members.
Agreement is defined in the preamble hereof.
Australian Guarantor is Mavenir Systems Australia Pty. Limited, an entity organized under the laws of Australia.
Australian Guaranty is that certain Unconditional Guaranty by Australian Guarantor in favor of Bank, dated as of the Effective Date.
Availability Amount is (a) the lesser of (i) the Revolving Line or (ii) the amount available under the Borrowing Base minus (b) the outstanding principal balance of any Advances.
Bank is defined in the preamble hereof.
Bank Expenses are all audit fees and expenses, costs, and expenses (including reasonable attorneys fees and expenses) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred with respect to Borrower or any Guarantor.
Bank Services Facility is the collective reference to the letter of credit facility described in Section 2.1.3, the foreign exchange contract facility described in Section 2.1.4 and the cash management services facility described in Section 2.1.5.
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Borrower is defined in the preamble hereof.
Borrowers Books are all Borrowers books and records including ledgers, federal and state tax returns, records regarding Borrowers assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.
Borrowing Base is the sum of (a) eighty percent (80%) of Eligible Accounts plus (b) without duplication, the lesser of (i) fifty percent (50%) of Borrowers Eligible Unbilled Accounts and (ii) Two Million Five Hundred Thousand Dollars ($2,500,000.00) in the aggregate, in each case as determined by Bank from Borrowers most recent Borrowing Base Certificate, provided, however, that Bank may decrease the foregoing amounts/percentages in its good faith business judgment based on events, conditions, contingencies, or risks which, as determined by Bank, may adversely affect the Collateral.
Borrowing Base Certificate is that certain certificate included within each Transaction Report.
Borrowing Resolutions are, with respect to any Person, those resolutions adopted by such Persons board of directors or other appropriate body and delivered by such Person to Bank approving the Loan Documents to which such Person is a party and the transactions contemplated thereby, together with a certificate executed by its secretary or other appropriate person on behalf of such Person certifying that (a) such Person has the authority to execute, deliver, and perform its obligations under each of the Loan Documents to which it is a party, (b) that attached as Exhibit A to such certificate is a true, correct, and complete copy of the resolutions then in full force and effect authorizing and ratifying the execution, delivery, and performance by such Person of the Loan Documents to which it is a party, (c) the name(s) of the Person(s) authorized to execute the Loan Documents on behalf of such Person, together with a sample of the true signature(s) of such Person(s), and (d) that Bank may conclusively rely on such certificate unless and until such Person shall have delivered to Bank a further certificate canceling or amending such prior certificate.
Business Day is any day that is not a Saturday, Sunday or a day on which Bank is closed.
Canadian Guarantor is Mavenir Systems North America Ltd., an entity organized under the laws of Canada.
Canadian Guaranty is that certain Unconditional Guaranty by Canadian Guarantor in favor of Bank, dated as of the Effective Date.
Cash Equivalents means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poors Ratings Group or Moodys Investors Service, Inc., (c) Banks certificates of deposit issued maturing no more than one (1) year after issue; and (d) money market funds at least ninety-five percent (95%) of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of this definition.
Cash Management Services is defined in Section 2.1.5.
Code is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of New York; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Banks Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of New York, the term Code shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.
Collateral is any and all properties, rights and assets of Borrower described on Exhibit A.
Collateral Account is any Deposit Account, Securities Account, or Commodity Account.
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Commodity Account is any commodity account as defined in the Code with such additions to such term as may hereafter be made.
Communication is defined in Section 10.
Compliance Certificate is that certain certificate in the form attached hereto as Exhibit B.
Contingent Obligation is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation, in each case directly or indirectly guaranteed, endorsed, co made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but Contingent Obligation does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.
Control Agreement is any control agreement entered into among the depository institution at which Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary at which Borrower maintains a Securities Account or a Commodity Account, Borrower, and Bank pursuant to which Bank obtains control (within the meaning of the Code) over such Deposit Account, Securities Account, or Commodity Account.
Copyrights are any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.
Credit Extension is any Advance, Non-Formula Advance, Letter of Credit, FX Forward Contract, amount utilized for Cash Management Services, or any other extension of credit by Bank for Borrowers benefit pursuant to any Loan Document.
Default means any event which with notice or passage of time or both, would constitute an Event of Default.
Default Rate is defined in Section 2.3(b).
Deferred Revenue is all amounts received or invoiced in advance of performance under contracts and not yet recognized as revenue.
Demonstration Systems shall mean equipment and related goods provided to customers or prospective customers for the purpose of allowing such parties to test Borrowers products and services.
Deposit Account is any deposit account as defined in the Code with such additions to such term as may hereafter be made.
Designated Deposit Account is Borrowers deposit account, account number 3300923666, maintained with Bank.
Dollars, dollars or use of the sign $ means only lawful money of the United States and not any other currency, regardless of whether that currency uses the $ sign to denote its currency or may be readily converted into lawful money of the United States.
Dollar Equivalent is, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in a Foreign Currency, the equivalent amount therefor in Dollars as determined by Bank at such time on the basis of the then-prevailing rate of exchange in San Francisco, California, for sales of the Foreign Currency for transfer to the country issuing such Foreign Currency.
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Effective Date is defined in the preamble hereof.
Eligible Accounts means Accounts which arise in the ordinary course of a Loan Partys business that meet all Borrowers representations and warranties in Section 5.3. Bank reserves the right at any time and from time to time after the Effective Date upon notice to Borrower, to adjust any of the criteria set forth below and to establish new criteria in its good faith business judgment. Without limiting the fact that the determination of which Accounts are eligible for borrowing is a matter of Banks good faith judgment, unless Bank agrees otherwise in writing, Eligible Accounts shall not include:
(a) Accounts for which the Account Debtor is Loan Parties Affiliate, officer, employee, or agent;
(b) Accounts that the Account Debtor has not paid within ninety (90) days of invoice date regardless of invoice payment period terms;
(c) Accounts with credit balances over ninety (90) days from invoice date;
(d) Accounts owing from an Account Debtor, in which fifty percent (50%) or more of the Accounts have not been paid within ninety (90) days of invoice date;
(e) Accounts owing from an Account Debtor which does not have its principal place of business in the United States;
(f) Accounts billed and/or payable outside of the United States (sometimes called foreign invoiced accounts);
(g) Accounts owing from an Account Debtor to the extent that the applicable Loan Party is indebted or obligated in any manner to the Account Debtor (as creditor, lessor, supplier or otherwisesometimes called contra accounts, accounts payable, customer deposits or credit accounts), with the exception of customary credit adjustments and/or discounts given to an Account Debtor by such Loan Party in the ordinary course of its business, in amounts and in a manner consistent with past practices;
(h) Accounts owing from an Account Debtor which is a United States government entity or any department, agency, or instrumentality thereof unless the applicable Loan Party has assigned its payment rights to Bank and the assignment has been acknowledged under the Federal Assignment of Claims Act of 1940, as amended;
(i) Accounts for demonstration or promotional equipment, or in which goods are consigned, or sold on a sale guaranteed, sale or return, sale on approval, or other terms if Account Debtors payment may be conditional;
(j) Accounts owing from an Account Debtor where goods or services have not yet been rendered to the Account Debtor (sometimes called memo billings or pre-billings);
(k) Accounts subject to contractual arrangements between Loan Party and an Account Debtor where payments shall be scheduled or due according to completion or fulfillment requirements where the Account Debtor has a right of offset for damages suffered as a result of Loan Partys failure to perform in accordance with the contract (sometimes called contracts accounts receivable, progress billings, milestone billings, or fulfillment contracts);
(l) Accounts owing from an Account Debtor the amount of which may be subject to withholding based on the Account Debtors satisfaction of Loan Partys complete performance (but only to the extent of the amount withheld; sometimes called retainage billings);
(m) Accounts subject to trust provisions, subrogation rights of a bonding company, or a statutory trust;
(n) Accounts owing from an Account Debtor that has been invoiced for goods that have not been shipped to the Account Debtor unless Bank, the applicable Loan Party, and the Account Debtor have entered into an agreement acceptable to Bank in its sole discretion wherein the Account Debtor acknowledges that (i) it has title to and has ownership of the goods wherever located, (ii) a bona fide sale of the goods has occurred, and (iii) it owes payment for such goods in accordance with invoices from such Loan Party (sometimes called bill and hold accounts);
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(o) Accounts for which the Account Debtor has not been invoiced;
(p) Accounts that represent non-trade receivables or that are derived by means other than in the ordinary course of Loan Partys business;
(q) Accounts for which Borrower has permitted Account Debtors payment to extend beyond ninety (90) days;
(r) Accounts arising from chargebacks, debit memos or other payment deductions taken by an Account Debtor;
(s) Accounts arising from product returns and/or exchanges (sometimes called warranty or RMA accounts);
(t) Accounts in which the Account Debtor disputes liability or makes any claim (but only up to the disputed or claimed amount), or if the Account Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out of business;
(u) Accounts owing from an Account Debtor with respect to which the applicable Loan Party has received Deferred Revenue (but only to the extent of such Deferred Revenue), except software related Deferred Revenue;
(v) Accounts owing from an Account Debtor, whose total obligations to the applicable Loan Party exceed twenty-five percent (25%) of all Accounts (except for Flextronics/Cisco, for which such percentage is thirty-five percent (35%)), for the amounts that exceed that percentage, unless Bank approves in writing;
(w) Accounts for which Bank in its good faith business judgment determines collection to be doubtful, including, without limitation, accounts represented by refreshed or recycled invoices; and
(x) other Accounts Bank, after notice and consultation with such Loan Party, deems ineligible in the exercise of its good faith business judgment.
Eligible Unbilled Accounts are Accounts for which the Account Debtor has not been invoiced or where goods or services have not yet been rendered to the Account Debtor but are otherwise Eligible Accounts; provided such Accounts are billed and goods and services will have been rendered to the applicable Account Debtor within fifteen (15) days of delivery of the applicable Borrowing Base Certificate and which must thereafter satisfy all of the requirements of Eligible Accounts.
Equipment is all equipment as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.
ERISA is the Employee Retirement Income Security Act of 1974, and its regulations.
Event of Default is defined in Section 8.
Excluded Property means any property, right or asset that is described on Exhibit A held by the Borrower, to the extent that such property, right or asset, or any agreement evidencing such property, right or asset, contains a term or is subject to a rule of law, statute or regulation that restricts, prohibits or requires a consent (that has not been obtained) of a Person (other than the Borrower) to the creation, attachment or perfection of the security interest granted herein, and any such restriction, prohibition and/or requirement of consent is effective and enforceable under applicable law; provided, that (x) Excluded Property shall not include any proceeds of any property, right or asset, and (y) any property, right or asset that at any time ceases to satisfy the definition of
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Excluded Property, whether as a result of the Borrower obtaining any necessary consent, any change in any rule of law, statute or regulation, or otherwise, shall no longer be Excluded Property and shall immediately thereafter be deemed Collateral hereunder, subject to no Liens other than (i) the first priority Lien and security interest in favor of Bank and (ii) other Permitted Liens.
Foreign Currency means lawful money of a country other than the United States.
Funding Date is any date on which a Credit Extension is made to or for the account of Borrower which shall be a Business Day.
FX Business Day is any day when (a) Banks Foreign Exchange Department is conducting its normal business and (b) the Foreign Currency being purchased or sold by Borrower is available to Bank from the entity from which Bank shall buy or sell such Foreign Currency.
FX Forward Contract is defined in Section 2.1.4.
FX Reduction Amount is defined in Section 2.1.4.
GAAP is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination.
General Intangibles is all general intangibles as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all Intellectual Property, claims, income and other tax refunds, security and other deposits, payment intangibles, contract rights, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.
Governmental Approval is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.
Governmental Authority is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.
Guarantor is any present or future guarantor of the Obligations, including as of the Effective Date, Australian Guarantor and Canadian Guarantor.
Indebtedness is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations.
Indemnified Person is defined in Section 12.3.
Initial Audit is Banks inspection of Borrowers Accounts, the Collateral, and Borrowers Books with results satisfactory to Bank in its sole and absolute discretion.
Insolvency Proceeding is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.
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Intellectual Property means all of Borrowers right, title, and interest in and to the following:
(a) its Copyrights, Trademarks and Patents;
(b) any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how, operating manuals;
(c) any and all source code;
(d) any and all design rights which may be available to a Borrower;
(e) any and all claims for damages by way of past, present and future infringement of any of the foregoing, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the Intellectual Property rights identified above; and
(f) all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.
Inventory is all inventory as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrowers custody or possession or in transit and including any returned goods and any documents of title representing any of the above.
Investment is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance or capital contribution to any Person.
IP Agreement is that certain Intellectual Property Security Agreement executed and delivered by Borrower to Bank dated as of the Effective Date including any amendments thereto together with any subsequent Intellectual Property Security Agreement delivered to Bank pursuant to this Agreement after the Effective Date.
Letter of Credit is a standby or commercial letter of credit issued by Bank upon request of Borrower based upon an application, guarantee, indemnity or similar agreement on the part of Bank as set forth in Section 2.1.3.
Letter of Credit Application is defined in Section 2.1.3(b).
Letter of Credit Reserve is defined in Section 2.1.3(e).
Lien is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.
Loan Documents are, collectively, this Agreement, the Perfection Certificate, the IP Agreement, the Canadian Guaranty, any agreements with respect to the Bank Services Facility, any subordination agreement, any note, or notes or guaranties executed by Borrower and/or any Guarantor, and any other present or future agreement between Borrower and/or any Guarantor and for the benefit of Bank in connection with the foregoing, all as amended, restated, or otherwise modified. For the sake of clarity, the Subordinated Loan Agreement and the documents and agreements entered into solely with respect to the Subordinated Loan Agreement (including, without limitation, the Warrant (as defined in the Subordinated Loan Agreement)) shall not be considered Loan Documents under this Agreement.
Loan Party means Borrower, Australian Guarantor and Canadian Guarantor, and any other Affiliate that becomes a Borrower or Guarantor under the Loan Documents after the Effective Date.
Material Adverse Change is (a) a material impairment in the perfection or priority of Banks Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower, taken as a whole; (c) a material impairment of the prospect of
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repayment of any portion of the Obligations or (d) Bank determines, based upon information available to it and in its reasonable judgment, that there is a reasonable likelihood that Borrower shall fail to comply with one or more of the financial covenants in Section 6 during the next succeeding financial reporting period.
Mavenir is defined in the preamble hereto.
Net Income is, as calculated on a consolidated basis for Borrower and its Subsidiaries, if any, for any period as at any date of determination, the net profit (or loss), after provision for taxes, of Borrower and its Subsidiaries for such period taken as a single accounting period.
Non-formula Advance or Non-formula Advances is an advance (or advances) under the Non-formula Revolving Line.
Non-formula Availability Amount is an amount equal to (a) the Non-formula Revolving Line minus (b) the outstanding principal balance of any Non-formula Advances.
Non-formula Revolving Line is a Non-formula Advance or Non-formula Advances in an aggregate amount not to exceed Five Million Dollars ($5,000,000.00) outstanding at any time.
Non-formula Revolving Line Maturity Date is October , 2015.
Obligations are Borrowers obligation to pay when due any debts, principal, interest, Bank Expenses and other amounts Borrower owes Bank now or later, whether under this Agreement, the Loan Documents or otherwise (excluding, however, Borrowers obligations to Bank under the Subordinated Loan Agreement and the documents and agreements entered into solely with respect to the Subordinated Loan Agreement), including, without limitation, all obligations relating to Letters of Credit (including reimbursement obligations for drawn and undrawn Letters of Credit), cash management services, and foreign exchange contracts, if any, (including any amounts under any Bank Services Facility) and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank, and to perform Borrowers duties under the Loan Documents. For the sake of clarity, any of Borrowers obligations arising solely under the Subordinated Loan Agreement (and the documents and agreements entered into solely with respect to the Subordinated Loan Agreement including, without limitation, the Warrant (as defined in the Subordinated Loan Agreement)) shall not constitute an Obligation under this Agreement.
Operating Documents are, for any Person, such Persons formation documents, as certified with the Secretary of State of such Persons state of formation on a date that is no earlier than 30 days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement, memorandum and articles of association (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.
Patents means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.
Payment means all checks, wire transfers and other items of payment received by Bank (including proceeds of Accounts and payment of all the Obligations in full) for credit to Borrowers outstanding Credit Extensions or, if the balance of the Credit Extensions has been reduced to zero, for credit to its Deposit Accounts.
Payment/Advance Form is that certain form attached hereto as Exhibit C.
Perfection Certificate is defined in Section 5.1.
Permitted Indebtedness is:
(g) Borrowers Indebtedness to Bank under this Agreement and the other Loan Documents;
(h) Indebtedness existing on the Effective Date and shown on the Perfection Certificate;
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(i) Subordinated Debt, if any;
(j) unsecured Indebtedness to trade creditors incurred in the ordinary course of business;
(k) Indebtedness secured by Liens permitted under clauses (a) and (c) of the definition of Permitted Liens hereunder;
(l)(i) (X) unsecured Indebtedness of any Subsidiary owed to a Loan Party plus (Y) unsecured guarantee obligations of Borrower with respect to leases or commercial contacts of any other Borrower or any Subsidiary entered into in the ordinary course of business, in an aggregate amount for all such Indebtedness permitted pursuant to this clause (i), together with Investments permitted in connection with clause (d) of the definition of Permitted Investments, not to exceed Five Million Five Hundred Thousand Dollars ($5,500,000.00) in the aggregate for any trailing three-month period, for reasonable operating expenses and capital expenditures of such Borrower or Subsidiaries incurred in the ordinary course of business, in amounts and in a manner consistent with past practices, (ii) Indebtedness of any Borrower owing to any other Borrower and (iii) Indebtedness of any Subsidiary (which is not a Loan Party) to any other Subsidiary (which is not a Loan Party);
(m) Indebtedness of Borrower to Bank under the Subordinated Loan Agreement and related documents and agreements;
(n) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;
(o) Subject to Section 6.5, current and deferred taxes;
(p) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (i) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be; and
(q) other unsecured Indebtedness in an amount not to exceed Twenty Five Thousand Dollars ($25,000.00).
Permitted Investments are:
(r) Investments shown on the Perfection Certificate and existing on the Effective Date;
(s) Cash Equivalents;
(t) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrowers business;
(u)(i) Investments by a Loan Party in any Subsidiary, in an aggregate amount for all such Investments, together with Indebtedness permitted in connection with clause (f) of the definition of Permitted Indebtedness, not to exceed Five Million Five Hundred Thousand Dollars ($5,500,000.00) in the aggregate for each trailing three-month period, for reasonable operating expenses and capital expenditures of such Borrower or Subsidiaries incurred in the ordinary course of business, in amounts and in a manner consistent with past practices, (ii) Investments by any Borrower in any other Borrower and (iii) Investments by any Subsidiary in any Loan Party;
(v) Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrowers board of directors;
(w) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business;
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(x) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph (g) shall not apply to Investments of Borrower in any Subsidiary;
(y) Investments consisting of deposit accounts in which Bank has a perfected security interest;
(z) Investments accepted in connection with Transfers permitted by Section 7.1;
(aa) Investments in connection with transactions permitted pursuant to Section 7.3; and
(bb) Joint ventures or strategic alliances in the ordinary course of Borrowers business consisting of the non-exclusive licensing of technology, the development of technology or the providing of technical support, provided that any cash Investments by Borrower do not exceed One Hundred Thousand Dollars ($100,000) in the aggregate in any fiscal year.
Permitted Liens are:
(cc) Liens existing on the Effective Date and shown on the Perfection Certificate or arising under this Agreement and the other Loan Documents;
(dd) Liens for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being contested in good faith and for which Borrower maintains adequate reserves on its Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;
(ee) purchase money Liens (i) on Equipment acquired or held by Borrower incurred for financing the acquisition of the Equipment securing no more than Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate amount outstanding, or (ii) existing on Equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment;
(ff) Liens of carriers, warehousemen, suppliers, landlords or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;
(gg) Liens to secure payment of workers compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);
(hh) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase;
(ii) leases or subleases of real property granted in the ordinary course of business, and leases, subleases, non-exclusive licenses or sublicenses of property (other than real property or Intellectual Property) granted in the ordinary course of Borrowers business, if the leases, subleases, licenses and sublicenses do not prohibit granting Bank a security interest;
(jj) Liens granted by Borrower to Bank under the Subordinated Loan Agreement and related documents and agreements;
(kk) non-exclusive license of Intellectual Property granted to third parties in the ordinary course of business;
(ll) Liens arising from judgments, orders, decrees or attachments in circumstances not constituting an Event of Default under Section 8.4 or 8.7;
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(mm) Easements, rights of way, covenants, restrictions, reservations, exceptions and other similar restrictions and encumbrances or title defects, in each case incurred in the ordinary course of business which, in the aggregate, do not materially detract from the value or usefulness of the property subject thereto or materially interfere with the ordinary conduct of business of Borrower; and
(nn) Liens in favor of other financial institutions arising in connection with Borrowers deposit and/or securities accounts held at such institutions; provided that (except as otherwise permitted in Section 6.8(b)) Bank has a perfected security interest in the amounts held in such deposit and/or securities accounts.
Person is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.
Prime Rate means the rate of interest published in the Money Rates section of The Wall Street Journal, Eastern Edition as the United States Prime Rate. In the event that The Wall Street Journal, Eastern Edition is not published or such rate does not appear in The Wall Street Journal, Eastern Edition, the Prime Rate shall be determined by Bank until such time as the Prime Rate becomes available in accordance with past practices.
Registered Organization is any registered organization as defined in the Code with such additions to such term as may hereafter be made.
Requirement of Law is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
Reserves means, as of any date of determination, such amounts as Bank, after notice and consultation with Borrower, may from time to time establish and revise in good faith reducing the amount of Advances, Letters of Credit and other financial accommodations which would otherwise be available to Borrower under the lending formulas: (a) to reflect events, conditions, contingencies or risks which, as determined by Bank in good faith, do or may affect (i) the Collateral or any other property which is security for the Obligations or its value (including without limitation any increase in delinquencies of Accounts), (ii) the assets or business of Borrower or any guarantor, or (iii) the security interests and other rights of Bank in the Collateral (including the enforceability, perfection and priority thereof); or (b) to reflect Banks good faith belief that any collateral report or financial information furnished by or on behalf of Borrower or any guarantor to Bank is or may have been incomplete, inaccurate or misleading in any material respect; or (c) in respect of any state of facts which Bank determines in good faith constitutes an Event of Default or may, with notice or passage of time or both, constitute an Event of Default.
Responsible Officer is any of the Chief Executive Officer, President, Chief Financial Officer and Controller of Borrower.
Restricted License is any material license or other agreement with respect to which Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from granting a security interest in Borrowers interest in such license or agreement or any other property, or (b) for which a default under or termination of could interfere with the Banks right to sell any Collateral.
Revolving Line is an Advance or Advances in an amount not to exceed Fifteen Million Dollars ($15,000,000.00) outstanding at any time.
Revolving Line Maturity Date is October , 2015.
SEC shall mean the Securities and Exchange Commission, any successor thereto, and any analogous Governmental Authority.
Securities Account is any securities account as defined in the Code with such additions to such term as may hereafter be made.
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Settlement Date is defined in Section 2.1.4.
Streamline Period is, on and after the Effective Date, provided no Default or Event of Default has occurred and is continuing, the period (i) beginning on the first (1st) day in which Borrower has, for each consecutive day in the immediately preceding sixty (60) day period, maintained Tangible Net Worth, in an amount at all times greater than Fourteen Million Five Hundred Thousand Dollars ($14,500,000), as determined by Bank, in its sole discretion (the Streamline Balance); and (ii) ending on the earlier to occur of (A) the occurrence of a Default or an Event of Default; and (B) the first day thereafter in which Borrower fails to maintain the Streamline Balance, as determined by Bank, in its sole discretion. Upon the termination of a Streamline Period, Borrower must maintain the Streamline Balance each consecutive day for sixty (60) consecutive days, as determined by Bank, in its sole discretion, prior to entering into a subsequent Streamline Period. Borrower shall give Bank prior-written notice of Borrowers intention to enter into any such Streamline Period.
Subordinated Debt is (i) Indebtedness incurred pursuant to the Subordinated Loan Agreement and (ii) indebtedness incurred by Borrower subordinated to all of Borrowers now or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered into between Bank and the other creditor), on terms acceptable to Bank.
Subordinated Loan Agreement is that certain Subordinated Loan and Security Agreement dated as of October , 2012 by and between Bank and Borrower, as may be amended from time to time.
Subsidiary is, as to any Person, (a) a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person, (b) a subsidiary as defined in Section 1159 of the U.K. Companies Act 2006, or (c) unless the context otherwise requires, a subsidiary undertaking within the meaning of Section 1162 of the U.K. Companies Act 2006. Unless the context otherwise requires, each reference to a Subsidiary herein shall be a reference to a Subsidiary of Borrower or Guarantor.
Tangible Net Worth is, on any date, the consolidated total assets of Borrower and its Subsidiaries minus (a) any amounts included in such assets attributable to (i) goodwill, (ii) intangible items including unamortized debt discount and expense, Patents, Trademarks, Copyrights, and research and development expenses except prepaid expenses, (iii) notes, accounts receivable and other obligations owing to Borrower from its officers or other Affiliates, and (iv) reserves not already deducted from assets, minus (b) Total Liabilities.
Total Liabilities is on any day, obligations that should, under GAAP, be classified as liabilities on Borrowers consolidated balance sheet, including all Indebtedness.
Trademarks means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.
Transaction Report is the Banks standard reporting package provided by Bank to Borrower.
Transfer is defined in Section 7.1.
Unused Revolving Line Facility Fee is defined in Section 2.4(d).
[Signature page follows.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.
BORROWER: | ||
MAVENIR SYSTEMS, INC. | ||
By | /s/ Terry Hungle | |
Name: | Terry Hungle | |
Title: | Chief Financial Officer | |
MAVENIR HOLDINGS, INC. | ||
By | /s/ Terry Hungle | |
Name: | Terry Hungle | |
Title: | Secretary and Chief Financial Officer | |
BANK: | ||
SILICON VALLEY BANK | ||
By | /s/ Jennifer Bentley | |
Name: | Jennifer Bentley | |
Title: | Relationship Manager |
[Signature page to Senior Loan and Security Agreement]
EXHIBIT A COLLATERAL DESCRIPTION
The Collateral consists of all of Borrowers right, title and interest in and to the following personal property:
All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles, commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and
all Borrowers Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.
Notwithstanding the foregoing, the Collateral does not include any Excluded Property.
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EXHIBIT B
COMPLIANCE CERTIFICATE
TO: | SILICON VALLEY BANK | Date: |
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FROM: | MAVENIR SYSTEMS, INC. |
The undersigned authorized officer of MAVENIR SYSTEMS, INC. (Borrower) certifies that under the terms and conditions of the Senior Loan and Security Agreement between Borrower and Bank (the Agreement), (1) Borrower is in complete compliance for the period ending with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries, if any, relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank. Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.
Please indicate compliance status by circling Yes/No under Complies column.
Reporting Covenant |
Required |
Complies | ||
Monthly financial statements (including income statement and statement of cash flows) with Compliance Certificate |
Monthly within 30 days | Yes No | ||
Annual financial statement (CPA Audited) + CC |
FYE within 150 days | Yes No | ||
10-Q, 10-K and 8-K |
Within 5 days after filing with SEC | Yes No | ||
A/R & A/P Agings |
Monthly within 20 days | Yes No | ||
Transaction Reports |
Weekly and with each Credit Extension (Monthly within 20 days under Streamline) | Yes No | ||
Projections/Operating Budgets |
Earlier of (i) 15 days after approval by board of directors or (ii) January 31st of each fiscal year | Yes No |
The following Intellectual Property was registered after the Effective Date (if no registrations, state None)
Financial Covenant |
Required | Actual | Complies | |||||||||
Maintain as indicated: |
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Minimum Tangible Net Worth |
11,500,000 | $ | Yes No |
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Streamline Reporting |
Applies | |||
Tangible Net Worth ³ $14,500,000 |
Yes No | |||
Tangible Net Worth < $14,500,000 |
Yes No |
The following financial covenant analyses and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate.
The following are the exceptions with respect to the certification above: (If no exceptions exist, state No exceptions to note.)
MAVENIR SYSTEMS, INC. | BANK USE ONLY | |||||||||
By: |
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Received by: |
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Name: |
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AUTHORIZED SIGNER | ||||||||
Title: |
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Date: |
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Verified: |
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AUTHORIZED SIGNER | ||||||||||
Date: |
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Compliance Status: Yes No |
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Schedule 1 to Compliance Certificate
Financial Covenants of Borrower
In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern.
Dated:
I. Tangible Net Worth (Section 6.9)
Required: Borrower shall maintain at all times, to be tested as of the last day of each month, on a consolidated basis with respect to Borrower and its Subsidiaries, a Tangible Net Worth of at least Eleven Million Five Hundred Thousand Dollars ($11,500,000), increasing by (i) fifty percent (50%) of the net proceeds from the issuance of equity, and (ii) twenty-five percent (25%) of quarterly Net Income.
Actual:
A. |
Aggregate value of total assets of Borrower and its Subsidiaries | $_________ | ||||
B. |
Aggregate value of goodwill of Borrower and its Subsidiaries* | $_________ | ||||
C. |
Aggregate value of intangible assets of Borrower and its Subsidiaries* | $_________ | ||||
D. |
Aggregate value of any reserves not already deducted from assets* | $_________ | ||||
E. |
Total Liabilities | $_________ | ||||
E. |
Tangible Net Worth (line A minus line B minus line C minus line D minus line E) | $_________ |
Is line F equal to or greater than $11,500,000?
No, not in compliance |
Yes, in compliance |
* | To the extent included in Line A. |
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EXHIBIT C
LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS NOON P.S.T.
Fax To: | Date: |
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LOAN PAYMENT:
MAVENIR SYSTEMS, INC.
From Account # |
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To Account # |
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(Deposit Account #) | (Loan Account #) | |||||
Principal $ |
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and/or Interest $ |
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Authorized Signature: |
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Phone Number: |
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Print Name/Title: |
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LOAN ADVANCE:
Complete Outgoing Wire Request section below if all or a portion of the funds from this loan advance are for an outgoing wire.
From Account # |
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To Account # |
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(Loan Account #) | (Deposit Account #) |
Amount of Non-formula Advance $ |
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All Borrowers representations and warranties in the Senior Loan and Security Agreement are true, accurate and complete in all material respects on the date of the request for an advance; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date:
Authorized Signature: |
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Phone Number: |
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Print Name/Title: |
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OUTGOING WIRE REQUEST:
Complete only if all or a portion of funds from the loan advance above is to be wired.
Deadline for same day processing is noon, P.S.T.
Beneficiary Name: |
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Amount of Wire: $ |
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Beneficiary Bank: |
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Account Number: |
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City and State: |
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Beneficiary Bank Transit (ABA) #: |
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Beneficiary Bank Code (Swift, Sort, Chip, etc.): |
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(For International Wire Only) |
Intermediary Bank: |
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Transit (ABA) #: |
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For Further Credit to: |
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Special Instruction: |
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By signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be processed in accordance with and subject to the terms and conditions set forth in the agreements(s) covering funds transfer service(s), which agreements(s) were previously received and executed by me (us).
Authorized Signature: |
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2nd Signature (if required): |
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Print Name/Title: |
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Print Name/Title: |
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Exhibit 10.26.1
JOINDER AND FIRST LOAN MODIFICATION
TO SENIOR LOAN AND SECURITY AGREEMENT
This Joinder and First Loan Modification to Senior Loan and Security Agreement (this Agreement) is entered into as of February 13, 2013 (First Loan Modification Effective Date), by and between (i) SILICON VALLEY BANK, a California corporation with a loan production office located at 14185 Dallas Parkway, Suite 760, Dallas TX 75254 (Bank), (ii) MAVENIR SYSTEMS, INC., a Delaware corporation (Mavenir), MAVENIR HOLDINGS, INC., a Delaware corporation, (Holdings), MAVENIR SYSTEMS IP HOLDINGS, LLC, a Delaware corporation (Mavenir IP, and together with Mavenir and Holdings, individually and collectively, jointly and severally, the Borrower) each with offices located at 1651 North Glenville Drive, Suite 216, Richardson, Texas 75081, (iii) MAVENIR SYSTEMS HOLDINGS LIMITED, a company registered under the laws of England and Wales under company number 05181808 whose registered office is at 76 Wallingford Road, Shillingford, Oxfordshire OX10 7EU, United Kingdom (U.K. Holdings), (iv) MAVENIR SYSTEMS UK LIMITED, a company registered under the laws of England and Wales under company number 04388973 whose registered office is at 76 Wallingford Road, Shillingford, Oxfordshire OX10 7EU, United Kingdom (Mavenir U.K. and together with U.K. Holdings, the U.K. Borrower), and (v) MAVENIR SYSTEMS PTE LTD., a company incorporated under the laws of Singapore with registration number 200105057D and having its registered office located at 18 Mohamed Sultan Road, #03-01, Singapore 238967 (Mavenir Singapore or Singapore Borrower, and together with U.K. Holdings and Mavenir U.K., individually and collectively, jointly and severally, the New Borrower).
1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other indebtedness and obligations which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan arrangement dated as of October 18, 2012, evidenced by, among other documents, a certain Senior Loan and Security Agreement dated as of October 18, 2012, between Borrower and Bank (as amended, the Loan Agreement). Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement.
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement and the Intellectual Property Collateral, as such term is defined in that certain Intellectual Property Security Agreement dated as of October 18, 2012 between Bank, Mavenir and Holdings and that certain Intellectual Property Security Agreement dated as of the November 16, 2012 between Bank and Mavenir IP (collectively and as amended, the IP Security Agreement, and together with any other collateral security granted by any Borrower or Guarantor to Bank, the Security Documents). Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations shall be referred to as the Existing Loan Documents.
3. JOINDER AND ASSUMPTION. New Borrower is a Subsidiary of Mavenir and an affiliate of each other Borrower. New Borrower hereby joins the Loan Agreement and each of the other appropriate Existing Loan Documents, and agrees to comply with and be bound by all of the terms, conditions and covenants of the Loan Agreement and each of the other appropriate Existing Loan Documents, as if New Borrower were originally named a Borrower and/or a Debtor therein. Without limiting the generality of the preceding sentence, New Borrower hereby assumes and agrees to pay and perform when due all present and future indebtedness, liabilities and obligations of Borrower under the Loan Agreement, including, without limitation, the Obligations. From and after the date hereof, all references in the Existing Loan Documents to Borrower and/or Debtor shall be deemed to refer to and include New Borrower. Further, all references to the Obligations of Borrower shall be deemed to include all present and future Obligations of New Borrower. New Borrower acknowledges that the Obligations are due and owing to Bank from Borrower including, without limitation, New Borrower, without any defense, offset or counterclaim of any kind or nature whatsoever as of the date hereof.
4. GRANT OF SECURITY INTEREST. In addition to any liens, pledges or security interests in the Collateral granted pursuant to the other Security Documents, to secure the payment and performance of all of the Obligations, New Borrower hereby grants to Bank a continuing lien upon and security interest in all of New Borrowers now existing or hereafter arising rights and interest in the Collateral, whether now owned or existing or hereafter created, acquired, or arising, and wherever located, including, without limitation, all of New Borrowers
assets listed on Exhibit A attached to the Loan Agreement and all of New Borrowers books and records relating to the foregoing and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing. New Borrower represents, warrants, and covenants that, upon the filing of appropriate financing statements, continuation statements or other appropriate filings, the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral (subject only to Permitted Liens that expressly or by operation of law have superior priority to Banks Lien in this Agreement). If New Borrower shall acquire a commercial tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of the Loan Agreement, with such writing to be in form and substance reasonably satisfactory to Bank. New Borrower further covenants and agrees that following written notice from Bank, it shall provide all such information, complete all such forms, and take all such actions, and enter into all such agreements, in form and substance reasonably satisfactory to Bank that are reasonably deemed necessary by Bank in order to grant and continue a valid, first perfected security interest to Bank in the Collateral. New Borrower hereby authorizes Bank to file financing statements or any other applicable filings, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Banks interest or rights hereunder, including a notice that any disposition of the Collateral, by either Borrower or any other Person, may be deemed to violate the rights of Bank under the Code. Such financing statements may indicate the Collateral as all assets of the Debtor or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Banks discretion. Bank shall terminate the security interest granted herein in accordance with Section 4.1 of the Loan Agreement.
5. SUBROGATION AND SIMILAR RIGHTS. Borrower (in each case including, without limitation, New Borrower) waives any suretyship defenses available to it under the Code or any other applicable law. Borrower waives any right to require Bank to: (i) proceed against any other Borrower or any other Person; (ii) proceed against or exhaust any security; or (iii) pursue any other remedy. Bank may exercise or not exercise any right or remedy it has against any Borrower or any security it holds (including the right to foreclose by judicial or non-judicial sale) without affecting any Borrowers liability. Notwithstanding any other provision of this Agreement or other related document, so long as any Obligation remains outstanding, each Borrower irrevocably subordinates in priority and payment to the indefeasible repayment in full in cash of the Obligations all rights that it may have at law or in equity (including, without limitation, any law subrogating such Borrower to the rights of Bank under the Loan Agreement) to seek contribution, indemnification or any other form of reimbursement from any other Borrower or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for any payment made by a Borrower with respect to the Obligations in connection with the Loan Agreement or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by any Borrower with respect to the Obligations in connection with the Loan Agreement or otherwise. Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this section shall be null and void. If any payment is made to any Borrower in contravention of this section, such Borrower shall hold such payment in trust for Bank and such payment shall be promptly delivered to Bank for application to the Obligations, whether matured or unmatured. Any Borrower may, acting singly, request Credit Extensions under the Loan Agreement. Each Borrower hereby appoints the other as agent for the other for all purposes under the Loan Agreement, including with respect to requesting Credit Extensions thereunder. Each Borrower shall be jointly and severally obligated to repay all Credit Extensions made under the Loan Agreement or any other Loan Documents, regardless of which Borrower actually received said Credit Extension, as if each Borrower directly received all Credit Extensions.
6. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants to Bank that all representations and warranties in the Loan Documents made on the part of any Borrower are true and correct on the date hereof with respect to New Borrower (provided that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date), with the same force and effect as if New Borrower were originally named as Borrower in the Loan Documents. In addition, Borrower and New Borrower hereby represent and warrant to Bank that this Agreement has been duly executed and delivered by Borrower and New Borrower, and constitutes their legal, valid and binding obligation, enforceable against each in accordance with its terms. Hereafter, each reference to Borrower and/or Debtor) in any Loan Document shall be deemed to reference both Borrower and New Borrower.
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7. DESCRIPTION OF CHANGE IN TERMS.
A. | Modifications to Loan Agreement. |
1 | The Loan Agreement shall be amended by inserting the following text immediately following Section 2.5 thereof: |
2.6 Withholding. Payments received by Bank from Borrower hereunder will be made free and clear of any withholding taxes. Specifically, however, if at any time any governmental authority, applicable law, regulation or international agreement requires Borrower to make any such withholding or deduction from any such payment or other sum payable hereunder to Bank, Borrower hereby covenants and agrees that the amount due from Borrower with respect to such payment or other sum payable hereunder will be increased to the extent necessary to ensure that, after the making of such required withholding or deduction, Bank receives a net sum equal to the sum which it would have received had no withholding or deduction been required and Borrower shall pay the full amount withheld or deducted to the relevant governmental authority. Borrower will, upon request, furnish Bank with proof satisfactory to Bank indicating that Borrower has made such withholding payment provided, however, that Borrower need not make any withholding payment if the amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings and as to which payment in full is bonded or reserved against by Borrower. The agreements and obligations of Borrower contained in this Section 2.6 shall survive the termination of this Agreement.
2 | The Loan Agreement shall be amended by deleting the following text appearing in Section 4.1 thereof: |
4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof.
Regardless of the terms of any agreements related to the Bank Services Facility, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed to be Obligations hereunder and that it is the intent of Borrower and Bank to have all such Obligations secured by the first priority perfected security interest in the Collateral granted herein (subject only to Permitted Liens that expressly or by operation of law have superior priority to Banks Lien in this Agreement).
and inserting in lieu thereof the following:
4.1 Grant of Security Interest. All Obligations shall be secured by (a) the Collateral as set forth and defined herein, (b) the Collateral as set forth and defined in the U.K. Borrower Debentures, (c) the security constituted by and pursuant to the terms of the U.K. Borrower Share Charges, (d) the Collateral as set forth and defined in the Singapore Security Documents, and (e) any and all other security agreements, mortgages or other documents or instruments creating a security interest in favor of Bank, granted by any Borrower or any Guarantor now or in the future including, without limitation, pursuant to the IP Agreement (together with this Agreement, the Security Documents).
Without prejudice to the security interests granted in the Security Documents (other than this Agreement), Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof.
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Regardless of the terms of any agreements related to the Bank Services Facility, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed to be Obligations hereunder and that it is the intent of Borrower and Bank to have all such Obligations secured by the first priority perfected security interest in the Collateral granted herein and pursuant to the terms of the other Security Documents (subject only to Permitted Liens that expressly or by operation of law have superior priority to Banks Lien in this Agreement).
3 | The Loan Agreement shall be amended by deleting the following text appearing as Section 4.2 thereof: |
4.2 Priority of Security Interest. Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral (subject only to Permitted Liens that expressly or by operation of law have superior priority to Banks Lien under this Agreement). If Borrower shall acquire a commercial tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank.
and inserting in lieu thereof the following:
4.2 Priority of Security Interest. Borrower represents, warrants, and covenants that, upon the filing of appropriate financing statements, continuation statements or other appropriate filings, the security interest granted herein and in the other Security Documents is and shall at all times continue to be a first priority perfected security interest in the Collateral (subject only to Permitted Liens that expressly or by operation of law have superior priority to Banks Lien under this Agreement). If Borrower shall acquire a commercial tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank.
4 | The Loan Agreement shall be amended by deleting the following text appearing as Section 4.3 thereof: |
4.3 Authorization to File Financing Statements. Borrower hereby authorizes Bank to file financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Banks interest or rights hereunder, including a notice that any disposition of the Collateral, by either Borrower or any other Person, may be deemed to violate the rights of Bank under the Code. Such financing statements may indicate the Collateral as all assets of the Debtor or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Banks discretion.
and inserting in lieu thereof the following:
4.3 Authorization to File Financing Statements. Borrower hereby authorizes Bank to file financing statements and other similar statements or forms, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Banks interest or rights hereunder, including a notice that any disposition of the Collateral, by either Borrower or any other Person, may be deemed to violate the rights of Bank under the Code or the relevant Security Documents. Such financing statements and other similar statements or forms may indicate the Collateral as all assets of the Debtor or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Banks discretion.
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5 | The Loan Agreement shall be amended by inserting the following text at the end of Section 4.4 thereof: |
Borrower agrees to take all such steps as Bank may request in order to establish and maintain such further first priority perfected security interests (subject only to Permitted Liens that expressly or by operation of law have superior priority to Banks Lien under this Agreement). In addition to the foregoing, at Banks request, in its sole discretion, Borrower shall take all such action as may be reasonably required by Bank, to cause Australian Guarantor, Canadian Guarantor and/or any of Borrowers or Guarantors Subsidiaries, to become a co-Borrower under the Loan Documents and grant a continuing pledge and security interest in and to the assets of such entity (substantially as described on Exhibit A hereto).
6 | The Loan Agreement shall be amended by deleting the following text appearing in Section 5.2 thereof: |
5.2 Collateral. Borrower has good title to, has rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien hereunder, free and clear of any and all Liens except Permitted Liens. Borrower has no deposit accounts other than the deposit accounts with Bank, the deposit accounts, if any described in the Perfection Certificate delivered to Bank in connection herewith, or of which Borrower has given Bank notice and taken such actions as are necessary to give Bank a perfected security interest therein. The Accounts are bona fide, existing obligations of the Account Debtors.
and inserting in lieu thereof the following:
5.2 Collateral. Borrower has good title to, has rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien hereunder and under the Security Documents, free and clear of any and all Liens except Permitted Liens. Borrower has no deposit accounts other than the deposit accounts with Bank, the deposit accounts, if any described in the Perfection Certificate delivered to Bank in connection herewith, or of which Borrower has given Bank notice and, upon Banks request, taken such actions as are necessary to give Bank a perfected security interest therein. The Accounts are bona fide, existing obligations of the Account Debtors.
7 | The Loan Agreement shall be amended by deleting the following text appearing as Section 5.6 thereof: |
5.6 Solvency. The fair salable value of Borrowers assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature.
and inserting in lieu thereof the following:
5.6 Solvency. The fair salable value of Borrowers assets (including goodwill minus disposition costs), taken as a whole, exceeds the fair value of its liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature, including, without limitation, within the meaning of the UK Insolvency Act 1986, and has not stopped paying its debts as they fall due.
8 | The Loan Agreement shall be amended by deleting the following text appearing in Sections 6.2(a)(ii) and 6.2(a)(iv) thereof: |
(ii) within twenty (20) days after the end of each month, (A) monthly accounts receivable agings, aged by invoice date, (B) monthly accounts payable agings, aged by invoice date, and outstanding or held check registers, if any, and (C) monthly reconciliations of accounts receivable agings (aged by invoice date), transaction reports, Deferred Revenue report and general ledger;
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(iv) within thirty (30) days after the end of each month a monthly Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such month, Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as Bank shall reasonably request, including, without limitation, a statement that at the end of such month there were no held checks;
and inserting in lieu thereof the following:
(ii) within twenty (20) days after the end of each month, (A) monthly accounts receivable agings, aged by invoice date, (B) monthly accounts payable agings, aged by invoice date, and outstanding or held check registers, if any, and (C) monthly reconciliations of accounts receivable agings (aged by invoice date), transaction reports, and general ledger;
(iv) within thirty (30) days after the end of each month a monthly Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such month, Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as Bank shall reasonably request, including, without limitation, a Deferred Revenue Report and statement that at the end of such month there were no held checks;
9 | The Loan Agreement shall be amended by deleting the following text appearing as the last sentence of Section 6.2(a) thereof: |
Notwithstanding the foregoing, during a Streamline Period, provided no Event of Default has occurred and is continuing, Borrower shall be required to provide Bank with the reports and schedules required pursuant to clause (a)(i)(A) above monthly, within twenty (20) days after the end of each month.
and inserting in lieu thereof the following:
Notwithstanding the foregoing, during a Streamline Period, provided no Event of Default has occurred and is continuing, Borrower shall be required to provide Bank with the reports and schedules required pursuant to clause (a)(i)(A) above monthly, within thirty (30) days after the end of each month.
10 | The Loan Agreement shall be amended by deleting the following text appearing as Section 6.3(c) thereof: |
(c) Collection of Accounts. Borrower shall have the right to collect all Accounts, unless and until a Default or an Event of Default has occurred and is continuing. All payments on, and proceeds of, Accounts shall be deposited directly by the applicable Account Debtor into a lockbox account, or such other blocked account as Bank may specify, pursuant to a blocked account agreement in form and substance satisfactory to Bank in its sole discretion. Whether or not an Event of Default has occurred and is continuing, Borrower shall immediately deliver all payments on and proceeds of Accounts to an account maintained with Bank to be applied (i) prior to an Event of Default, to the Revolving Line and Non-formula Revolving Line pursuant to the terms of Section 2.5(b) hereof, and (ii) after the occurrence and during the continuance of an Event of Default, pursuant to the terms of Section 9.4 hereof; provided, however, during a Streamline Period, such payments and proceeds shall be transferred to an account of Borrower maintained at Bank.
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and inserting in lieu thereof the following:
(c) Collection of Accounts.
(i) Subject to Section 6.3(c)(ii), (A) Borrower shall have the right to collect all Accounts unless and until a Default or an Event of Default has occurred and is continuing; (B) all payments on, and proceeds of, Accounts shall be deposited directly by the applicable Account Debtor into a lockbox account, or such other blocked account as Bank may specify, pursuant to a blocked account agreement in form and substance satisfactory to Bank in its sole discretion; and (C) whether or not an Event of Default has occurred and is continuing, Borrower shall immediately deliver all payments on and proceeds of Accounts to an account maintained with Bank to be applied (i) prior to an Event of Default, to the Revolving Line and Non-formula Revolving Line pursuant to the terms of Section 2.5(b) hereof, and (ii) after the occurrence and during the continuance of an Event of Default, pursuant to the terms of Section 9.4 hereof; provided, however, during a Streamline Period, such payments and proceeds shall be transferred to an account of Borrower maintained at Bank and shall not be required to be applied as set forth in clause (i) or (ii) above.
(ii) Commencing on the First Loan Modification Effective Date, U.K. Borrower shall direct each Account Debtor to remit any payments with respect to the Accounts of U.K. Borrower to Sterling, Euro and Dollar blocked account(s) (as appropriate) established with Royal Bank of Scotland plc or such other designated account(s) with such bank as Bank may stipulate from time to time, or to wire any other transfer payments to a cash collateral account that Bank controls (collectively, the U.K. Blocked Account). U.K. Borrower shall at all times get in and realise and pay into the U.K. Blocked Account all monies which U.K. Borrower may receive in respect of the Accounts, and shall not draw money from such account except to the extent permitted in writing by Bank. U.K. Borrower shall not at any time without the prior written consent of Bank deal with the Accounts (or the proceeds of Accounts) otherwise than by getting in the same and paying them into the U.K. Blocked Account. Without prejudice to the generality of the foregoing, U.K. Borrower shall not at any such time factor or discount any of the Accounts or their proceeds or enter into any agreement for such factoring or discounting and shall not, without the prior written consent of Bank, release, exchange, compound, set off, grant time or indulgence in respect of, or in any other manner deal with all or any of the Accounts or their proceeds. Notwithstanding any terms in this Agreement to the contrary, Bank shall have absolute discretion as to the sums (if any) it permits Borrower, on a case by case basis, to withdraw from the U.K. Blocked Account, and Bank shall have no obligation to allow Borrower to withdraw any sums in the U.K. Blocked Account. Bank may at its absolute discretion apply the proceeds of any Accounts credited to the U.K. Blocked Account to the Obligations. For purposes of clarity, (a) the parties contemplate that U.K. Borrower will maintain one or more operating accounts, which will not be U.K. Blocked Accounts, and (b) the restrictions set forth in this Section 6.3(c)(ii) shall not apply to the proceeds of any Accounts after such proceeds have been transferred out of the U.K. Blocked Account in accordance with this Section 6.3(c)(ii) or to any funds unrelated to Accounts of U.K. Borrower.
11 | The Loan Agreement shall be amended by deleting the following text appearing as Section 6.8(a) thereof: |
(a) Maintain its (i) depository accounts and operating accounts and (ii) securities accounts (which such accounts shall represent at least eighty-five percent (85%) of the dollar value of Borrowers securities accounts at all financial institutions worldwide),
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each with Bank and Banks affiliates with all excess funds maintained at or invested through Bank or an affiliate of Bank, excluding however, cash collateral held at other financial institutions used to secure letters of credit or cash held as lease deposits, in each case as described in the Perfection Certificate.
and inserting in lieu thereof the following:
(a) Maintain U.S. Borrowers and U.K. Borrowers (i) depository accounts and operating accounts and (ii) securities accounts (which such accounts shall represent at least eighty-five percent (85%) of the dollar value of U.S. Borrowers and U.K. Borrowers securities accounts at all financial institutions worldwide), each with Bank and Banks affiliates with all excess funds maintained at or invested through Bank or an affiliate of Bank, excluding however, collections held in the U.K. Blocked Account and cash collateral held at other financial institutions used to secure letters of credit or cash held as lease deposits, in each case as described in the Perfection Certificate.
12 | The Loan Agreement shall be amended by deleting the following text appearing as Section 6.9 thereof: |
6.9 Tangible Net Worth. Borrower shall maintain at all times, to be tested as of the last day of each month, on a consolidated basis with respect to Borrower and its Subsidiaries, a Tangible Net Worth of at least Eleven Million Five Hundred Thousand Dollars ($11,500,000), increasing by (i) fifty percent (50%) of the net proceeds from the issuance of equity, and (ii), twenty-five percent (25%) of quarterly Net Income.
and inserting in lieu thereof the following:
6.9 Tangible Net Worth. Borrower shall maintain at all times, to be tested as of the last day of each month, on a consolidated basis with respect to Borrower and its Subsidiaries, Tangible Net Worth of at least (no worse than) negative Seven Million Dollars (-$7,000,000), increasing by (i) fifty percent (50%) of the net proceeds from the issuance of equity, and (ii), twenty-five percent (25%) of quarterly Net Income.
13 | The Loan Agreement shall be amended by deleting the following text appearing as Section 7.6 thereof: |
7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms of Section 6.8(b) hereof.
and inserting in lieu thereof the following:
7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms of Sections 6.8(b) and 6.3(c) hereof.
14 | The Loan Agreement shall be amended by deleting the following text appearing as Section 8.5 thereof: |
8.5 Insolvency. (a) Borrower is unable to pay its debts (including trade debts) as they become due or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within thirty (30) days (but no Credit Extensions shall be made while of any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed);
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and inserting in lieu thereof the following:
8.5 Insolvency. (a) Any Borrower is, or with respect to any U.K. Borrower is deemed for the purposes of any law applicable to such Borrower to be, unable to pay its debts (including trade debts), including, without limitation, within the meaning of the UK Insolvency Act 1986, as they become due, or otherwise becomes insolvent; (b) any U.K. Borrower or Singapore Borrower admits in writing its inability to pay its debts as they fall due; (c) any U.K. Borrower or Singapore Borrower suspends making payment on any of its uncontested debts or announces an intention to do so; (d) a moratorium is declared in respect of any of any U.K. Borrowers or Singapore Borrowers indebtedness; (e) by reason of actual or anticipated inability to pay debts as they fall due or insolvency, any U.K. Borrower or Singapore Borrower begins negotiations with any creditor for the rescheduling of its indebtedness; (f) any Borrower begins an Insolvency Proceeding; (g) a UK Insolvency Proceeding is begun against any U.K. Borrower; (h) a US Insolvency Proceeding is begun against any Borrower and not dismissed or stayed within thirty (30) days (but no Credit Extensions shall be made while of any of the conditions described in clause (a) through (e) exist and/or until any Insolvency Proceeding against any Borrower is dismissed); or (i) a Singapore Insolvency Proceeding is begun against the Singapore Borrower;
15 | The Loan Agreement shall be amended by deleting the following text appearing as Section 9.4 thereof: |
9.4 Application of Payments and Proceeds. If an Event of Default has occurred and is continuing, Bank may apply any funds in its possession, whether from Borrower account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of the Collateral, or otherwise, to the Obligations in such order as Bank shall determine in its sole discretion. Any surplus shall be paid to Borrower or to other Persons legally entitled thereto; Borrower shall remain liable to Bank for any deficiency. If Bank, in its good faith business judgment, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Bank shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Bank of cash therefor.
and inserting in lieu thereof the following:
9.4 Application of Payments and Proceeds. Without prejudice to Banks rights under Section 6.3(c), if an Event of Default has occurred and is continuing, Bank may apply any funds in its possession, whether from Borrower account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of the Collateral, or otherwise, to the Obligations in such order as Bank shall determine in its sole discretion. Any surplus shall be paid to Borrower or to other Persons legally entitled thereto; Borrower shall remain liable to Bank for any deficiency. If Bank, in its good faith business judgment, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Bank shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Bank of cash therefor.
16 | The Loan Agreement shall be amended by deleting the following text appearing as Section 12.13 thereof: |
12.13 Electronic Execution of Documents. The words execution, signed, signature and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.
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and inserting in lieu thereof the following:
12.13 Electronic Execution of Documents. With respect to any Loan Documents signed by any party other than U.K. Borrower and Singapore Borrower, the words execution, signed, signature and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.
17 | The Loan Agreement shall be amended by inserting the following text at the end of Section 12.17 thereof: |
Without limitation to the foregoing, a person who is not a party to this Agreement has neither rights under the U.K. Contracts (Rights of Third Parties) Act 1999 nor rights under the Contracts (Rights of Third Parties) Act (Cap. 53B) of Singapore to enforce or enjoy the benefit of any term of this Agreement.
18 | The Loan Agreement shall be amended by deleting the following definition appearing in Section 13.1 thereof: |
Borrowing Base is the sum of (a) eighty percent (80%) of Eligible Accounts plus (b) without duplication, the lesser of (i) fifty percent (50%) of Borrowers Eligible Unbilled Accounts and (ii) Two Million Five Hundred Thousand Dollars ($2,500,000.00) in the aggregate, in each case as determined by Bank from Borrowers most recent Borrowing Base Certificate, provided, however, that Bank may decrease the foregoing amounts/percentages in its good faith business judgment based on events, conditions, contingencies, or risks which, as determined by Bank, may adversely affect the Collateral.
Collateral is any and all properties, rights and assets of Borrower described on Exhibit A.
GAAP is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination.
Insolvency Proceeding is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.
Loan Documents are, collectively, this Agreement, the Perfection Certificate, the IP Agreement, the Canadian Guaranty, any agreements with respect to the Bank Services Facility, any subordination agreement, any note, or notes or guaranties executed by Borrower and/or any Guarantor, and any other present or future agreement between Borrower and/or any Guarantor and for the benefit of Bank in connection with the foregoing, all as amended, restated, or otherwise modified. For the sake of clarity, the Subordinated Loan Agreement and the documents and agreements entered into solely with respect to the Subordinated Loan Agreement (including, without limitation, the Warrant (as defined in the Subordinated Loan Agreement)) shall not be considered Loan Documents under this Agreement.
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Streamline Period is, on and after the Effective Date, provided no Default or Event of Default has occurred and is continuing, the period (i) beginning on the first (1 ) day in which Borrower has, for each consecutive day in the immediately preceding sixty (60) day period, maintained Tangible Net Worth, in an amount at all times greater than Fourteen Million Five Hundred Thousand Dollars ($14,500,000), as determined by Bank, in its sole discretion (the Streamline Balance); and (ii) ending on the earlier to occur of (A) the occurrence of a Default or an Event of Default; and (B) the first day thereafter in which Borrower fails to maintain the Streamline Balance, as determined by Bank, in its sole discretion. Upon the termination of a Streamline Period, Borrower must maintain the Streamline Balance each consecutive day for sixty (60) consecutive days, as determined by Bank, in its sole discretion, prior to entering into a subsequent Streamline Period. Borrower shall give Bank prior-written notice of Borrowers intention to enter into any such Streamline Period.
Tangible Net Worth is, on any date, the consolidated total assets of Borrower and its Subsidiaries minus (a) any amounts included in such assets attributable to (i) goodwill, (ii) intangible items including unamortized debt discount and expense, Patents, Trademarks, Copyrights, and research and development expenses except prepaid expenses, (iii) notes, accounts receivable and other obligations owing to Borrower from its officers or other Affiliates, and (iv) reserves not already deducted from assets, minus (b) Total Liabilities.
and inserting in lieu thereof the following:
Borrowing Base is the sum of (a) eighty percent (80%) of Eligible Accounts plus (b) without duplication, seventy percent (70%) of Eligible Foreign Accounts plus (c) without duplication, seventy percent (70%) of Eligible Domestic-Billed Foreign Accounts; provided that, such amount described in this clause (c) shall not exceed Five Million Dollars ($5,000,000.00) in the aggregate plus (d) without duplication, fifty percent (50%) of Borrowers Eligible Unbilled Accounts; provided that, such amount described in this clause (d) shall not exceed Two Million Five Hundred Thousand Dollars ($2,500,000.00) in the aggregate, in each case as determined by Bank from Borrowers most recent Borrowing Base Certificate, provided, however, that Bank may decrease the foregoing amounts/percentages in its good faith business judgment based on events, conditions, contingencies, or risks which, as determined by Bank, may adversely affect the Collateral.
Collateral is (a) any and all properties, rights and assets of Borrower described on Exhibit A, (b) without limitation on (a) above, is any and all properties, rights and assets of Borrower which are subject to any Lien in favor of Bank.
GAAP is (a) in respect of U.S. Borrower, generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination, (b) in respect of U.K. Borrower, generally accepted accounting principles in the United Kingdom, (c) in respect of Singapore Borrower, generally accepted accounting principles in Singapore.
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Insolvency Proceeding is a U.S. Insolvency Proceeding, a U.K. Insolvency Proceeding, a Singapore Insolvency Proceeding or any of them.
Loan Documents are, collectively, this Agreement, the Perfection Certificate, the IP Agreement, the Australian Guaranty, the Canadian Guaranty, any Security Document (including the U.K Security Documents and the Singapore Security Documents), any agreements with respect to the Bank Services Facility, any subordination agreement, any note, or notes payable to Bank or guaranties for the benefit of Bank, executed by Borrower and/or any Guarantor, and any other present or future agreement between Borrower and/or any Guarantor and for the benefit of Bank in connection with the foregoing, all as amended, restated, or otherwise modified. For the sake of clarity, the Subordinated Loan Agreement and the documents and agreements entered into solely with respect to the Subordinated Loan Agreement (including, without limitation, the Warrant (as defined in the Subordinated Loan Agreement)) shall not be considered Loan Documents under this Agreement.
Streamline Period is, on and after the Effective Date, provided no Default or Event of Default has occurred and is continuing, the period (i) beginning on the first (1st ) day in which Borrower has, for each consecutive day in the immediately preceding sixty (60) day period, maintained Tangible Net Worth, in an amount at all times of at least (no worse than) negative Three Million Five Hundred Thousand Dollars (-$3,500,000), as determined by Bank, in its sole discretion (the Streamline Balance); and (ii) ending on the earlier to occur of (A) the occurrence of a Default or an Event of Default; and (B) the first day thereafter in which Borrower fails to maintain the Streamline Balance, as determined by Bank, in its sole discretion. Upon the termination of a Streamline Period, Borrower must maintain the Streamline Balance each consecutive day for sixty (60) consecutive days, as determined by Bank, in its sole discretion, prior to entering into a subsequent Streamline Period. Borrower shall give Bank prior-written notice of Borrowers intention to enter into any such Streamline Period.
Tangible Net Worth is, on any date, the consolidated total assets of Borrower and its Subsidiaries minus (a) any amounts included in such assets attributable to (i) goodwill, (ii) intangible items including unamortized debt discount and expense, Patents, Trademarks, Copyrights, and research and development expenses except prepaid expenses, (iii) notes, accounts receivable and other obligations owing to Borrower from its officers or other Affiliates and (iv) reserves not already deducted from assets, minus (b) Total Liabilities, minus (c) net foreign exchange currency translation adjustments.
19 | The Loan Agreement shall be amended by inserting the following new definitions in Section 13.1 thereof, each in its applicable alphabetical order: |
Eligible Domestic-Billed Foreign Accounts are, without duplication of any Eligible Foreign Accounts, Accounts owing from an Account Debtor which does not have its principal place of business in the United States but are otherwise Eligible Accounts; provided such Accounts are owing from an Account Debtor which does not have its principal place of business in the jurisdictions located on Schedule 1 attached hereto.
Eligible Foreign Accounts are Accounts billed and/or payable in Singapore, the United Kingdom, Australia and Canada that are otherwise Eligible Accounts; provided such Accounts are owing from an Account Debtor which does not have its principal place of business in the jurisdictions located on Schedule 1 attached hereto.
First Loan Modification Effective Date is February 13, 2013.
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Mavenir Singapore is Mavenir Systems Pte Ltd., a company incorporated under the laws of Singapore with registration number 200105057D and having its registered office located at 18 Mohamed Sultan Road, #03-01, Singapore 238967.
Mavenir U.K. is Mavenir Systems UK Limited, a company registered under the laws of England and Wales under company number 04388973 whose registered office is at 76 Wallingford Road, Shillingford, Oxfordshire OX10 7EU, United Kingdom.
Security Documents is defined in Section 4.1.
Singapore Borrower is Mavenir Singapore.
Singapore Debenture is that certain debenture dated as of the First Loan Modification Effective Date granted by Singapore Borrower in favor of Bank, together with any additional debenture granted by any Singapore Borrower thereafter.
Singapore Insolvency Proceeding means in relation to the Singapore Borrower (a) any step is taken with a view to a moratorium or a composition, assignment or similar arrangement with any of its creditors; (b) a meeting of its shareholders, directors or other officers is convened for the purpose of considering any resolution for, to petition for or to make an application to or to file documents with a court or any registrar for, its winding-up, administration or dissolution or any such resolution is passed; (c) an order is made for its winding-up, administration or dissolution, or any Person presents a petition, or makes an application to or files documents with a court or any registrar, for its winding-up, administration or dissolution, or gives notice to the Bank of an intention to appoint an administrator other than, in any case, any winding up petition which is frivolous or vexatious and is discharged, stayed, or dismissed within thirty (30) days of commencement or, if earlier, the date on which it is advertised (but no Credit Extensions shall be made until such petition is dismissed); (d) any liquidator, receiver, judicial manager, administrative receiver, administrator or similar officer is appointed in respect of it or any of its assets; or (e) its shareholders, directors or other officers request the appointment of, or give notice of their intention to appoint, a liquidator, receiver, administrator or similar officer.
Singapore Security Documents is the Singapore Debenture and any other security document as may be entered into by the Singapore Borrower in respect of security granted by the Singapore Borrower in favor of Bank thereafter.
U.K. Blocked Account is defined in Section 6.3(c)(ii).
U.K. Borrower is the collective reference to Mavenir U.K. and U.K. Holdings.
U.K. Borrower Debentures means each of (i) that certain mortgage debenture dated as of the First Loan Modification Effective Date granted by Mavenir U.K. in favor of Bank and (ii) that certain mortgage debenture dated as of the First Loan Modification Effective Date granted by U.K. Holdings in favor of Bank, together with any additional mortgage debenture granted by any U.K Borrower thereafter.
U.K. Borrower Share Charges means each of (i) that certain first charge over the entire issued share capital of U.K. Holdings granted by U.S. Holdings as the shareholder of U.K. Holdings to Bank dated as of the First Loan Modification Effective Date and (ii) that certain first charge over the entire issued share capital Mavenir U.K. granted by U.K. Holdings as the shareholder of Mavenir U.K. to Bank dated as of the First Loan Modification Effective Date.
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U.K. Holdings is Mavenir Systems Holdings Limited, a company registered under the laws of England and Wales under company number 05181808 whose registered office is at 76 Wallingford Road, Shillingford, Oxfordshire OX10 7EU, United Kingdom.
U.K. Insolvency Proceeding means in relation to any Person: (a) any step is taken with a view to a moratorium or a composition, assignment or similar arrangement with any of its creditors; (b) a meeting of its shareholders, directors or other officers is convened for the purpose of considering any resolution for, to petition for or to make an application to or to file documents with a court or any registrar for, its winding-up, administration or dissolution or any such resolution is passed; (c) an order is made for its winding-up, administration or dissolution, or any Person presents a petition, or makes an application to or files documents with a court or any registrar, for its winding-up, administration or dissolution, or gives notice to Agent of an intention to appoint an administrator other than, in any case, any winding up petition which is frivolous or vexatious and is discharged, stayed, or dismissed within thirty (30) days of commencement or, if earlier, the date on which it is advertised (but no Credit Extensions shall be made until such petition is dismissed); (d) any liquidator, receiver, administrative receiver, administrator or similar officer is appointed in respect of it or any of its assets; or (e) its shareholders, directors or other officers request the appointment of, or give notice of their intention to appoint, a liquidator, receiver, administrator or similar officer.
U.K. Security Documents is the U.K. Borrower Debentures and the U.K. Borrower Share Charges.
United Kingdom or U.K. means the United Kingdom of Great Britain and Northern Ireland.
U.S. Borrower is the collective reference to Mavenir, Holdings and Mavenir IP.
U.S. Insolvency Proceeding is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other similar relief.
20 | The Loan Agreement shall be amended by inserting Schedule 1 attached hereto as Schedule 1. |
21 | The Loan Agreement shall be amended by deleting Exhibit B attached thereto and inserting Exhibit B attached hereto in lieu thereof. |
8. ACKNOWLEDGMENT OF DEFAULTS; WAIVER. Borrower acknowledges that it is currently in default under the Loan Agreement by its failure to comply with the minimum Tangible Net Worth financial covenant contained in former Section 6.9 of the Loan Agreement for the reporting periods ended November 30, 2012 and December 31, 2012 and at various times therein and thereafter up to but excluding the First Loan Modification Effective Date (collectively, the Existing Defaults). Bank hereby waives Borrowers Existing Defaults for the compliance dates indicated above. Banks waiver of Borrowers compliance with said Existing Defaults shall apply only to the foregoing specific dates and compliance periods. The Borrower hereby acknowledges and agrees that except as specifically provided in this Section, nothing in this Section or anywhere in this Loan Modification Agreement shall be deemed or otherwise construed as a waiver by the Bank of any of its rights and remedies pursuant to the Existing Loan Documents, applicable law or otherwise.
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9. CONDITIONS PRECEDENT. As a condition precedent to the effectiveness of this Agreement and the Banks obligation to make further Credit Extensions under the Loan Agreement, the Bank shall have received the following documents prior to or concurrently with this Agreement, each in form and substance satisfactory to the Bank:
A. | duly executed original signature pages to the U.K. Security Documents; |
B. | duly executed original signature pages to the Singapore Security Documents; |
C. | duly executed original certificate of the Secretary or a Director of each U.K. Borrower certifying the memorandum and articles of association, register of charges, specimen signatures, board resolutions authorizing the execution and delivery of this Agreement and the other Loan Documents to which it is a party, and (if required) written resolutions of the sole shareholder of each U.K. Borrower amending its articles of association; |
D. | evidence of the establishment of the U.K. Blocked Account; |
E. | duly executed original certificate of the Secretary or a Director of Singapore Borrower certifying the certificate of incorporation, memorandum and articles of association, register of members, specimen signatures and directors resolutions authorizing the execution and delivery of this Agreement and the other Loan Documents to which it is a party, and (if required) shareholders resolutions of the Singapore Borrower (and if required, amending its constitution documents); |
F. | duly executed original signature pages to the Australian Guaranty, together with Secretarys Certificate and completed Borrowing Resolutions for Australian Guarantor; |
G. | original share certificates representing the shares in each U.K. Borrower charged in favor of Bank pursuant to the terms of the U.K. Share Charges, together with duly executed blank stock transfer forms in respect of such shares; |
H. | a legal opinion of Banks U.K. counsel (authority/enforceability) in respect of U.K. Borrower, in form and substance acceptable to Bank, dated as of the First Loan Modification Effective Date, together with the duly executed signatures thereto; |
I. | a legal opinion of Borrowers Singapore counsel in respect of Mavenir Singapore, in form and substance acceptable to Bank, dated as of the First Loan Modification Effective Date, together with the duly executed signatures thereto; |
J. | such evidence as Bank shall require and obtain confirming that there are no Liens in effect against the Collateral other than Liens in favor of Bank or other Permitted Liens; |
K. | a filed copy, which shall be filed by Bank, acknowledged by the appropriate filing office in the District of Columbia, of UCC Financing Statements, naming each New Borrower as Debtor and Bank as Secured Party; |
L. | a Perfection Certificate of each New Borrower and Mavenir Systems Australia Pty. Limited, together with the duly executed original signature pages thereto; |
M. | evidence satisfactory to Bank that the insurance policies required for New Borrower are in full force and effect, together with appropriate evidence showing lender loss payable and/or additional insured clauses or endorsements in favor of Bank; and |
N. | such other documents as Bank may reasonably request. |
10. DELIVERY OF POST-CLOSING MATTERS. Except as provided for herein, Bank confirms satisfaction of the provisions of Section 6.14 of the Loan Agreement. Notwithstanding the terms and conditions of Section 6.14(e) of the Loan Agreement, Borrower shall use commercially reasonable efforts to deliver a landlords consent in favor of Bank for Borrowers leased location at 1700 International Parkway, Suite 200, Richardson, Texas 75081 by the respective landlord thereof, together with the duly executed original signature pages thereto. Within five (5) Business Days following the First Amendment Effective Date (or such later date as the Bank shall determine in its sole discretion) Borrower shall deliver to Bank the Particulars of the Charge(s) created under the Singapore Debenture, this Agreement and the Subordinated Loan Agreement to be registered with ACRA within 30 days of creation of the charges.
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11. FEES. Borrower shall pay to Bank a modification fee equal to Seventeen Thousand Five Hundred Dollars ($17,500), which fee shall be due on the date hereof and shall be deemed fully earned as of the date hereof. Borrower shall reimburse Bank for all reasonable legal fees and expenses incurred in connection with the Existing Loan Documents and this Agreement.
12. AUTHORIZATION TO FILE. Borrower hereby authorizes Bank to file UCC financing statements without notice to Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in order to further perfect or protect Banks interest in the Collateral, including a notice that any disposition of the Collateral, by either the Borrower or any other Person, shall be deemed to violate the rights of the Bank under the Code.
13. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.
14. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and reaffirms all terms and conditions (as they may be modified by this Agreement) of all security or other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.
15. NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and Borrower hereby RELEASES Bank from any liability thereunder.
16. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the existing Obligations, Bank is relying upon Borrowers representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Banks agreement to modifications to the existing Obligations pursuant to this Agreement in no way shall obligate Bank to make any future modifications to the Obligations. Nothing in this Agreement shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker will be released by virtue of this Agreement.
17. RIGHT OF SET-OFF. In consideration of Banks agreement to enter into this Agreement, Borrower hereby reaffirms and hereby grants to Bank, a lien, security interest and right of set off as security for all Obligations to Bank, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity under the control of Silicon Valley Bank (including a Bank subsidiary) or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Bank may set off the same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the loan. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
18. | JURISDICTION/VENUE. Section 11 of the Loan Agreement is hereby incorporated by reference in its entirety. |
19. COUNTERSIGNATURE. This Agreement shall become effective only when it shall have been executed by Borrower and Bank.
[The remainder of this page is intentionally left blank]
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This Agreement is executed as of the date first written above.
MAVENIR SYSTEMS, INC. | ||
By | /s/ Terrence Hungle | |
Name: | Terrence Hungle | |
Title: | Chief Financial Officer | |
MAVENIR HOLDINGS, INC. | ||
By | /s/ Terrence Hungle | |
Name: | Terrence Hungle | |
Title: | Chief Financial Officer | |
MAVENIR SYSTEMS IP HOLDINGS, LLC | ||
By | /s/ Terrence Hungle | |
Name: | Terrence Hungle | |
Title: | Vice President | |
MAVENIR SYSTEMS HOLDINGS LIMITED | ||
By | /s/ Terrence Hungle | |
Name: | Terrence Hungle | |
Title: | Director | |
MAVENIR SYSTEMS UK LTD. | ||
By | /s/ Terrence Hungle | |
Name: | Terrence Hungle | |
Title: | Director | |
MAVENIR SYSTEMS PTE LTD. | ||
By | /s/ Terrence Hungle | |
Name: | Terrence Hungle | |
Title: | Director | |
BANK: | ||
SILICON VALLEY BANK | ||
By | /s/ Jennifer Bentley | |
Name: | Jennifer Bentley | |
Title: | Relationship Manager |
[Signature page to Joinder and First Loan Modification to Senior Loan and Security Agreement]
Schedule 1
List of Ineligible Jurisdictions
Afganistan
Antiqua and Barbuda
Argentina
Burma
Cambodia
Cuba
East Timor
Ecuador
Guinea
Guinea-Bassau
Haiti
Iran
North Korea
Laos
Libya
Nauru
Nepal
Somalia
Sudan
Suriname
Syria
Turkmenistan
Venezuela
Yemen
Zimbabwe
EXHIBIT B
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK | Date: | |
FROM: MAVENIR SYSTEMS, INC. |
The undersigned authorized officer of MAVENIR SYSTEMS, INC. (Borrower) certifies that under the terms and conditions of the Senior Loan and Security Agreement between Borrower and Bank (the Agreement), (1) Borrower is in complete compliance for the period ending with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries, if any, relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank. Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.
Please indicate compliance status by circling Yes/No under Complies column.
Reporting Covenant |
Required |
Complies | ||
Monthly financial statements (including income statement and statement of cash flows) with Compliance Certificate and Deferred Revenue Report | Monthly within 30 days | Yes No | ||
Annual financial statement (CPA Audited) + CC | FYE within150 days | Yes No | ||
10-Q, 10-K and 8-K | Within 5 days after filing with SEC | Yes No | ||
A/R & A/P Agings | Monthly within 20 days | Yes No | ||
Transaction Reports | Weekly and with each Credit Extension (Monthly within 30 days under Streamline) | Yes No | ||
Projections/Operating Budgets | Earlier of (i) 15 days after approval by board of directors or (ii) January 31st of each fiscal year | Yes No |
The following Intellectual Property was registered after the Effective Date (if no registrations, state None)
Financial Covenant |
Required | Actual | Complies | |||||||||
Maintain as indicated: |
||||||||||||
Minimum Tangible Net Worth |
($ | 7,000,000 | ) | $ | ____ | Yes No |
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Streamline Reporting |
Applies | |
Tangible Net Worth ³ ($3,500,000) | Yes No | |
Tangible Net Worth < ($3,500,000) | Yes No |
The following financial covenant analyses and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate.
The following are the exceptions with respect to the certification above: (If no exceptions exist, state No exceptions to note.)
MAVENIR SYSTEMS, INC. | BANK USE ONLY | |||||||
By: | Received by: | |||||||
Name: | AUTHORIZED SIGNER | |||||||
Title: | Date: | |||||||
Verified: | ||||||||
AUTHORIZED SIGNER | ||||||||
Date: | ||||||||
Compliance Status: | Yes No |
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Schedule 1 to Compliance Certificate
Financial Covenants of Borrower
In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern.
Dated:
I. Tangible Net Worth (Section 6.9)
Required: Borrower shall maintain at all times, to be tested as of the last day of each month, on a consolidated basis with respect to Borrower and its Subsidiaries, Tangible Net Worth of at least (no worse than) negative Seven Million Dollars (-$7,000,000), increasing by (i) fifty percent (50%) of the net proceeds from the issuance of equity, and (ii), twenty-five percent (25%) of quarterly Net Income.
Actual:
A. | Aggregate value of total assets of Borrower and its Subsidiaries | $ | ||
B. | Aggregate value of goodwill of Borrower and its Subsidiaries* | $ | ||
C. | Aggregate value of intangible assets of Borrower and its Subsidiaries* | $ | ||
D. | Aggregate value of any reserves not already deducted from assets* | $ | ||
E. | Total Liabilities | $ | ||
F. | Net foreign exchange currency translation adjustments | $ | ||
G. | Tangible Net Worth (line A minus line B minus line C minus line D minus line E minus line F) | $ |
Is line G at least (no worse than) (-$7,000,000)?
No, not in compliance | Yes, in compliance |
* | To the extent included in Line A. |
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Exhibit 10.26.2
SECOND LOAN MODIFICATION
TO SENIOR LOAN AND SECURITY AGREEMENT
This Second Loan Modification to Senior Loan and Security Agreement (this Agreement) is entered into as of June 4, 2013 (Second Loan Modification Effective Date), by and between (i) SILICON VALLEY BANK, a California corporation with a loan production office located at 14185 Dallas Parkway, Suite 760, Dallas TX 75254 (Bank), (ii) MA VENIR SYSTEMS, INC., a Delaware corporation (Mavenir), (iii) MAVENIR HOLDINGS, INC., a Delaware corporation (Holdings), (iv) MA VENIR SYSTEMS IP HOLDINGS, LLC, a Delaware limited liability company (Mavenir IP) each with offices located at 1700 International Parkway, Suite 200, Richardson, TX 75081, (v) MA VENIR SYSTEMS HOLDINGS LIMITED, a company registered under the laws of England and Wales under company number 05181808 whose registered office is at 76 Wallingford Road, Shillingford, Oxfordshire OX10 7EU, United Kingdom (U.K. Holdings), (vi) MAVENIR SYSTEMS UK LIMITED, a company registered under the laws of England and Wales under company number 04388973 whose registered office is at 76 Wallingford Road, Shillingford, Oxfordshire OXlO 7EU, United Kingdom (Mavenir U.K. and together with U.K. Holdings, the U.K. Borrower), and (vii) MAVENIR SYSTEMS PTE LTD., a company incorporated under the laws of Singapore with registration number 200105057D and having its registered office located at 18 Mohamed Sultan Road, #03-01, Singapore 238967 (Mavenir Singapore or Singapore Borrower, and together with U.K. Holdings and Mavenir U.K., Mavenir, Holdings, and Mavenir IP, individually and collectively, jointly and severally, the Borrower).
1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other indebtedness and obligations which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan arrangement dated as of October 18, 2012, evidenced by, among other documents, a certain Senior Loan and Security Agreement dated as of October 18, 2012, between Borrower and Bank, as amended by that certain Joinder and First Loan Modification to Senior Loan and Security Agreement dated as of February 13, 2013 (as amended, the Loan Agreement). Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement.
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement and the Intellectual Property Collateral, as such term is defined in that certain Intellectual Property Security Agreement dated as of October 18, 2012 between Bank, Mavenir and Holdings and that certain Intellectual Property Security Agreement dated as of the November 16,2012 between Bank and Mavenir IP (collectively and as amended, the IP Security Agreement, and together with any other collateral security granted by any Borrower or Guarantor to Bank, the Security Documents). Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations shall be referred to as the Existing Loan Documents.
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modifications to Loan Agreement.
1 | The Loan Agreement shall be amended by inserting the following text at the end of Section 4.4 thereof: |
If Borrower is required to add one or more Subsidiaries as co-borrowers or guarantors of its obligations pursuant to the Silver Lake Subordinated Indebtedness and to cause such Subsidiaries to grant a security interest on their assets to secure the Silver Lake Subordinated Indebtedness or if Borrower desires to Transfer assets to one or more Subsidiaries, and any such Subsidiaries have not granted a security interest in favor of Bank, Borrower shall notify Bank of same and shall cause such Subsidiaries to grant a first priority security interest (subject only to Permitted Liens that expressly or by operation of law have superior priority to Bank's Lien under this Agreement) on their assets consistent with the description of Collateral set forth in Exhibit A in favor of Bank unless Bank waives such obligation in writing.
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2 | The Loan Agreement shall be amended by deleting the following text appearing as Section 6.9 thereof: |
6.9 Tangible Net Worth. Borrower shall maintain at all times, to be tested as of the last day of each month, on a consolidated basis with respect to Borrower and its Subsidiaries, Tangible Net Worth of at least (no worse than) negative Seven Million Dollars (-$7 ,000,000), increasing by (i) fifty percent (50%) of the net proceeds from the issuance of equity, and (ii), twenty-five percent (25%) of quarterly Net Income.
and inserting in lieu thereof the following:
6.9 Tangible Net Worth. Borrower shall maintain at all times, to be tested as of the last day of each month, on a consolidated basis with respect to Borrower and its Subsidiaries, Tangible Net Worth of at least (no worse than) negative Seven Million Dollars (-$7 ,000,000), increasing by (i) fifty percent (50%) of the net proceeds from the issuance of equity or Subordinated Debt (excluding the Indebtedness incurred pursuant to the Subordinated Loan Agreement, but including the Silver Lake Subordinated Indebtedness), and (ii), twenty-five percent (25%) of quarterly Net Income.
3 | The Loan Agreement shall be amended by deleting the following text appearing as Section 7.1 thereof: |
7.1 Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, Transfer), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of Equipment or other property which is worn out, obsolete, being replaced by Equipment or property of reasonably equivalent or better value or usefulness, or no longer necessary for the business of Borrower or such Subsidiary; (c) in connection with Permitted Liens and Permitted Investments, (d) of non-exclusive licenses for the use of the property of Borrower or any of its Subsidiaries in the ordinary course of business and consistent with past practice; (e) of Demonstration Systems to customers or prospective customers in the ordinary course of business and consistent with past practice; (f) of property from one Borrower to another Borrower; and (g) otherwise expressly permitted pursuant to this Agreement.
and inserting in lieu thereof the following:
7.1 Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, Transfer), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of Equipment or other property which is worn out, obsolete, being replaced by Equipment or property of reasonably equivalent or better value or usefulness, or no longer necessary for the business of Borrower or such Subsidiary; (c) in connection with Permitted Liens and Permitted Investments, (d) of non-exclusive licenses for the use of the property of Borrower or any of its Subsidiaries in the ordinary course of business and consistent with past practice; (e) of Demonstration Systems to customers or prospective customers in the ordinary course of business and consistent with past practice; (f) of property from one Borrower to another Borrower (or to a non-Borrower Subsidiary which has granted a lien on its assets to Bank pursuant to Section 4.4); and (g) otherwise expressly permitted pursuant to this Agreement.
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4 | The Loan Agreement shall be amended by deleting the following text appearing as Section 7.5 thereof: |
7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of the Collateral, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, permit any Collateral not to be subject to the first priority security interest granted herein, or enter into any agreement, document, instrument or other arrangement (except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower's or any Subsidiary's Intellectual Property, except as is otherwise permitted in Section 7.1 hereof and the definition of Permitted Liens herein.
and inserting in lieu thereof the following:
7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of the Collateral, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, permit any Collateral not to be subject to the first priority security interest granted herein, or enter into any agreement, document, instrument or other arrangement (except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower's or any Subsidiary's Intellectual Property included in the Collateral, except as is otherwise permitted in Section 7.1 hereof and the definition of Permitted Liens herein.
5 | The Loan Agreement shall be amended by deleting the following text appearing as Sections 8.6 thereof: |
8.6 Other Agreements. There is, under any agreement to which Borrower or any Guarantor is a party with a third party or parties (other than the Subordinated Loan Agreement), (a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount individually or in the aggregate in excess of Two Hundred Fifty Thousand Dollars ($250,000.00); or (b) any default under any material agreement of Borrower or Guarantor that could have a material adverse effect on Borrower's or Guarantor's business, taken as a whole;
and inserting in lieu thereof the following:
8.6 Other Agreements. There is, under any agreement to which Borrower or any Guarantor is a party with a third party or parties (other than the Subordinated Loan Agreement), (a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount individually or in the aggregate in excess of Two Hundred Fifty Thousand Dollars ($250,000.00); or (b) any default under any material agreement of Borrower or Guarantor that could have a material adverse effect on Borrower's or Guarantor's business, taken as a whole; provided, however, that the Event of Default under this Section 8.6 caused by the occurrence of a breach or default under such other agreement shall be cured or waived for purposes of this Agreement upon Bank receiving written notice from the party asserting such breach or default of such cure or waiver of the breach or default under such other agreement, if at the time of such cure or waiver under such other agreement (x) Bank has not declared an Event of Default under this Agreement in writing; (y) any such cure or waiver does not result in an Event of Default under any other provision of this Agreement or any Loan Document; and (z) in connection with any such cure or waiver under such other agreement, the terms of any agreement with such third party are not modified or amended in any manner which could in the good faith business judgment of Bank be materially less advantageous to Borrower or any Guarantor.
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6 | The Loan Agreement shall be amended by deleting the following text appearing as Sections 8.9 thereof: |
8.9 Subordinated Debt. Any document, instrument, or agreement evidencing any Subordinated Debt shall for any reason be revoked or invalidated or otherwise cease to be in full force and effect, any Person shall be in breach thereof or contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Obligations shall for any reason be subordinated or shall not have the priority contemplated by this Agreement;
and inserting in lieu thereof the following:
8.9 Subordinated Debt. Any document, instrument, or agreement evidencing any Subordinated Debt shall for any reason be revoked or invalidated or otherwise cease to be in full force and effect (other than a result of the full payment thereof, to the extent permitted in accordance with any intercreditor agreement, subordination agreement or other similar agreement relating thereto), any Borrower or Guarantor shall be in breach thereof or contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder (other than a result of the full payment thereof, to the extent permitted in accordance with any intercreditor agreement, subordination agreement or other similar agreement relating thereto), or the Obligations shall for any reason be subordinated or shall not have the priority contemplated by this Agreement; provided, however, that the Event of Default under this Section 8.9 caused by the occurrence of such breach, revocation or similar event specified above, under the Silver Lake Subordinated Indebtedness shall be cured or waived for purposes of this Agreement upon Bank receiving written notice from Silver Lake asserting of such cure or waiver of such breach, revocation or similar event specified above under the Silver Lake Subordinated Indebtedness, if at the time of such cure of such other agreement (x) Bank has not declared an Event of Default under this Agreement in writing; (y) any such cure does not result in an Event of Default under any other provision of this Agreement or any Loan Document; and (z) in connection with any such cure under such other agreement, the terms of any agreement with such third party are not modified or amended in any manner which could in the good faith business judgment of Bank be materially less advantageous to Borrower or any Guarantor.
7 | The Loan Agreement shall be amended by deleting the following clauses (b) and (v) appearing in the definition of Eligible Accounts in Section 13.1 thereof: |
(b) Accounts that the Account Debtor has not paid within ninety (90) days of invoice date regardless of invoice payment period terms;
(v) Accounts owing from an Account Debtor, whose total obligations to the applicable Loan Party exceed twenty-five percent (25%) of all Accounts (except for Flextronics/Cisco, for which such percentage is thirty-five percent (35% )), for the amounts that exceed that percentage, unless Bank approves in writing;
and inserting in lieu thereof the following:
(b) Accounts that the Account Debtor has not paid within ninety (90) days (one hundred twenty (120) days for Accounts of Duetsche Telekom) of invoice date regardless of invoice payment period terms;
(v) Accounts owing from an Account Debtor, whose total obligations to the applicable Loan Party exceed twenty-five percent (25%) of all Accounts (except for Starent/Cisco, for which such percentage is thirty-five percent (35%)), for the amounts that exceed that percentage, unless Bank approves in writing;
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8 | The Loan Agreement shall be amended by deleting the following clause (f) appearing in the definition of Permitted Indebtedness in Section 13.1 thereof: |
(f) (i) (X) unsecured Indebtedness of any Subsidiary owed to a Loan Party plus (Y) unsecured guarantee obligations of Borrower with respect to leases or commercial contacts of any other Borrower or any Subsidiary entered into in the ordinary course of business, in an aggregate amount for all such Indebtedness permitted pursuant to this clause (i), together with Investments permitted in connection with clause (d) of the definition of Permitted Investments, not to exceed Five Million Five Hundred Thousand Dollars ($5,500,000.00) in the aggregate for any trailing three-month period, for reasonable operating expenses and capital expenditures of such Borrower or Subsidiaries incurred in the ordinary course of business, in amounts and in a manner consistent with past practices, (ii) Indebtedness of any Borrower owing to any other Borrower and (iii) Indebtedness of any Subsidiary (which is not a Loan Party) to any other Subsidiary (which is not a Loan Party);
and inserting in lieu thereof the following:
(f) (i) (X) unsecured Indebtedness of any Subsidiary owed to a Loan Party plus (Y) unsecured guarantee obligations of Borrower with respect to leases or commercial contacts of any other Borrower or any Subsidiary entered into in the ordinary course of business, in an aggregate amount for all such Indebtedness permitted pursuant to this clause (i), together with Investments permitted in connection with clause (d) of the definition of Permitted Investments, not to exceed Eight Million Dollars ($8,000,000.00) in the aggregate for any trailing three-month period, for reasonable operating expenses and capital expenditures of such Borrower or Subsidiaries incurred in the ordinary course of business, in amounts and in a manner consistent with past practices, (ii) Indebtedness of any Borrower owing to any other Borrower and (iii) Indebtedness of any Subsidiary (which is not a Loan Party) to any other Subsidiary (which is not a Loan Party);
9 | The Loan Agreement shall be amended by deleting the following clause (d) appearing in the definition of Permitted Investments in Section 13.1 thereof: |
(d) (i) Investments by a Loan Party in any Subsidiary, in an aggregate amount for all such Investments, together with Indebtedness permitted in connection with clause (f) of the definition of Permitted Indebtedness, not to exceed Five Million Five Hundred Thousand Dollars ($5,500,000.00) in the aggregate for each trailing three-month period, for reasonable operating expenses and capital expenditures of such Borrower or Subsidiaries incurred in the ordinary course of business, in amounts and in a manner consistent with past practices, (ii) Investments by any Borrower in any other Borrower and (iii) Investments by any Subsidiary in any Loan Party;
and inserting in lieu thereof the following:
(d) (i) Investments by a Loan Party in any Subsidiary, in an aggregate amount for all such Investments, together with Indebtedness permitted in connection with clause (f) of the definition of Permitted Indebtedness, not to exceed Eight Million Thousand Dollars ($8,000,000.00) in the aggregate for each trailing three-month period, for reasonable operating expenses and capital expenditures of such Borrower or Subsidiaries incurred in the ordinary course of business, in amounts and in a manner consistent with past practices, (ii) Investments by any Borrower in any other Borrower and (iii) Investments by any Subsidiary in any Loan Party;
10 | The Loan Agreement shall be amended by deleting the following clause (h) appearing in the definition of Permitted Liens in Section 13.1 thereof: |
(h) Liens granted by Borrower to Bank under the Subordinated Loan Agreement and related documents and agreements;
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and inserting in lieu thereof the following:
(h) (i) Liens granted by Borrower to Bank under the Subordinated Loan Agreement and related documents and agreements and (ii) Liens granted by Borrower to Silver Lake Waterman Fund, L.P., as agent, pursuant to the documents providing for and securing the Silver Lake Subordinated Indebtedness;
11 | The Loan Agreement shall be amended by deleting the following definition appearing in Section 13.1 thereof: |
Borrowing Base is the sum of (a) eighty percent (80%) of Eligible Accounts plus (b) without duplication, seventy percent (70%) of Eligible Foreign Accounts plus (c) without duplication, seventy percent (70%) of Eligible Domestic-Billed Foreign Accounts; provided that, such amount described in this clause (c) shall not exceed Five Million Dollars ($5,000,000.00) in the aggregate plus (d) without duplication, fifty percent (50%) of Borrower's Eligible Unbilled Accounts; provided that, such amount described in this clause (d) shall not exceed Two Million Five Hundred Thousand Dollars ($2,500,000.00) in the aggregate, in each case as determined by Bank from Borrower's most recent Borrowing Base Certificate, provided, however, that Bank may decrease the foregoing amounts/percentages in its good faith business judgment based on events, conditions, contingencies, or risks which, as determined by Bank, may adversely affect the Collateral.
Eligible Unbilled Accounts are Accounts for which the Account Debtor has not been invoiced or where goods or services have not yet been rendered to the Account Debtor but are otherwise Eligible Accounts; provided such Accounts are billed and goods and services will have been rendered to the applicable Account Debtor within fifteen (15) days of delivery of the applicable Borrowing Base Certificate and which must thereafter satisfy all of the requirements of Eligible Accounts.
Streamline Period is, on and after the Effective Date, provided no Default or Event of Default has occurred and is continuing, the period (i) beginning on the first (1st) day in which Borrower has, for each consecutive day in the immediately preceding sixty (60) day period, maintained Tangible Net Worth, in an amount at all times of at least (no worse than) negative Three Million Five Hundred Thousand Dollars (-$3,500,000), as determined by Bank, in its sole discretion (the Streamline Balance); and (ii) ending on the earlier to occur of (A) the occurrence of a Default or an Event of Default; and (B) the first day thereafter in which Borrower fails to maintain the Streamline Balance, as determined by Bank, in its sole discretion. Upon the termination of a Streamline Period, Borrower must maintain the Streamline Balance each consecutive day for sixty (60) consecutive days, as determined by Bank, in its sole discretion, prior to entering into a subsequent Streamline Period. Borrower shall give Bank prior-written notice of Borrower's intention to enter into any such Streamline Period.
Subordinated Debt is (i) Indebtedness incurred pursuant to the Subordinated Loan Agreement and (ii) indebtedness incurred by Borrower subordinated to all of Borrower's now or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered into between Bank and the other creditor), on terms acceptable to Bank.
Tangible Net Worth is, on any date, the consolidated total assets of Borrower and its Subsidiaries minus (a) any amounts included in such assets attributable to (i) goodwill, (ii) intangible items including unamortized debt discount and expense, Patents, Trademarks, Copyrights, and research and development expenses except prepaid expenses, (iii) notes, accounts receivable and other obligations owing to Borrower from its officers or other Affiliates and (iv) reserves not already deducted from assets, minus (b) Total Liabilities, minus (c) net foreign exchange currency translation adjustments.
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and inserting in lieu thereof the following:
Borrowing Base is the sum of (a) eighty percent (80%) of Eligible Accounts plus (b) without duplication, seventy percent (70%) of Eligible Foreign Accounts plus (c) without duplication, seventy percent (70%) of Eligible Domestic-Billed Foreign Accounts; provided that, such amount described in this clause (c) shall not exceed Five Million Dollars ($5,000,000.00) in the aggregate plus (d) without duplication, thirty-five percent (35%) of Borrower's Eligible Unbilled Accounts; provided that, such amount described in this clause (d) shall not exceed Two Million Dollars ($2,000,000.00) in the aggregate, in each case as determined by Bank from Borrower's most recent Borrowing Base Certificate, provided, however, that Bank may decrease the foregoing amounts/percentages in its good faith business judgment based on events, conditions, contingencies, or risks which, as determined by Bank, may adversely affect the Collateral.
Eligible Unbilled Accounts are Accounts for which the Account Debtor has not been invoiced or where goods or services have not yet been rendered to the Account Debtor but are otherwise Eligible Accounts (other than clause (u) in the definition of Eligible Accounts); provided such Accounts are billed and goods and services will have been rendered to the applicable Account Debtor within thirty (30) days of month-end and which must thereafter satisfy all of the requirements of Eligible Accounts (other than clause (u) in the definition of Eligible Accounts).
Streamline Period is, on and after the Effective Date, provided no Default or Event of Default has occurred and is continuing, the period (i) beginning on the first (1st) day in which Borrower has, for each consecutive day in the immediately preceding sixty (60) day period, maintained Tangible Net Worth, in an amount at all times of at least (no worse than) negative Three Million Five Hundred Thousand Dollars (-$3,500,000), as determined by Bank, in its sole discretion (the Streamline Balance); and (ii) ending on the earlier to occur of (A) the occurrence of a Default or an Event of Default; and (B) the first day thereafter in which Borrower fails to maintain the Streamline Balance, as determined by Bank, in its sole discretion. Upon the termination of a Streamline Period, Borrower must maintain the Streamline Balance each consecutive day for sixty (60) consecutive days, as determined by Bank, in its sole discretion, prior to entering into a subsequent Streamline Period. Borrower shall give Bank prior-written notice of Borrower's intention to enter into any such Streamline Period. The Streamline Balance shall increase by fifty percent (50%) of the net proceeds from the issuance of equity or Subordinated Debt (excluding the Indebtedness incurred pursuant to the Subordinated Loan Agreement, but including the Silver Lake Subordinated Indebtedness).
Subordinated Debt is (i) Indebtedness incurred pursuant to the Subordinated Loan Agreement, (ii) Silver Lake Subordinated Indebtedness, and (iii) indebtedness incurred by Borrower subordinated to all of Borrower's now or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered into between Bank and the other creditor), on terms acceptable to Bank.
Tangible Net Worth is, on any date, the consolidated total assets of Borrower and its Subsidiaries minus (a) any amounts included in such assets attributable to (i) goodwill, (ii) intangible items including unamortized debt discount and expense, Patents, Trademarks, Copyrights, and research and development expenses except prepaid expenses, (iii) notes, accounts receivable and other obligations owing to Borrower from its officers or other Affiliates and (iv) reserves not already deducted from assets, minus (b) Total Liabilities, minus (c) net foreign exchange currency translation adjustments, plus (d) Subordinated Indebtedness (excluding the Indebtedness incurred pursuant to the Subordinated Loan Agreement, but including the Silver Lake Subordinated Indebtedness).
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12 | The Loan Agreement shall be amended by inserting the following new definitions in Section 13.1 thereof, each in its applicable alphabetical order: |
Second Loan Modification Effective Date is June 4, 2013.
Silver Lake Subordinated Indebtedness is Subordinated Indebtedness in an aggregate principal amount not to exceed Fifteen Million Dollars ($15,000,0000) incurred by Mavenir, Holdings and Mavenir IP, pursuant to the Loan and Security Agreement entered into by Mavenir, Holdings and Mavenir IP, Silver Lake Waterman Fund, L.P., as agent, and the lenders named therein, executed on or after the Second Loan Modification Effective Date, as such Loan and Security Agreement may be amended, modified, renewed or extended in accordance with the terms of the subordination, intercreditor, or other similar agreement entered into between Bank and Silver Lake Waterman Fund, L.P.).
13 | The Loan Agreement shall be amended by deleting Exhibit B attached thereto and inserting Exhibit B attached hereto in lieu thereof. |
4. LIMITED WAIVER. Borrower has disclosed to Bank certain indebtedness owing by one or more of the Borrowers and their Subsidiaries to one or more of the other Borrowers and their Subsidiaries as of the Effective Date. Bank hereby waives any Default and Event of Default arising from the absence of disclosing. such intercompany obligations from the Perfection Certificate and such obligations are hereby incorporated into the Perfection Certificate as if fully set forth therein.
5. CONDITIONS PRECEDENT. As a condition precedent to the effectiveness of this Agreement and the Bank's obligation to make further Credit Extensions under the Loan Agreement, the Bank shall have received the following documents prior to or concurrently with this Agreement, each in form and substance satisfactory to the Bank:
A. | duly executed original signature pages to this Agreement; |
B. | duly executed original signature pages to the Second Loan Modification to Subordinated Loan and Security Agreement; and |
C. | such other documents as Bank may reasonably request. |
6. FEES. Borrower shall pay to Bank a modification fee equal to Fifteen Thousand Dollars ($15,000.00), which fee shall be due on the date hereof and shall be deemed fully earned as of the date hereof. Borrower shall reimburse Bank for all reasonable legal fees and expenses incurred in connection with the Existing Loan Documents and this Agreement.
7. AUTHORIZATION TO FILE. Borrower hereby authorizes Bank to file UCC financing statements without notice to Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in order to further perfect or protect Bank's interest in the Collateral, including a notice that any disposition of the Collateral, by either the Borrower or any other Person, shall be deemed to violate the rights of the Bank under the Code.
8. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.
9. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and reaffirms all terms and conditions (as they may be modified by this Agreement) of all security or other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.
10. NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and Borrower hereby RELEASES Bank from any liability thereunder.
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11. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the existing Obligations, Bank is relying upon Borrower's representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Bank's agreement to modifications to the existing Obligations pursuant to this Agreement in no way shall obligate Bank to make any future modifications to the Obligations. Nothing in this Agreement shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker will be released by virtue of this Agreement.
12. RIGHT OF SET-OFF. In consideration of Bank's agreement to enter into this Agreement, Borrower hereby reaffirms and hereby grants to Bank, a lien, security interest and right of set off as security for all Obligations to Bank, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity under the control of Silicon Valley Bank (including a Bank subsidiary) or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Bank may set off the same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the loan. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
13. JURISDICTION/VENUE. Section 11 of the Loan Agreement is hereby incorporated by reference in its entirety.
14. COUNTERSIGNATURE. This Agreement shall become effective only when it shall have been executed by Borrower and Bank.
[The remainder of this page is intentionally left blank]
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This Agreement is executed as of the date first written above.
MAVENIR SYSTEMS, INC. | ||
By | /s/ Terry Hungle | |
Name: | Terry Hungle | |
Title: | Chief Financial Officer | |
MAVENIR HOLDINGS, INC. | ||
By | /s/ Terry Hungle | |
Name: | Terry Hungle | |
Title: | Chief Financial Officer | |
MAVENIR SYSTEMS IP HOLDINGS, LLC | ||
By | /s/ Terry Hungle | |
Name: | Terry Hungle | |
Title: | Vice President | |
MAVENIR SYSTEMS HOLDINGS LIMITED | ||
By | /s/ Terry Hungle | |
Name: | Terry Hungle | |
Title: | Director | |
MAVENIR SYSTEMS UK LTD. | ||
By | /s/ Terry Hungle | |
Name: | Terry Hungle | |
Title: | Director | |
MAVENIR SYSTEMS PTE LTD. | ||
By | /s/ Terry Hungle | |
Name: | Terry Hungle | |
Title: | Director | |
BANK: | ||
SILICON VALLEY BANK | ||
By | ||
Name: | ||
Title: |
[Signature page to Second Loan Modification Senior Loan and Security Agreement]
This Agreement is executed as of the date first written above.
MAVENIR SYSTEMS, INC. | ||
By | ||
Name: | Terry Hungle | |
Title: | Chief Financial Officer | |
MAVENIR HOLDINGS, INC. | ||
By | ||
Name: | Terry Hungle | |
Title: | Chief Financial Officer | |
MAVENIR SYSTEMS IP HOLDINGS, LLC | ||
By | ||
Name: | Terry Hungle | |
Title: | Vice President | |
MAVENIR SYSTEMS HOLDINGS LIMITED | ||
By | ||
Name: | Terry Hungle | |
Title: | Director | |
MAVENIR SYSTEMS UK LTD. | ||
By | ||
Name: | Terry Hungle | |
Title: | Director | |
MAVENIR SYSTEMS PTE LTD. | ||
By | ||
Name: | Terry Hungle | |
Title: | Director | |
BANK: | ||
SILICON VALLEY BANK | ||
By | /s/ Jennifer Bentley | |
Name: | Jennifer Bentley | |
Title: | VP |
[Signature page to Second Loan Modification Senior Loan and Security Agreement]
EXHIBIT B
COMPLIANCE CERTIFICATE
TO: | SILICON VALLEY BANK | Date: | ||
FROM: | MAVENIR SYSTEMS, INC. |
The undersigned authorized officer of MAVENIR SYSTEMS, INC. (Borrower) certifies that under the terms and conditions of the Senior Loan and Security Agreement between Borrower and Bank (the Agreement), (1) Borrower is in complete compliance for the period ending with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries, if any, relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank. Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.
Please indicate compliance status by circling Yes/No under Complies column.
Reporting Covenant |
Required |
Complies | ||||
Monthly financial statements (including income statement and statement of cash flows) with Compliance Certificate and Deferred Revenue Report | Monthly within 30 days | Yes | No | |||
Annual financial statement (CPA Audited) + CC | FYE within 150 days | Yes | No | |||
10-Q, 10-K and 8-K | Within 5 days after filing with SEC | Yes | No | |||
A/R & A/P Agings | Monthly within 20 days | Yes | No | |||
Transaction Reports | Weekly and with each Credit Extension (Monthly within 30 days under Streamline) | Yes | No | |||
Projections/Operating Budgets | Earlier of (i) 15 days after approval by board of directors or (ii) January 31st of each fiscal year | Yes | No |
The following Intellectual Property was registered after the Effective Date (if no registrations, state None)
Financial Covenant |
Required | Actual | Complies | |||||||||||||
Maintain as indicated: |
||||||||||||||||
Minimum Tangible Net Worth** |
($ | 7,000,000 | ) | $ | Yes | No |
Streamline Reporting |
Applies | |||||||
Tangible Net Worth ³ (3,500,000) *** |
Yes | No | ||||||
Tangible Net Worth < (3,500,000) *** |
Yes | No |
** | Increase by (1) fifty percent (50%) of the net proceeds from the Issuance of equity or Subordinated Debt (excluding Indebtedness incurred pursuant to the Subordinated Loan Agreement and including the Silver Lake Subordinated Indebtedness), and (ii), twenty-five percent (25%) of quarterly Net Income. |
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*** | Increase by fifty percent (50%) of the net proceeds from the issuance of equity or Subordinated Debt (excluding Indebtedness incurred pursuant to the Subordinated Loan Agreement and including the Silver Lake Subordinated Indebtedness). |
The following financial covenant analyses and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate.
The following are the exceptions with respect to the certification above: (If no exceptions exist, state No exceptions to note.)
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MAVENIR SYSTEMS, INC. | BANK USE ONLY | |||||||||
By: | Received by: | |||||||||
Name: | AUTHORIZED SIGNER | |||||||||
Title: | Date: | |||||||||
Verified: | ||||||||||
AUTHORIZED SIGNER | ||||||||||
Date: | ||||||||||
Compliance Status: | Yes No |
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Schedule 1 to Compliance Certificate
Financial Covenants of Borrower
In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern.
Dated:
I. Tangible Net Worth (Section 6.9)
Required: Borrower shall maintain at all times, to be tested as of the last day of each month, on a consolidated basis with respect to Borrower and its Subsidiaries, Tangible Net Worth of at least (no worse than) negative Seven Million Dollars ( -$7 ,000,000), increasing by (i) fifty percent (50%) of the net proceeds from the issuance of equity or Subordinated Debt (excluding Indebtedness incurred pursuant to the Subordinated Loan Agreement and including the Silver Lake Subordinated Indebtedness), and (ii) twenty-five percent (25%) of quarterly Net Income.
Actual:
A. |
Aggregate value of total assets of Borrower and its Subsidiaries | $ | ||||
B. |
Aggregate value of goodwill of Borrower and its Subsidiaries* | $ | ||||
C. |
Aggregate value of intangible assets of Borrower and its Subsidiaries* | $ | ||||
D. |
Aggregate value of any reserves not already deducted from assets* | $ | ||||
E. |
Total Liabilities | $ | ||||
F. |
Net foreign exchange currency translation adjustments | $ | ||||
G. |
Original proceeds of Subordinated Debt (excluding Indebtedness incurred pursuant to the Subordinated Loan Agreement and including the Silver Lake Subordinated Indebtedness) | $ | ||||
H. |
Tangible Net Worth (line A minus line B minus line C minus line D minus line E minus line F plus line G) | $ |
Is line Hat least (no worse than) negative Seven Million Dollars (-$7,000,000) **?
No, not in compliance |
Yes, in compliance |
* | To the extent included in Line A. |
** | Increase by (i) fifty percent (50%) of the net proceeds from the issuance of equity or Subordinated Debt (excluding Indebtedness incurred pursuant to the Subordinated Loan Agreement and including the Silver Lake Subordinated Indebtedness), and (ii), twenty-five percent (25%) of quarterly Net Income. |
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Exhibit 10.27
SUBORDINATED LOAN AND SECURITY AGREEMENT
THIS SUBORDINATED LOAN AND SECURITY AGREEMENT (this Agreement) dated as of October 18, 2012 (the Effective Date) by and among (i) SILICON VALLEY BANK, a California corporation with a loan production office located at 14185 Dallas Parkway, Suite 760, Dallas TX 75254 (Bank), (ii) MAVENIR SYSTEMS, INC., a Delaware corporation (Mavenir) and (iii) MAVENIR HOLDINGS, INC., a Delaware corporation, (Holdings, and together with Mavenir, individually and collectively, jointly and severally, the Borrower) each with offices located at 1651 North Glenville Drive, Suite 216, Richardson, Texas 75081, provides the terms on which Bank shall lend to Borrower and Borrower shall repay Bank. The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed following GAAP. Calculations and determinations must be made following GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13. All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein.
2 LOAN AND TERMS OF PAYMENT
2.1 Promise to Pay. Borrower hereby unconditionally promises to pay Bank the outstanding principal amount of all Credit Extensions and accrued and unpaid interest thereon as and when due in accordance with this Agreement.
2.1.1 Term Loan.
(a) Availability. Subject to the terms and conditions of this Agreement, prior to the expiration of the Draw Period, Borrower may request, and Bank shall thereafter make term loan advances in an aggregate amount of up to the Term Loan Amount (each, a Term Advance and, collectively, the Term Advances). Borrower may only request two (2) Term Advances hereunder and each Term Advance must be in an amount equal to at least One Million Dollars ($1,000,000.00) provided that the final Term Advance may be in an amount less than One Million Dollars ($1,000,000.00) so long as it is in an amount equal to the remaining Term Loan Amount Borrower has available to borrow under this Section 2.1.1. After repayment, no Term Advance (or any portion thereof) may be re-borrowed.
(b) Interest Period. Commencing on the first Payment Date following the Funding Date of the applicable Term Advance (or commencing on such Funding Date if such Funding Date is also a Payment Date), and continuing on each Payment Date thereafter, Borrower shall make monthly payments of interest, in arrears, on the principal amount of each Term Advance at the rate set forth in Section 2.2(a).
(c) Repayment. All outstanding principal and accrued and unpaid interest with respect to each Term Advance, and all other outstanding Obligations with respect to such Term Advance, are due and payable in full on the Term Loan Maturity Date. The Term Loan may be prepaid at any time in full or in part without prepayment premium or penalty.
2.2 Payment of Interest on the Credit Extensions.
(a) Interest Rate. Subject to Section 2.2(b), the principal amount outstanding under the Term Loan shall accrue interest at a fixed per annum rate equal to eleven percent (11.00%), which interest shall be payable monthly on the Payment Date.
(b) Default Rate. Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is five percentage points (5.00%) above the rate that is otherwise applicable thereto (the Default Rate) unless Bank otherwise elects from time to time in its sole discretion to impose a smaller increase. Fees and expenses which are required to be paid by Borrower pursuant to the Loan Documents (including, without limitation, Bank Expenses) but are not paid when due shall bear interest until paid at a rate equal to the highest rate applicable to the Obligations. Payment or acceptance of the increased interest rate provided in this Section 2.2(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Bank.
(c) Computation; 360-Day Year. In computing interest, the date of the making of any Credit Extension shall be included and the date of payment shall be excluded; provided, however, that if any Credit Extension is repaid on the same day on which it is made, such day shall be included in computing interest on such Credit Extension. Interest shall be computed on the basis of a 360-day year for the actual number of days elapsed.
(d) Debit of Accounts. Bank may debit any of Borrowers deposit accounts, including the Designated Deposit Account, for principal and interest payments or any other amounts Borrower owes Bank when due under the Loan Documents. These debits shall not constitute a set-off.
2.3 Fees. Borrower shall pay to Bank:
(a) Commitment Fee. A fully earned, non-refundable commitment fee of One Hundred Thousand Dollars ($100,000.00), payable on the Effective Date (which, for the avoidance of doubt, shall be in addition to any fees payable under the Senior Loan Agreement);
(b) Bank Expenses. All Bank Expenses (including reasonable attorneys fees and expenses for documentation and negotiation of this Agreement, the Senior Loan Agreement and any other Loan Documents) incurred through and after the Effective Date, when due.
2.4 Payments. All payments (including prepayments) to be made by Borrower under any Loan Document shall be made in immediately available funds in Dollars, without setoff or counterclaim, before 12:00 noon Pacific time on the date when due. Payments of principal and/or interest received after 12:00 noon Pacific time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment shall be due the next Business Day, and additional fees or interest, as applicable, shall continue to accrue until paid.
3 CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. Banks obligation to make the initial Credit Extension is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, such documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate, including, without limitation:
(a) delivery of the Senior Loan Agreement and satisfaction of all conditions precedent thereto;
(b) duly executed original signature pages to the Loan Documents;
(c) duly executed original signature pages to the Warrant together with copies of Borrowers equity documents and capitalization table;
(d) Operating Documents for each Borrower and long-form good standing certificates certified by the proper authority for each jurisdiction in which each Borrower is incorporated, organized or is otherwise authorized to do business as a foreign entity (as required by Bank), as of a date no earlier than thirty (30) days prior to the Effective Date;
(e) duly executed original signature pages to the Secretarys Certificate of each Borrower with completed Borrowing Resolutions for each Borrower;
(f) duly executed original signature pages to the Canadian Guaranty, together with Secretarys Certificate and completed Borrowing Resolutions for Canadian Guarantor;
(g) duly executed signature to a payoff letter from Comerica Bank, N.A. (Prior Lender), identifying the amount required to be paid to Prior Lender to fully satisfy outstanding obligations owed by the Borrower to Prior Lender as of the date of the initial Credit Extension;
(h) evidence that (i) the Liens securing Indebtedness owed by the Borrower to Prior Lender will be terminated and (ii) the documents and/or filings evidencing the perfection of such Liens, including without limitation any financing statements and/or control agreements, have or will, concurrently with or promptly following the initial Credit Extension, be terminated;
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(i) certified copies, dated as of a recent date, of financing statement searches, as Bank shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;
(j) the Perfection Certificate of each Borrower and Guarantor, together with the duly executed original signature pages thereto;
(k) a bailees/warehousemans waiver executed by each bailee, if any, of Borrower as required by Bank, in favor of Bank;
(l) a legal opinion of Borrowers counsel, in form and substance acceptable to Bank, in its reasonable discretion, dated as of the Effective Date, together with the duly executed original signature pages thereto;
(m) legal opinion of Borrowers Canadian counsel in respect of Canadian Guarantor, in form and substance acceptable to Bank, dated as of the Effective Date, together with the duly executed signatures thereto;
(n) evidence satisfactory to Bank that the insurance policies required by Section 6.7 hereof are in full force and effect, together with appropriate evidence showing lender loss payable and/or additional insured clauses and cancellation notice to Bank (or endorsements reflecting the same) in favor of Bank; and
(o) payment of the fees and Bank Expenses then due as specified in Section 2.4 hereof.
3.2 Conditions Precedent to all Credit Extensions. Banks obligation to make each Credit Extension, including the initial Credit Extension, is subject to the following conditions precedent:
(a) timely receipt of an executed Payment Advance Form;
(b) the representations and warranties in Section 5 of this Agreement shall be true, accurate, and complete in all material respects on the date of the Payment/Advance Form and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Default or Event of Default shall have occurred and be continuing or result from the Credit Extension. Each Credit Extension is Borrowers representation and warranty on that date that the representations and warranties in Section 5 of this Agreement remain true, accurate, and complete in all material respects; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; and
(c) in Banks sole discretion, there has not been any material impairment in the general affairs, management, results of operation, financial condition or the prospect of repayment of the Obligations, or any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Bank.
3.3 Covenant to Deliver. Borrower agrees to deliver to Bank each item required to be delivered to Bank under this Agreement as a condition precedent to any Credit Extension. Borrower expressly agrees that a Credit Extension made prior to the receipt by Bank of any such item shall not constitute a waiver by Bank of Borrowers obligation to deliver such item, and the making of any Credit Extension in the absence of a required item shall be in Banks sole discretion.
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3.4 Procedures for Borrowing. Subject to the prior satisfaction of all other applicable conditions to the making of a Term Advance, each as set forth in this Agreement, to obtain a Term Advance, Borrower shall notify Bank (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 12:00 noon Pacific time on the Funding Date of the Term Advance. Together with any such electronic or facsimile notification, Borrower shall deliver to Bank by electronic mail or facsimile a completed a Payment/Advance Form executed by a Responsible Officer or his or her designee. Bank may rely on any telephone notice given by a person whom Bank believes is a Responsible Officer or designee. Bank shall credit such Term Advance to the Designated Deposit Account. Bank may make a Term Advance under this Agreement based on instructions from a Responsible Officer or his or her designee or without instructions if a Term Advance is necessary to meet Obligations which have become due.
4 CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof.
Borrower acknowledges that it previously has entered, and/or may in the future enter, into Bank Services Agreements with Bank. Regardless of the terms of any Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed to be Obligations hereunder and that it is the intent of Borrower and Bank to have all such Obligations secured by the first priority perfected security interest in the Collateral granted herein (subject only to Permitted Liens that expressly or by operation of law have superior priority to Banks Lien in this Agreement).
If this Agreement is terminated, Banks Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are satisfied in full, and at such time, Bank shall, at Borrowers sole cost and expense, terminate its security interest in the Collateral and all rights therein shall revert to Borrower. In the event (a) all Obligations (other than inchoate indemnity obligations), except for Bank Services, are satisfied in full, and (b) this Agreement is terminated, Bank shall terminate the security interest granted herein upon Borrower providing cash collateral acceptable to Bank in its good faith business judgment for Bank Services, if any. In the event such Bank Services consist of outstanding letters of credit, Borrower shall provide to Bank cash collateral in an amount equal to 105% (110% for letters of credit denominated in a currency other than Dollars), of the Dollar Equivalent of the face amount of all such letters of credit plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment), to secure all of the Obligations relating to such letters of credit.
4.2 Priority of Security Interest. Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral (subject only to Permitted Liens that expressly or by operation of law have superior priority to Banks Lien under this Agreement). If Borrower shall acquire a commercial tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank.
Notwithstanding the foregoing, Banks security interest in the assets of Borrower securing the Obligations of Borrower to Bank under this Agreement shall be junior and subordinate to Banks security interest in the assets of Borrower securing the Obligations of Borrower under the Senior Loan Agreement.
4.3 Authorization to File Financing Statements. Borrower hereby authorizes Bank to file financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Banks interest or rights hereunder, including a notice that any disposition of the Collateral, by either Borrower or any other Person, may be deemed to violate the rights of Bank under the Code. Such financing statements may indicate the Collateral as all assets of the Debtor or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Banks discretion.
4.4 Subsequent Security. At any time following the Effective Date, the Bank may, in its sole discretion, require any Subsidiary to grant the Bank such further security interests over their present and future undertaking and assets as the Bank may require, including for the avoidance of doubt, a fixed charge over all book and other debts and monetary claims due or owing or incurred to any Subsidiary, including all accounts with banks and the moneys deposited therein and interest accruing and arrears and claims arising in respect of accounts, together with the full benefit of all guarantees and securities therefore and indemnities in respect thereof and all liens, reservations of title, rights of tracing and other rights enabling any Subsidiary to enforce any such debts or claims.
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5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization; Authorization; Power and Authority. Borrower and each of its Subsidiaries are duly existing and in good standing, as a Registered Organization in its jurisdiction of formation and each is qualified and licensed to do business and each is in good standing in any jurisdiction in which the conduct of each of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to have a material adverse effect on Borrowers business, taken as a whole. In connection with this Agreement, Borrower has delivered to Bank completed certificates signed by each Borrower and Guarantor, respectively, entitled Perfection Certificate. Borrower represents and warrants to Bank that (a) Borrowers exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; (b) Borrower is an organization of the type and is organized in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth Borrowers organizational identification number or accurately states that Borrower has none; (d) the Perfection Certificate accurately sets forth Borrowers place of business, or, if more than one, its chief executive office as well as Borrowers mailing address (if different than its chief executive office); (e) except as set forth in the Perfection Certificate, Borrower (and each of its predecessors) has not, in the five (5) years immediately preceding the Effective Date, changed its jurisdiction of formation, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificate pertaining to Borrower and each of its Subsidiaries is accurate and complete in all material respects (it being understood and agreed that Borrower may from time to time update certain information in the Perfection Certificate after the Effective Date to the extent the event of change reflected in such updated Perfection Certificate is not prohibited by one or more specific provisions in this Agreement, and upon written notification by Borrower to Bank of such event or change, the Perfection Certificate shall be deemed to have been updated to include such information). If Borrower is not now a Registered Organization but later becomes one, Borrower shall promptly notify Bank of such occurrence and provide Bank with Borrowers organizational identification number.
The execution, delivery and performance by Borrower of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrowers organizational documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law, (iii) contravene, conflict or violate any applicable material order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or any of its Subsidiaries or any of their property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect or (v) constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which it is a party or by which it is bound in which the default could reasonably be expected to have a material adverse effect on Borrowers business, taken as a whole.
5.2 Collateral. Borrower has good title to, has rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien hereunder, free and clear of any and all Liens except Permitted Liens. Borrower has no deposit accounts other than the deposit accounts with Bank, the deposit accounts, if any described in the Perfection Certificate delivered to Bank in connection herewith, or of which Borrower has given Bank notice and taken such actions as are necessary to give Bank a perfected security interest therein. The Accounts are bona fide, existing obligations of the Account Debtors.
The Collateral is not in the possession of any third party bailee (such as a warehouse) except as otherwise provided in the Perfection Certificate. None of the components of the Collateral shall be maintained at locations other than as provided in the Perfection Certificate or as permitted pursuant to Section 7.2. In the event that Borrower, after the date hereof, intends to store or otherwise deliver any portion of the Collateral with an aggregate value in excess of $50,000 to a bailee, and such bailee and Bank are not already parties to a bailee agreement covering both the Collateral and the location where the Collateral will be stored, then Borrower will first receive the written consent of Bank and such bailee must execute and deliver a bailee agreement in form and substance satisfactory to Bank in its sole discretion. The provisions of this paragraph shall not apply to Demonstration Systems delivered to Borrowers customers or prospective customers in the ordinary course of business.
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All Inventory is in all material respects of good and marketable quality, free from material defects.
Borrower is the sole owner of the Intellectual Property which it owns or purports to own except for (a) non-exclusive licenses granted to its customers in the ordinary course of business, (b) over-the-counter software that is commercially available to the public, and (c) material Intellectual Property licensed to Borrower and noted on the Perfection Certificate. Each Patent which it owns or purports to own and which is material to Borrowers business, taken as a whole, is valid and enforceable, and no part of the Intellectual Property which Borrower owns or purports to own and which is material to Borrowers business, taken as a whole, has been judged invalid or unenforceable, in whole or in part. To the best of Borrowers knowledge, no claim has been made that any part of the Intellectual Property violates the rights of any third party except to the extent such claim would not have a material adverse effect on Borrowers business, taken as a whole.
Except as noted on the Perfection Certificate, Borrower is not a party to, nor is it bound by, any Restricted License.
5.3 Litigation. Except for those actions or proceedings disclosed to Bank in writing, there are no actions or proceedings pending or, to the knowledge of the Responsible Officers, threatened in writing by or against Borrower or any of its Subsidiaries involving more than, individually or in the aggregate, Two Hundred Fifty Thousand Dollars ($250,000.00).
5.4 Financial Condition. All consolidated financial statements for Borrower and any of its Subsidiaries delivered to Bank fairly present in all material respects Borrowers consolidated financial condition and Borrowers consolidated results of operations. There has not been any material deterioration in Borrowers consolidated financial condition since the date of the most recent financial statements submitted to Bank.
5.5 Solvency. The fair salable value of Borrowers assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature.
5.6 Regulatory Compliance. Borrower is not an investment company or a company controlled by an investment company under the Investment Company Act of 1940, as amended. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a holding company or an affiliate of a holding company or a subsidiary company of a holding company as each term is defined and used in the Public Utility Holding Company Act of 2005. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to have a material adverse effect on Borrowers business, taken as a whole. None of Borrowers or any of its Subsidiaries properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrowers knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted.
5.7 Subsidiaries; Investments. Borrower does not own any stock, partnership interest or other equity securities except for Permitted Investments.
5.8 Tax Returns and Payments; Pension Contributions. Borrower has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower. Borrower may defer payment of any contested taxes, provided that Borrower (a) in good faith contests its obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Bank in writing of the commencement of, and any material development in, the proceedings, (c) posts bonds or takes any other steps required to prevent the Governmental Authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a Permitted Lien. Borrower is unaware of any claims or adjustments proposed for any of Borrowers prior tax years which could result in additional taxes becoming due and payable by Borrower. Borrower has paid all amounts necessary to fund all
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present pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not withdrawn from participation in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
5.9 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions as working capital and to fund its general business requirements and not for personal, family, household or agricultural purposes.
5.10 Full Disclosure. No written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to Bank, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).
5.11 Definition of Knowledge. For purposes of the Loan Documents, whenever a representation or warranty is made to Borrowers knowledge or awareness, to the best of Borrowers knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of the Responsible Officers.
6 AFFIRMATIVE COVENANTS
Borrower shall do all of the following:
6.1 Government Compliance. (a) Maintain its and all its Subsidiaries legal existence and good standing in their respective jurisdictions of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect on Borrowers business or operations, taken as a whole. Borrower shall comply, and have each Subsidiary comply, with all laws, ordinances and regulations to which it is subject, the noncompliance with which could have a material adverse effect on Borrowers business, taken as a whole.
(b) Obtain all of the Governmental Approvals necessary for the performance by Borrower of its obligations under the Loan Documents to which it is a party and the grant of a security interest to Bank in all of its property. Borrower, upon Banks request, shall promptly provide copies of any such obtained Governmental Approvals to Bank.
6.2 Financial Statements, Reports, Certificates.
(a) Borrower shall provide Bank with the following:
(i) as soon as available, and in any event within thirty (30) days after the end of each month, monthly unaudited financial statements including balance sheet, income statement and statement of cash flows;
(iv) within thirty (30) days after the end of each month a monthly Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such month, Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement (if any) and such other information as Bank shall reasonably request;
(v) no later than the earlier to occur of (i) fifteen (15) days following approval by Borrowers board of directors and (ii) January 31st of each fiscal year, (A) annual operating budgets (including income statements, balance sheets and cash flow statements, by month) for the upcoming fiscal year of Borrower, and (B) annual financial projections for the following fiscal year (on a quarterly basis) as approved by Borrowers board of directors, together with any related business forecasts used in the preparation of such annual financial projections;
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(vi) as soon as available, and in any event within one hundred fifty (150) days following the end of Borrowers fiscal year, annual audited financial statements certified by, and with an unqualified opinion of, independent certified public accountants acceptable to Bank;
(vii) within five (5) days of delivery, copies of all statements, reports and notices made available to Borrowers security holders or to any holders of Subordinated Debt;
(viii) a prompt report of any legal actions pending or threatened in writing against Borrower or any of its Subsidiaries that could result in damages or costs to Borrower or any of its Subsidiaries of, individually or in the aggregate, Two Hundred Fifty Thousand Dollars ($250,000.00) or more;
(b) In the event that Borrower is or becomes subject to the reporting requirements under the Securities Exchange Act of 1934, as amended, within five (5) days after filing, all reports on Form 10-K, 10-Q and 8-K filed with the SEC or a link thereto on Borrowers or another website on the Internet.
(c) Borrower shall provide Bank with prompt written notice of (i) any material change in the composition of the Intellectual Property, (ii) the registration of any Copyright (including any subsequent ownership right of Borrower in or to any Copyright), Patent or Trademark not previously disclosed to Bank, or (iii) Borrowers knowledge of an event that materially adversely affects the value of the Intellectual Property.
6.3 Taxes; Pensions. Timely file, and require each of its Subsidiaries to timely file, all required tax returns and reports and timely pay, and require each of its Subsidiaries to timely pay, all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower and each of its Subsidiaries, except for deferred payment of any taxes contested pursuant to the terms of Section 5.9 hereof, and shall deliver to Bank, on demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms.
6.4 Insurance. Keep its business and the Collateral insured for risks and in amounts standard for companies in Borrowers industry and location and as Bank may reasonably request. Insurance policies shall be in a form, with companies, and in amounts that are satisfactory to Bank, in its reasonable discretion. Bank hereby confirms that Borrowers insurance in effect on the Effective Date is acceptable to Bank as of the Effective Date. All property policies shall have a lenders loss payable endorsement showing Bank as a lender loss payee and waive subrogation against Bank. All liability policies of Borrower shall show, or have endorsements showing, Bank as an additional insured. All policies (or their respective endorsements) shall provide that the insurer shall give Bank at least twenty (20) days notice before canceling, amending, or declining to renew its policy. At Banks request, Borrower shall deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any policy shall, at Banks option, be payable to Bank on account of the Obligations. Notwithstanding the foregoing, (a) so long as no Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy up to Two Hundred Fifty Thousand Dollars ($250,000.00) with respect to any loss, but not exceeding Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate for all losses under all casualty policies in any one fiscal year, toward the replacement or repair of destroyed or damaged property; provided, that any such replaced or repaired property (i) shall be of materially equal or like value as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which Bank has been granted a first priority security interest, and (b) after the occurrence and during the continuance of an Event of Default, all proceeds payable under such casualty policy shall, at the option of Bank, be payable to Bank on account of the Obligations. If Borrower fails to obtain insurance as required under this Section 6.4 or to pay any amount or furnish any required proof of payment to third persons and Bank, Bank may make all or part of such payment or obtain such insurance policies required in this Section 6.4, and take any action under the policies Bank deems prudent.
6.5 Operating Accounts.
(a) Maintain its (i) depository accounts and operating accounts and (ii) securities accounts (which such accounts shall represent at least eighty-five percent (85%) of the dollar value of Borrowers securities accounts at all financial institutions worldwide), each with Bank and Banks affiliates with all excess funds maintained at or invested through Bank or an affiliate of Bank, excluding however, cash collateral held at other financial institutions used to secure letters of credit or cash held as lease deposits, in each case as described in the Perfection Certificate.
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(b) Provide Bank five (5) days prior-written notice before establishing any Collateral Account at or with any bank or financial institution other than Bank or Banks Affiliates. For each Collateral Account that Borrower at any time maintains (excluding however, cash collateral held at other financial institutions used to secure letters of credit or cash held as lease deposits, in each case as described in the Perfection Certificate), Borrower shall cause the applicable bank or financial institution (other than Bank) at or with which any Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Banks Lien in such Collateral Account in accordance with the terms hereunder which Control Agreement may not be terminated without the prior written consent of Bank. The provisions of the previous sentence shall not apply to (i) deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrowers employees and identified to Bank by Borrower as such and (ii) Collateral Accounts existing on the Effective Date but solely for a period of sixty (60) days following the Effective Date.
6.6 Protection and Registration of Intellectual Property Rights.
(a) (i) Protect, defend and maintain the validity and enforceability of its Intellectual Property; (ii) promptly advise Bank in writing of material infringements of its Intellectual Property; and (iii) not allow any Intellectual Property material to Borrowers business, taken as a whole, to be abandoned, forfeited or dedicated to the public without Banks written consent.
(b) If Borrower (i) obtains any Patent, registered Trademark, registered Copyright, registered mask work, or any pending application for any of the foregoing, whether as owner, licensee or otherwise, or (ii) applies for any Patent or the registration of any Trademark, then Borrower shall immediately provide written notice thereof to Bank and shall execute such intellectual property security agreements and other documents and take such other actions as Bank shall request in its good faith business judgment to perfect and maintain a first priority perfected security interest in favor of Bank in such property (subject only to those Liens granted to Bank pursuant to the Senior Loan Agreement). If Borrower decides to register any Copyrights or mask works in the United States Copyright Office, Borrower shall: (x) provide Bank with at least fifteen (15) days prior written notice of Borrowers intent to register such Copyrights or mask works together with a copy of the application it intends to file with the United States Copyright Office (excluding exhibits thereto); (y) execute an intellectual property security agreement and such other documents and take such other actions as Bank may request in its good faith business judgment to perfect and maintain a first priority perfected security interest (subject only to those Liens granted to Bank pursuant to the Senior Loan Agreement) in favor of Bank in the Copyrights or mask works intended to be registered with the United States Copyright Office; and (z) record such intellectual property security agreement with the United States Copyright Office contemporaneously with filing the Copyright or mask work application(s) with the United States Copyright Office. Borrower shall promptly provide to Bank copies of all applications that it files for Patents or for the registration of Trademarks, Copyrights or mask works, together with evidence of the recording of the intellectual property security agreement necessary for Bank to perfect and maintain a first priority security interest (subject only to those Liens granted to Bank pursuant to the Senior Loan Agreement) in such property.
(c) Provide written notice to Bank within ten (10) days of entering or becoming bound by any Restricted License (other than over-the-counter software that is commercially available to the public). Borrower shall take such steps as Bank reasonably requests to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for (i) any Restricted License to be deemed Collateral and for Bank to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such Restricted License, whether now existing or entered into in the future, and (ii) Bank to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Banks rights and remedies under this Agreement and the other Loan Documents.
6.7 Litigation Cooperation. From the date hereof and continuing through the termination of this Agreement, make available to Bank, without expense to Bank, Borrower and its officers, employees and agents and Borrowers Books, to the extent that Bank may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or against Bank with respect to any Collateral or relating to Borrower.
6.8 Creation/Acquisition of Subsidiaries. Notwithstanding and without limiting the negative covenant contained in Section 7.3 hereof, in the event Borrower or any Subsidiary creates or acquires any Subsidiary, Borrower and such Subsidiary shall promptly notify Bank of the creation or acquisition of such new Subsidiary and, at Banks request, in its sole discretion, take all such action as may be reasonably required by Bank
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to cause each such Subsidiary to, in Banks sole discretion, become a co-Borrower or Guarantor under the Loan Documents and grant a continuing pledge and security interest in and to the assets of such Subsidiary (substantially as defined as Collateral herein and as described on Exhibit A hereto); and Borrower shall grant and pledge to Bank a perfected security interest in the stock, units or other evidence of ownership of each Subsidiary.
6.9 Further Assurances. Execute any further instruments and take further action as Bank reasonably requests to perfect or continue Banks Lien in the Collateral or to effect the purposes of this Agreement. Borrower shall deliver to Bank, within five (5) days after the same are sent or received, copies of all correspondence, reports, documents and other filings with any Governmental Authority regarding compliance with or maintenance of Governmental Approvals or Requirements of Law or that could reasonably be expected to have a material effect on any of the Governmental Approvals or otherwise on the operations of Borrower or any of its Subsidiaries.
6.10 Post-closing Obligations.
(a) Within ninety (90) days following the Effective Date (or such later date as Bank shall determine in its sole discretion), Borrower take all such action as may be reasonably required by Bank to cause each of MAVENIR SYSTEMS HOLDINGS LIMITED (U.K. Holdings), MAVENIR SYSTEMS UK LIMITED (Mavenir U.K.) and MAVENIR SYSTEMS PTE LTD. (Mavenir Singapore) to become a co-Borrower under the Loan Documents and grant a continuing pledge and security interest in and to the assets of each such entity (substantially as described on Exhibit A hereto), including, without limitation, delivery of the following, in each case in form and substance acceptable to Bank, in its sole discretion:
(i) duly executed original signature pages to the applicable joinder agreement;
(ii) duly executed original signature pages to mortgage debentures granted by each of Mavenir U.K. and U.K. Holdings in favor of Bank;
(iii) duly executed original signature pages to (A) a first charge over the entire issued share capital of U.K. Holdings granted by U.S. Holdings as the shareholder of U.K. Holdings to Bank and (B) a first charge over the entire issued share capital Mavenir U.K. granted by U.K. Holdings as the shareholder of Mavenir U.K. to Bank dated as of the Effective Date;
(iv) original share certificates representing the shares in each of Mavenir U.K. and U.K. Holdings charged in favor of Bank pursuant to the terms of the charges referenced in item (iii) above, together with duly executed blank stock transfer forms in respect of such shares;
(v) duly executed original signature pages to a debenture by Mavenir Singapore in favor of Bank;
(vi) evidence of the establishment of blocked account(s) (as appropriate) established with Royal Bank of Scotland plc or such other designated account(s) with such bank(s) as Bank may stipulate or reasonably approve from time to time, or to wire any other transfer payments to a cash collateral account that Bank controls;
(vii) duly executed original certificate of the Secretary or a Director of each of U.K. Holdings and Mavenir U.K. certifying the memorandum and articles of association, register of charges, specimen signatures, board minutes authorizing the execution and delivery of any Loan Documents to which it is a party, and (if required) written resolutions of the sole shareholder of each U.K. Holdings and Mavenir U.K. amending its articles of association;
(viii) duly executed original certificate of the Secretary or a Director of Mavenir Singapore certifying the certificate of incorporation, memorandum and articles of association, register of members, specimen signatures and directors resolutions authorizing the execution and delivery of any Loan Documents to which it is a party, and shareholders resolutions of the Mavenir Singapore (and if required, amending its constitution documents);
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(ix) duly executed original signature to a payoff letter from The Hong Kong and Shanghai Banking Corporation Limited, as necessary, evidencing repayment in full of all obligations owed by the Mavenir Singapore to such entity;
(x) evidence that, (i) the Liens securing Indebtedness owed by the Mavenir Singapore to The Hong Kong and Shanghai Banking Corporation Limited (including, without limitation, the Security over Deposits with the Bank dated 30 July 2003 granted by the Mavenir Singapore to such entity) will be terminated and (ii) the documents and/or filings evidencing the perfection of such Liens, including without limitation any financing statements and/or control agreements have been terminated, in each case, as necessary;
(xi) certified copies, dated as of a recent date, of financing statement searches, as Bank shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been terminated or released;
(xii) an updated Perfection Certificate of each Borrower and Guarantor, together with the duly executed original signature pages thereto;
(xiii) a legal opinion of Banks UK counsel (authority/enforceability) in respect of each of Mavenir U.K. and U.K. Holdings, in form and substance acceptable to Bank, together with the duly executed signatures thereto; and
(xiv) a legal opinion of Borrowers Singapore counsel in respect of Mavenir Singapore, in form and substance acceptable to Bank, dated as of the Effective Date, together with the duly executed signatures thereto.
(b) Within fifteen (15) days following the Effective Date (or such later date as Bank shall determine in its sole discretion), Borrower shall deliver to Bank evidence of recordation of releases of any security agreement or other filings recorded with the U.S. Patent and Trademark Office with respect to the security granted to Prior Lender.
(c) Completion of the Initial Audit with results satisfactory to Bank in its sole and absolute discretion within thirty (30) days following the Effective Date (provided that, completion of such Initial Audit shall not be condition precedent to any Credit Extension under the Non-formula Revolving Line or the Bank Services Facility.
(d) Within thirty (30) days following the Effective Date (or such later date as Bank shall determine in its sole discretion), Borrower shall cause Mavenir Systems IP Holdings, LLC (Mavenir IP), a Delaware corporation and a direct subsidiary of Mavenir, to join the Loan Documents as a Borrower and granting to Bank a continuing, first-priority security interest in and to all assets of Mavenir IP.
(e) Within sixty (60) days following the Effective Date (or such later date as Bank shall determine in its sole discretion), Borrower shall deliver a landlords consent in favor of Bank for Borrowers leased location at 1700 International Parkway, Suite 200, Richardson, Texas 75081 by the respective landlord thereof, together with the duly executed original signature pages thereto.
(f) Within sixty (60) days following the Effective Date (or such later date as Bank shall determine in its sole discretion), Borrower shall deliver to Bank duly executed original signature pages to the Control Agreements for Collateral Accounts existing on the Effective Date, as required pursuant to Section 6.8(b).
(g) Within ninety (90) days following the Effective Date (or such later date as Bank shall determine in its sole discretion), Borrower shall deliver to Bank duly executed original signature pages to the Australian Guaranty, together with Secretarys Certificate and completed Borrowing Resolutions for Australian Guarantor.
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7 NEGATIVE COVENANTS
Borrower shall not do any of the following without Banks prior written consent:
7.1 Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, Transfer), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of Equipment or other property which is worn out, obsolete, being replaced by Equipment or property of reasonably equivalent or better value or usefulness, or no longer necessary for the business of Borrower or such Subsidiary; (c) in connection with Permitted Liens and Permitted Investments, (d) of non-exclusive licenses for the use of the property of Borrower or any of its Subsidiaries in the ordinary course of business and consistent with past practice; (e) of Demonstration Systems to customers or prospective customers in the ordinary course of business and consistent with past practice; (f) of property from one Borrower to another Borrower; and (g) otherwise expressly permitted pursuant to this Agreement.
7.2 Changes in Business, Management, Ownership, or Business Locations. (a) Engage in or permit any of its Subsidiaries, if any, to engage in any material line of business other than those lines of business currently engaged in by Borrower and its Subsidiaries, or business reasonably related, complimentary or incidental thereto; (b) liquidate or dissolve; or (c) (i) have a change in the Chief Executive Officer or Chief Financial Officer of Mavenir and replacements satisfactory to Mavenirs board of directors are not made within sixty (60) days after their departure from Mavenir; or (ii) enter into any transaction or series of related transactions in which the stockholders of such Borrower who were not stockholders immediately prior to the first such transaction own more than 49.00% of the voting stock of such Borrower immediately after giving effect to such transaction or related series of such transactions (other than by the sale of Borrowers equity securities in a public offering or to venture capital investors so long as Borrower identifies to Bank the venture capital investors prior to the closing of the transaction and provides to Bank a description of the material terms of the transaction).
Borrower shall not, without at least thirty (30) days prior written notice to Bank: (1) add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than Fifty Thousand Dollars ($50,000.00) in Borrowers assets or property) or deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Fifty Thousand Dollars ($50,000.00) to a bailee at a location other than to a bailee and at a location already disclosed in the Perfection Certificate, (2) change its jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal name, or (5) change any organizational number (if any) assigned by its jurisdiction of organization. If Borrower intends to deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Fifty Thousand Dollars ($50,000.00) to a bailee, and Bank and such bailee are not already parties to a bailee agreement governing both the Collateral and the location to which Borrower intends to deliver the Collateral, then Borrower will first receive the written consent of Bank, and such bailee shall execute and deliver a bailee agreement in form and substance satisfactory to Bank in its sole discretion.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person. A Subsidiary may merge or consolidate into another Subsidiary or into Borrower.
7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of the Collateral, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, permit any Collateral not to be subject to the first priority security interest granted herein, or enter into any agreement, document, instrument or other arrangement (except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrowers or any Subsidiarys Intellectual Property, except as is otherwise permitted in Section 7.1 hereof and the definition of Permitted Liens herein.
7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms of Section 6.5(b) hereof.
7.7 Distributions; Investments. (a) Pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock provided that (i) Borrower may convert any of its convertible securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange thereof, (ii) Borrower may pay dividends solely in common stock; and (iii) Borrower may repurchase the stock of former
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directors, employees or consultants pursuant to stock repurchase agreements or similar agreements so long as an Event of Default does not exist at the time of such repurchase and would not exist after giving effect to such repurchase, provided such repurchase does not exceed in the aggregate of One Hundred Thousand Dollars ($100,000.00) per fiscal year; or (b) directly or indirectly make any Investment (including, without limitation, any additional Investment in any Subsidiary) other than Permitted Investments, or permit any of its Subsidiaries to do so.
7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower, except for transactions that are in the ordinary course of Borrowers business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arms length transaction with a non-affiliated Person.
7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof or adversely affect the subordination thereof to Obligations owed to Bank. Notwithstanding the foregoing, so long as no Event of Default has occurred and is continuing or would result from such payment, Bank consents to payments made in respect of Indebtedness described under clause (f) of the definition of Permitted Indebtedness.
7.10 Compliance. Become an investment company or a company controlled by an investment company, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or non-exempt Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrowers business, taken as a whole, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
8 EVENTS OF DEFAULT
Any one of the following shall constitute an event of default (an Event of Default) under this Agreement:
8.1 Payment Default. Borrower fails to (a) make any payment of principal or interest on any Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business Day cure period shall not apply to payments due on the Term Loan Maturity Date) ); provided that no Event of Default under this Section 8.1 shall occur as a result of the failure by Bank to timely debit Borrowers account for any such payments of principal and/or interest. During the cure period, the failure to make or pay any payment specified under clause (a) or (b) hereunder is not an Event of Default (but no Credit Extension will be made during the cure period);
8.2 Covenant Default.
(a) Borrower fails or neglects to perform any obligation in Sections 6.3, 6.4, 6.5, 6.6, 6.7, or violates any covenant in Section 7; or
(b) Borrower fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such cure period). Cure periods provided under this section shall not apply, among other things, to financial covenants or any other covenants set forth in clause (a) above;
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8.3 Material Adverse Change. A Material Adverse Change occurs;
8.4 Attachment; Levy; Restraint on Business.
(a) (i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or of any entity under the control of Borrower (including a Subsidiary) on deposit or otherwise maintained with Bank or any Bank Affiliate, or (ii) a notice of lien or levy is filed against any of Borrowers assets by any government agency, and the same under subclauses (i) and (ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any ten (10) day cure period; or
(b) (i) any material portion of Borrowers assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower from conducting any material part of its business;
8.5 Insolvency. (a) Borrower is unable to pay its debts (including trade debts) as they become due or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within thirty (30) days (but no Credit Extensions shall be made while of any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed);
8.6 Other Agreements. There is, under any agreement to which Borrower or any Guarantor is a party with a third party or parties (other than the Senior Loan Agreement), (a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount individually or in the aggregate in excess of Two Hundred Fifty Thousand Dollars ($250,000.00); or (b) any default under any material agreement of Borrower or Guarantor that could have a material adverse effect on Borrowers or Guarantors business, taken as a whole;
8.7 Judgments. One or more final judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least Five Hundred Thousand Dollars ($500,000.00) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower and the same are not, within ten (10) days after the entry thereof, discharged or execution thereof stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of any such stay (provided that no Credit Extensions will be made prior to the discharge, stay, or bonding of such judgment, order, or decree);
8.8 Misrepresentations. Borrower or any Person acting for Borrower makes any representation, warranty, or other statement now or later in this Agreement, any Loan Document or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made;
8.9 Subordinated Debt. Any document, instrument, or agreement evidencing any Subordinated Debt shall for any reason be revoked or invalidated or otherwise cease to be in full force and effect, any Person shall be in breach thereof or contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Obligations shall for any reason be subordinated or shall not have the priority contemplated by this Agreement;
8.10 Governmental Approvals. Any Governmental Approval shall have been (a) revoked, rescinded, suspended, modified in a material adverse manner or not renewed in the ordinary course for a full term or (b) subject to any decision by a Governmental Authority that designates a hearing with respect to any applications for renewal of any of such Governmental Approval or that could result in the Governmental Authority taking any of the actions described in clause (a) above, and such decision or such revocation, rescission, suspension, modification or non-renewal (i) has, or could reasonably be expected to have, a Material Adverse Change, or (ii) adversely affects the legal qualifications of Borrower or any of its Subsidiaries to hold such Governmental Approval in any applicable jurisdiction and such revocation, rescission, suspension, modification or non-renewal could reasonably be expected to affect the status of or legal qualifications of Borrower or any of its Subsidiaries to hold any Governmental Approval in any other jurisdiction;
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8.11 Senior Loan Agreement. (a) The occurrence of an Event of Default (as defined in the Senior Loan Agreement) resulting from Borrowers failure to comply with Sections 2.1.1(b), 2.1.2(b) or 2.1.3(c) of the Senior Loan Agreement or (b) upon Banks exercise of remedies pursuant to Section 9.1(a) of the Senior Loan Agreement; or
8.12 Guaranty. (a) Any guaranty of any Obligations terminates or ceases for any reason to be in full force and effect; (b) any Guarantor does not perform any obligation or covenant relating to the Obligations under any guaranty of the Obligations; (c) any circumstance described in Sections 8.3, 8.4, 8.5, 8.7, or 8.8. occurs with respect to any Guarantor, or (d) the liquidation, winding up, or termination of existence of any Guarantor; or (e) a material adverse change in the general affairs, management, results of operation, condition (financial or otherwise) or the prospect of repayment of the Obligations occurs with respect to any Guarantor.
9 BANKS RIGHTS AND REMEDIES
9.1 Rights and Remedies. While an Event of Default occurs and continues Bank may, without notice or demand, do any or all of the following:
(a) declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank);
(b) stop advancing money or extending credit for Borrowers benefit under this Agreement or under any other agreement between Borrower and Bank;
(c) for any letters of credit, demand that Borrower (i) deposit cash with Bank in an amount equal to 105% (110% for letters of credit issued in a currency other than Dollars), of the Dollar Equivalent of the aggregate face amount of all letters of credit remaining undrawn plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment), to secure all of the Obligations relating to such letters of credit, as collateral security for the repayment of any future drawings under such letters of credit, and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in advance all letter of credit fees scheduled to be paid or payable over the remaining term of any letters of credit; provided, however, if an Event of Default described in Section 8.5 occurs, the obligation of Borrower to cash collateralize all letters of credit remaining undrawn shall automatically become effective without any action by Bank;
(d) terminate any foreign exchange forward contracts;
(e) settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Bank considers advisable, notify any Person owing Borrower money of Banks security interest in such funds, and verify the amount of such account;
(f) make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the Collateral. Borrower shall assemble the Collateral if Bank requests and make it available as Bank designates. Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Banks rights or remedies;
(g) apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or the account of Borrower;
(h) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Bank is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrowers labels, Patents, Copyrights, mask works, rights of use of any name, trade secrets, trade names, Trademarks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Banks exercise of its rights under this Section, Borrowers rights under all licenses and all franchise agreements inure to Banks benefit;
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(i) place a hold on any account maintained with Bank and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;
(j) demand and receive possession of Borrowers Books; and
(k) exercise all rights and remedies available to Bank under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof).
9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse Borrowers name on any checks or other forms of payment or security; (b) sign Borrowers name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle, and adjust all claims under Borrowers insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Bank or a third party as the Code permits. Borrower hereby appoints Bank as its lawful attorney-in-fact to sign Borrowers name on any documents necessary to perfect or continue the perfection of Banks security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations have been satisfied in full and Bank is under no further obligation to make Credit Extensions hereunder. Banks foregoing appointment as Borrowers attorney in fact, and all of Banks rights and powers, being coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and Banks obligation to provide Credit Extensions terminates.
9.3 Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.7 or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other Loan Document, Bank may obtain such insurance or make such payment, and all amounts so paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then highest rate applicable to the Obligations, and secured by the Collateral. Bank will make reasonable efforts to provide Borrower with notice of Bank obtaining such insurance at the time it is obtained or within a reasonable time thereafter. No payments by Bank are deemed an agreement to make similar payments in the future or Banks waiver of any Event of Default.
9.4 Application of Payments and Proceeds. If an Event of Default has occurred and is continuing, Bank may apply any funds in its possession, whether from Borrower account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of the Collateral, or otherwise, to the Obligations in such order as Bank shall determine in its sole discretion. Any surplus shall be paid to Borrower or to other Persons legally entitled thereto; Borrower shall remain liable to Bank for any deficiency. If Bank, in its good faith business judgment, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Bank shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Bank of cash therefor.
9.5 Banks Liability for Collateral. So long as Bank complies with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Bank, Bank shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage or destruction of the Collateral.
9.6 No Waiver; Remedies Cumulative. Banks failure, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Bank thereafter to demand strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by the party granting the waiver and then is only effective for the specific instance and purpose for which it is given. Banks rights and remedies under this Agreement and the other Loan Documents are cumulative. Bank has all rights and remedies provided under the Code, by law, or in equity. Banks exercise of one right or remedy is not an election and shall not preclude Bank from exercising any other remedy under this Agreement or other remedy available at law or in equity, and Banks waiver of any Event of Default is not a continuing waiver. Banks delay in exercising any remedy is not a waiver, election, or acquiescence.
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9.7 Demand Waiver. Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable.
9.8 Borrower Liability. Any Borrower may, acting singly, request Credit Extensions hereunder. Each Borrower hereby appoints the other as agent for the other for all purposes hereunder, including with respect to requesting Credit Extensions hereunder. Each Borrower hereunder shall be jointly and severally obligated to repay all Credit Extensions made hereunder, regardless of which Borrower actually receives said Credit Extension, as if each Borrower hereunder directly received all Credit Extensions. Each Borrower waives (a) any suretyship defenses available to it under the Code or any other applicable law, and (b) any right to require Bank to: (i) proceed against any Borrower or any other person; (ii) proceed against or exhaust any security; or (iii) pursue any other remedy. Bank may exercise or not exercise any right or remedy it has against any Borrower or any security it holds (including the right to foreclose by judicial or non-judicial sale) without affecting any Borrowers liability. Notwithstanding any other provision of this Agreement or other related document, so long as any Obligation remains outstanding, each Borrower irrevocably subordinates in priority and payment to the indefeasible repayment in full in cash of the Obligations all rights that it may have at law or in equity (including, without limitation, any law subrogating Borrower to the rights of Bank under this Agreement) to seek contribution, indemnification or any other form of reimbursement from any other Borrower, or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise. Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section shall be null and void. If any payment is made to a Borrower in contravention of this Section, such Borrower shall hold such payment in trust for Bank and such payment shall be promptly delivered to Bank for application to the Obligations, whether matured or unmatured.
10 NOTICES
All notices, consents, requests, approvals, demands, or other communication (collectively, Communication), other than Advance requests made pursuant to Section 3.4, by any party to this Agreement or any other Loan Document must be in writing and be delivered or sent by facsimile at the addresses or facsimile numbers listed below. Bank or Borrower may change its notice address by giving the other party written notice thereof. Each such Communication shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S mail, registered or certified mail, return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by facsimile transmission (with such facsimile promptly confirmed by delivery of a copy by personal delivery or United States mail as otherwise provided in this Section 10); (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address or facsimile number indicated below. Advance requests made pursuant to Section 3.4 must be in writing and may be in the form of electronic mail, delivered to Bank by Borrower at the e-mail address of Bank provided below and shall be deemed to have been validly served, given, or delivered when sent (with such electronic mail promptly confirmed by delivery of a copy by personal delivery or United States mail as otherwise provided in this Section 10). Bank or Borrower may change its address, facsimile number, or electronic mail address by giving the other party written notice thereof in accordance with the terms of this Section 10.
If to Borrower: | Mavenir Systems, Inc. | |||||
1651 North Glenville Drive, Suite 216 | ||||||
Richardson, Texas 75081 | ||||||
Attn: Sam Garrett, General Counsel | ||||||
Fax: (469) 916-4397 | ||||||
Email: sam@mavenir.com |
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with a copy to: | Andrews Kurth LLP | |||||
111 Congress Avenue, Suite 1700 | ||||||
Austin, Texas 78701 | ||||||
Attn: Alan D. Bickerstaff | ||||||
Fax: (512) 542-5219 | ||||||
Email: abickerstaff@andrewskurth.com | ||||||
If to Bank: | Silicon Valley Bank | |||||
14185 Dallas Parkway, Suite 780 | ||||||
Dallas, Texas 75254 | ||||||
Attn: Jennifer Bentley | ||||||
Fax: (972) 212-7289 | ||||||
Email: jbentley@svb.com | ||||||
with a copy to: | Riemer & Braunstein LLP | |||||
Three Center Plaza | ||||||
Boston, Massachusetts 02108 | ||||||
Attn: Charles W. Stavros, Esquire | ||||||
Fax: (617) 880-3456 | ||||||
Email: cstavros@riemerlaw.com |
11 CHOICE OF LAW, VENUE, AND JURY TRIAL WAIVER
New York law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in New York; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Bank. Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrowers actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH HEREINABOVE, BANK SHALL SPECIFICALLY HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE BANKS RIGHTS AGAINST BORROWER OR ITS PROPERTY.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 [Reserved].
12.2 Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights or obligations under it without Banks prior written consent (which may be granted or withheld in Banks discretion). Bank has the right, without the consent of or notice to Borrower, to sell, transfer, assign, negotiate, or grant participation in all or any
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part of, or any interest in, Banks obligations, rights, and benefits under this Agreement and the other Loan Documents (other than the Warrants, as to which assignment, transfer and other such actions are governed by the terms of the Warrants). In addition and without limiting the foregoing, Bank may elect to participate all or a portion of its interest under this Agreement to any Person; provided, however, the documentation of such participation shall be at no cost to Borrower.
12.3 Indemnification. Borrower agrees to indemnify, defend and hold Bank and its directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Bank (each, an Indemnified Person) harmless against: (a) all obligations, demands, claims, and liabilities (collectively, Claims) claimed or asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or expenses (including Bank Expenses) in any way suffered, incurred, or paid by such Indemnified Person as a result of, following from, consequential to, or arising from transactions between Bank and Borrower contemplated by the Loan Documents (including reasonable attorneys fees and expenses), except for Claims and/or losses directly caused by such Indemnified Persons gross negligence or willful misconduct.
12.4 Time of Essence. Time is of the essence for the performance of all Obligations in this Agreement.
12.5 Correction of Loan Documents. Bank may correct patent errors and fill in any blanks in the Loan Documents consistent with the agreement of the parties.
12.6 Severability of Provisions. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.
12.7 Amendments in Writing; Waiver; Integration. No purported amendment or modification of any Loan Document, or waiver, discharge or termination of any obligation under any Loan Document, shall be enforceable or admissible unless, and only to the extent, expressly set forth in a writing signed by the party against which enforcement or admission is sought. Without limiting the generality of the foregoing, no oral promise or statement, nor any action, inaction, delay, failure to require performance or course of conduct shall operate as, or evidence, an amendment, supplement or waiver or have any other effect on any Loan Document. Any waiver granted shall be limited to the specific circumstance expressly described in it, and shall not apply to any subsequent or other circumstance, whether similar or dissimilar, or give rise to, or evidence, any obligation or commitment to grant any further waiver. The Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of the Loan Documents merge into the Loan Documents.
12.8 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.
12.9 Survival. All covenants, representations and warranties made in this Agreement continue in full force until this Agreement has terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been paid in full and satisfied. Without limiting the foregoing, except as otherwise provided in Section 4.1, the grant of security interest by Borrower in Section 4.1 shall survive until the termination of all Bank Services Agreements. The obligation of Borrower in Section 12.3 to indemnify Bank shall survive until the statute of limitations with respect to such claim or cause of action shall have run.
12.10 Confidentiality. In handling any confidential information, Bank shall exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made: (a) to Banks Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together with Bank, collectively, Bank Entities); (b) to prospective transferees or purchasers of any interest in the Credit Extensions (provided, however, Bank shall use commercially reasonable efforts to obtain any prospective transferees or purchasers agreement to the terms of this provision); (c) as required by law, regulation, subpoena, or other order; (d) to Banks regulators or as otherwise required in connection with Banks examination or audit; (e) as Bank considers appropriate in exercising remedies under the Loan Documents; and (f) to third-party service providers of Bank so long as such service providers have executed a confidentiality agreement with Bank with terms no less restrictive than those contained herein. Confidential information does not include information that is either: (i) in the public domain or in Banks possession when disclosed to Bank, or becomes part of the public domain after disclosure to Bank; or (ii) disclosed to Bank by a third party if Bank does not know that the third party is prohibited from disclosing the information.
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Bank Entities may use the confidential information for reporting purposes and the development and distribution of databases and market analyses so long as such confidential information is aggregated and anonymized prior to distribution, unless otherwise expressly permitted by Borrower. The provisions of the immediately preceding sentence shall survive the termination of this Agreement.
12.11 Attorneys Fees, Costs and Expenses. In any action or proceeding between Borrower and Bank arising out of or relating to the Loan Documents, Bank shall be entitled to recover its reasonable attorneys fees and other costs and expenses incurred, in addition to any other relief to which it may be entitled.
12.12 Right of Set Off. Borrower hereby grants to Bank, a lien, security interest and right of set off as security for all Obligations to Bank, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity under the control of Bank (including a Bank subsidiary) or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Bank may set off the same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
12.13 Electronic Execution of Documents. The words execution, signed, signature and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.
12.14 Captions. The headings used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.
12.15 Construction of Agreement. The parties mutually acknowledge that they and their attorneys have participated in the preparation and negotiation of this Agreement. In cases of uncertainty this Agreement shall be construed without regard to which of the parties caused the uncertainty to exist.
12.16 Relationship. The relationship of the parties to this Agreement is determined solely by the provisions of this Agreement. The parties do not intend to create any agency, partnership, joint venture, trust, fiduciary or other relationship with duties or incidents different from those of parties to an arms-length contract.
12.17 Third Parties. Nothing in this Agreement, whether express or implied, is intended to: (a) confer any benefits, rights or remedies under or by reason of this Agreement on any Persons other than the express parties to it and their respective permitted successors and assigns; (b) relieve or discharge the obligation or liability of any Person not an express party to this Agreement; or (c) give any Person not an express party to this Agreement any right of subrogation or action against any party to this Agreement.
12.18 Aylus Acquisition. The Bank hereby consents to the acquisition by Borrower or a Subsidiary of Borrower of Aylus Networks, Inc., a Delaware corporation; provided that, Borrower or such Subsidiary shall comply with the provisions of Section 6.8 hereof.
13 DEFINITIONS
13.1 Definitions. As used in the Loan Documents, the word shall is mandatory, the word may is permissive, the word or is not exclusive, the words includes and including are not limiting and the singular includes the plural. As used in this Agreement, the following capitalized terms have the following meanings:
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Account is any account as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to Loan Party.
Account Debtor is any account debtor as defined in the Code with such additions to such term as may hereafter be made.
Affiliate is, with respect to any Person, each other Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Persons senior executive officers, directors, partners and, for any Person that is a limited liability company or limited liability partnership, that Persons managers and members.
Agreement is defined in the preamble hereof.
Australian Guarantor is Mavenir Systems Australia Pty. Limited, an entity organized under the laws of Australia.
Australian Guaranty is that certain Unconditional Guaranty by Australian Guarantor in favor of Bank, dated as of the Effective Date.
Bank is defined in the preamble hereof.
Bank Expenses are all audit fees and expenses, costs, and expenses (including reasonable attorneys fees and expenses) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred with respect to Borrower or any Guarantor.
Bank Services are any products, credit services, and/or financial accommodations previously, now, or hereafter provided to Borrower or any of its Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any letters of credit, cash management services (including, without limitation, merchant services, direct deposit of payroll, business credit cards, and check cashing services), interest rate swap arrangements, and foreign exchange services as any such products or services may be identified in Banks various agreements related thereto (each, a Bank Services Agreement).
Borrower is defined in the preamble hereof.
Borrowers Books are all Borrowers books and records including ledgers, federal and state tax returns, records regarding Borrowers assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.
Borrowing Resolutions are, with respect to any Person, those resolutions adopted by such Persons board of directors or other appropriate body and delivered by such Person to Bank approving the Loan Documents to which such Person is a party and the transactions contemplated thereby, together with a certificate executed by its secretary or other appropriate person on behalf of such Person certifying that (a) such Person has the authority to execute, deliver, and perform its obligations under each of the Loan Documents to which it is a party, (b) that attached as Exhibit A to such certificate is a true, correct, and complete copy of the resolutions then in full force and effect authorizing and ratifying the execution, delivery, and performance by such Person of the Loan Documents to which it is a party, (c) the name(s) of the Person(s) authorized to execute the Loan Documents on behalf of such Person, together with a sample of the true signature(s) of such Person(s), and (d) that Bank may conclusively rely on such certificate unless and until such Person shall have delivered to Bank a further certificate canceling or amending such prior certificate.
Business Day is any day that is not a Saturday, Sunday or a day on which Bank is closed.
Canadian Guarantor is Mavenir Systems North America Ltd., an entity organized under the laws of Canada.
Canadian Guaranty is that certain Unconditional Guaranty by Canadian Guarantor in favor of Bank, dated as of the Effective Date.
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Cash Equivalents means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poors Ratings Group or Moodys Investors Service, Inc., (c) Banks certificates of deposit issued maturing no more than one (1) year after issue; and (d) money market funds at least ninety-five percent (95%) of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of this definition.
Code is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of New York; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Banks Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of New York, the term Code shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.
Collateral is any and all properties, rights and assets of Borrower described on Exhibit A.
Collateral Account is any Deposit Account, Securities Account, or Commodity Account.
Commodity Account is any commodity account as defined in the Code with such additions to such term as may hereafter be made.
Communication is defined in Section 10.
Compliance Certificate is that certain certificate in the form attached hereto as Exhibit B.
Contingent Obligation is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation, in each case directly or indirectly guaranteed, endorsed, co made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but Contingent Obligation does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.
Control Agreement is any control agreement entered into among the depository institution at which Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary at which Borrower maintains a Securities Account or a Commodity Account, Borrower, and Bank pursuant to which Bank obtains control (within the meaning of the Code) over such Deposit Account, Securities Account, or Commodity Account.
Copyrights are any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.
Credit Extension is any Term Advance or any other extension of credit by Bank for Borrowers benefit pursuant to any Loan Document.
Default means any event which with notice or passage of time or both, would constitute an Event of Default.
Default Rate is defined in Section 2.2(b).
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Deferred Revenue is all amounts received or invoiced in advance of performance under contracts and not yet recognized as revenue.
Demonstration Systems shall mean equipment and related goods provided to customers or prospective customers for the purpose of allowing such parties to test Borrowers products and services.
Deposit Account is any deposit account as defined in the Code with such additions to such term as may hereafter be made.
Designated Deposit Account is Borrowers deposit account, account number 3300923666, maintained with Bank.
Dollars, dollars or use of the sign $ means only lawful money of the United States and not any other currency, regardless of whether that currency uses the $ sign to denote its currency or may be readily converted into lawful money of the United States.
Dollar Equivalent is, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in a Foreign Currency, the equivalent amount therefor in Dollars as determined by Bank at such time on the basis of the then-prevailing rate of exchange in San Francisco, California, for sales of the Foreign Currency for transfer to the country issuing such Foreign Currency.
Draw Period is the period of time from the Effective Date through the earliest to occur of (a) December 31, 2012, (b) an Event of Default, or (c) the existence of any Default.
Effective Date is defined in the preamble hereof.
Equipment is all equipment as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.
ERISA is the Employee Retirement Income Security Act of 1974, and its regulations.
Event of Default is defined in Section 8.
Excluded Property means any property, right or asset that is described on Exhibit A held by the Borrower, to the extent that such property, right or asset, or any agreement evidencing such property, right or asset, contains a term or is subject to a rule of law, statute or regulation that restricts, prohibits or requires a consent (that has not been obtained) of a Person (other than the Borrower) to the creation, attachment or perfection of the security interest granted herein, and any such restriction, prohibition and/or requirement of consent is effective and enforceable under applicable law; provided, that (x) Excluded Property shall not include any proceeds of any property, right or asset, and (y) any property, right or asset that at any time ceases to satisfy the definition of Excluded Property, whether as a result of the Borrower obtaining any necessary consent, any change in any rule of law, statute or regulation, or otherwise, shall no longer be Excluded Property and shall immediately thereafter be deemed Collateral hereunder, subject to no Liens other than (i) the first priority Lien and security interest in favor of Bank and (ii) other Permitted Liens.
Foreign Currency means lawful money of a country other than the United States.
Funding Date is any date on which a Credit Extension is made to or for the account of Borrower which shall be a Business Day.
GAAP is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination.
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General Intangibles is all general intangibles as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all Intellectual Property, claims, income and other tax refunds, security and other deposits, payment intangibles, contract rights, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.
Governmental Approval is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.
Governmental Authority is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.
Guarantor is any present or future guarantor of the Obligations, including as of the Effective Date, Australian Guarantor and Canadian Guarantor.
Indebtedness is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations.
Indemnified Person is defined in Section 12.3.
Initial Audit is Banks inspection of Borrowers Accounts, the Collateral, and Borrowers Books with results satisfactory to Bank in its sole and absolute discretion.
Insolvency Proceeding is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.
Intellectual Property means all of Borrowers right, title, and interest in and to the following:
(a) its Copyrights, Trademarks and Patents;
(b) any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how, operating manuals;
(c) any and all source code;
(d) any and all design rights which may be available to a Borrower;
(e) any and all claims for damages by way of past, present and future infringement of any of the foregoing, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the Intellectual Property rights identified above; and
(f) all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.
Inventory is all inventory as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrowers custody or possession or in transit and including any returned goods and any documents of title representing any of the above.
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Investment is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance or capital contribution to any Person.
IP Agreement is that certain Intellectual Property Security Agreement executed and delivered by Borrower to Bank dated as of the Effective Date including any amendments thereto together with any subsequent Intellectual Property Security Agreement delivered to Bank pursuant to this Agreement after the Effective Date.
Lien is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.
Loan Documents are, collectively, this Agreement, the Perfection Certificate, the IP Agreement, the Canadian Guaranty, the Warrants, any Bank Services Agreement, any subordination agreement, any note, or notes or guaranties executed by Borrower and/or any Guarantor, and any other present or future agreement between Borrower and/or any Guarantor and for the benefit of Bank in connection with the foregoing, all as amended, restated, or otherwise modified. For the sake of clarity, the Senior Loan Agreement and the documents and agreements entered into solely with respect to the Senior Loan Agreement shall not be considered Loan Documents under this Agreement.
Loan Party means Borrower, Australian Guarantor and Canadian Guarantor, and any other Affiliate that becomes a Borrower or Guarantor under the Loan Documents after the Effective Date.
Material Adverse Change is (a) a material impairment in the perfection or priority of Banks Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower, taken as a whole; (c) a material impairment of the prospect of repayment of any portion of the Obligations or (d) Bank determines, based upon information available to it and in its reasonable judgment, that there is a reasonable likelihood that Borrower shall fail to comply with one or more of the financial covenants in Section 6 during the next succeeding financial reporting period.
Mavenir is defined in the preamble hereto.
Obligations are Borrowers obligation to pay when due any debts, principal, interest, Bank Expenses and other amounts Borrower owes Bank now or later, whether under this Agreement, the Loan Documents, or otherwise (excluding, however, Borrowers obligations to Bank under the Senior Loan Agreement and the documents and agreements entered into solely with respect to the Senior Loan Agreement), including, without limitation, all obligations relating to letters of credit (including reimbursement obligations for drawn and undrawn letters of credit), cash management services, and foreign exchange contracts, if any, and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank, and to perform Borrowers duties under the Loan Documents. For the sake of clarity, any of Borrowers obligations arising solely under the Senior Loan Agreement (and the documents and agreements entered into solely with respect to the Senior Loan Agreement) shall not constitute an Obligation under this Agreement.
Operating Documents are, for any Person, such Persons formation documents, as certified with the Secretary of State of such Persons state of formation on a date that is no earlier than 30 days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement, memorandum and articles of association (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.
Patents means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.
Payment means all checks, wire transfers and other items of payment received by Bank (including proceeds of Accounts and payment of all the Obligations in full) for credit to Borrowers outstanding Credit Extensions or, if the balance of the Credit Extensions has been reduced to zero, for credit to its Deposit Accounts.
Payment/Advance Form is that certain form attached hereto as Exhibit C.
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Payment Date is the first (1st) calendar day of each month.
Perfection Certificate is defined in Section 5.1.
Permitted Indebtedness is:
(g) Borrowers Indebtedness to Bank under this Agreement and the other Loan Documents;
(h) Indebtedness existing on the Effective Date and shown on the Perfection Certificate;
(i) Subordinated Debt, if any;
(j) unsecured Indebtedness to trade creditors incurred in the ordinary course of business;
(k) Indebtedness secured by Liens permitted under clauses (a) and (c) of the definition of Permitted Liens hereunder;
(l) (i) (X) unsecured Indebtedness of any Subsidiary owed to a Loan Party plus (Y) unsecured guarantee obligations of Borrower with respect to leases or commercial contacts of any other Borrower or any Subsidiary entered into in the ordinary course of business, in an aggregate amount for all such Indebtedness permitted pursuant to this clause (i), together with Investments permitted in connection with clause (d) of the definition of Permitted Investments, not to exceed Five Million Five Hundred Thousand Dollars ($5,500,000.00) in the aggregate for any trailing three-month period, for reasonable operating expenses and capital expenditures of such Borrower or Subsidiaries incurred in the ordinary course of business, in amounts and in a manner consistent with past practices, (ii) Indebtedness of any Borrower owing to any other Borrower and (iii) Indebtedness of any Subsidiary (which is not a Loan Party) to any other Subsidiary (which is not a Loan Party);
(m) Indebtedness of Borrower to Bank under the Senior Loan Agreement and related documents and agreements;
(n) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;
(o) Subject to Section 6.5, current and deferred taxes;
(p) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (i) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be; and
(q) other unsecured Indebtedness in an amount not to exceed Twenty Five Thousand Dollars ($25,000.00).
Permitted Investments are:
(r) Investments shown on the Perfection Certificate and existing on the Effective Date;
(s) Cash Equivalents;
(t) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrowers business;
(u) (i) Investments by any Loan Party in any Subsidiary, in an aggregate amount for all such Investments, together with Indebtedness permitted in connection with clause (f) of the definition of Permitted Indebtedness, not to exceed Five Million Five Hundred Thousand Dollars ($5,500,000.00) in the aggregate for each trailing three-month period, for reasonable operating expenses and capital expenditures of such Borrower or Subsidiaries incurred in the ordinary course of business, in amounts and in a manner consistent with past practices, (ii) Investments by any Borrower in any other Borrower and (iii) Investments by any Subsidiary in any Loan Party;
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(v) Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrowers board of directors;
(w) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business;
(x) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph (g) shall not apply to Investments of Borrower in any Subsidiary;
(y) Investments consisting of deposit accounts in which Bank has a perfected security interest;
(z) Investments accepted in connection with Transfers permitted by Section 7.1;
(aa) Investments in connection with transactions permitted pursuant to Section 7.3; and
(bb) Joint ventures or strategic alliances in the ordinary course of Borrowers business consisting of the non-exclusive licensing of technology, the development of technology or the providing of technical support, provided that any cash Investments by Borrower do not exceed One Hundred Thousand Dollars ($100,000) in the aggregate in any fiscal year.
Permitted Liens are:
(cc) Liens existing on the Effective Date and shown on the Perfection Certificate or arising under this Agreement and the other Loan Documents;
(dd) Liens for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being contested in good faith and for which Borrower maintains adequate reserves on its Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;
(ee) purchase money Liens (i) on Equipment acquired or held by Borrower incurred for financing the acquisition of the Equipment securing no more than Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate amount outstanding, or (ii) existing on Equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment;
(ff) Liens of carriers, warehousemen, suppliers, landlords or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;
(gg) Liens to secure payment of workers compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);
(hh) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase;
(ii) leases or subleases of real property granted in the ordinary course of business, and leases, subleases, non-exclusive licenses or sublicenses of property (other than real property or Intellectual Property) granted in the ordinary course of Borrowers business, if the leases, subleases, licenses and sublicenses do not prohibit granting Bank a security interest;
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(jj) Liens granted by Borrower to Bank under the Senior Loan Agreement and related documents and agreements;
(kk) non-exclusive license of Intellectual Property granted to third parties in the ordinary course of business;
(ll) Liens arising from judgments, orders, decrees or attachments in circumstances not constituting an Event of Default under Section 8.4 or 8.7;
(mm) Easements, rights of way, covenants, restrictions, reservations, exceptions and other similar restrictions and encumbrances or title defects, in each case incurred in the ordinary course of business which, in the aggregate, do not materially detract from the value or usefulness of the property subject thereto or materially interfere with the ordinary conduct of business of Borrower; and
(nn) Liens in favor of other financial institutions arising in connection with Borrowers deposit and/or securities accounts held at such institutions; provided that (except as otherwise permitted in Section 6.8(b)) Bank has a perfected security interest in the amounts held in such deposit and/or securities accounts.
Person is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.
Registered Organization is any registered organization as defined in the Code with such additions to such term as may hereafter be made.
Requirement of Law is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
Responsible Officer is any of the Chief Executive Officer, President, Chief Financial Officer and Controller of Borrower.
Restricted License is any material license or other agreement with respect to which Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from granting a security interest in Borrowers interest in such license or agreement or any other property, or (b) for which a default under or termination of could interfere with the Banks right to sell any Collateral.
SEC shall mean the Securities and Exchange Commission, any successor thereto, and any analogous Governmental Authority.
Securities Account is any securities account as defined in the Code with such additions to such term as may hereafter be made.
Senior Loan Agreement is that certain Senior Loan and Security Agreement dated as of October __, 2012 by and between Bank and Borrower, as may be amended from time to time.
Subordinated Debt is indebtedness incurred by Borrower subordinated to all of Borrowers now or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered into between Bank and the other creditor), on terms acceptable to Bank.
Subsidiary is, as to any Person, (a) a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person, (b) a subsidiary as defined in Section 1159 of the U.K. Companies Act 2006, or (c) unless the context otherwise requires, a subsidiary undertaking within the meaning of Section 1162 of the U.K. Companies Act 2006. Unless the context otherwise requires, each reference to a Subsidiary herein shall be a reference to a Subsidiary of Borrower or Guarantor.
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Term Advance or Term Advances is defined in Section 2.1.1 hereof.
Term Loan is a loan made by Bank pursuant to the terms of Section 2.1.1 hereof.
Term Loan Amount is an aggregate amount equal to Ten Million Dollars ($10,000,000.00) outstanding at any time.
Term Loan Maturity Date is the earliest of (a) October __, 2015 or (b) the occurrence of an Event of Default.
Trademarks means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.
Transfer is defined in Section 7.1.
Warrant means that certain Warrant to Purchase Stock dated as of the Effective Date between Parent Borrower and Bank.
[Signature page follows.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.
BORROWER:
MAVENIR SYSTEMS, INC. | ||
By | /s/ Terry Hungle | |
Name: | Terry Hungle | |
Title: | Chief Financial Officer | |
MAVENIR HOLDINGS, INC. | ||
By | /s/ Terry Hungle | |
Name: | Terry Hungle | |
Title: | Secretary and Chief Financial Officer | |
BANK: | ||
SILICON VALLEY BANK | ||
By | /s/ Brendan P. Quinn | |
Name: | Brendan P. Quinn | |
Title: | Vice President |
[Signature page to Subordinated Loan and Security Agreement]
EXHIBIT A COLLATERAL DESCRIPTION
The Collateral consists of all of Borrowers right, title and interest in and to the following personal property:
All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles, commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and
all Borrowers Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.
Notwithstanding the foregoing, the Collateral does not include any Excluded Property.
1
EXHIBIT B
COMPLIANCE CERTIFICATE
TO: | SILICON VALLEY BANK | Date: | ||||
FROM: | MAVENIR SYSTEMS, INC. |
The undersigned authorized officer of MAVENIR SYSTEMS, INC. (Borrower) certifies that under the terms and conditions of the Subordinated Loan and Security Agreement between Borrower and Bank (the Agreement), (1) Borrower is in complete compliance for the period ending with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries, if any, relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank. Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.
Please indicate compliance status by circling Yes/No under Complies column.
Reporting Covenant |
Required |
Complies | ||
Monthly financial statements (including income statement and statement of cash flows) with Compliance Certificate |
Monthly within 30 days | Yes No | ||
Annual financial statement (CPA Audited) + CC | FYE within 150 days | Yes No | ||
10-Q, 10-K and 8-K | Within 5 days after filing with SEC | Yes No | ||
Projections/Operating Budgets | Earlier of (i) 15 days after approval by board of directors or (ii) January 31st of each fiscal year | Yes No |
The following Intellectual Property was registered after the Effective Date (if no registrations, state None)
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The following are the exceptions with respect to the certification above: (If no exceptions exist, state No exceptions to note.)
MAVENIR SYSTEMS INC. | BANK USE ONLY | |||||||
By: |
|
Received by: | ||||||
Name: |
|
AUTHORIZED SIGNER | ||||||
Title: |
|
Date: | ||||||
Verified: | ||||||||
AUTHORIZED SIGNER | ||||||||
Date: | ||||||||
Compliance Status: Yes No |
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EXHIBIT C
LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS NOON P.S.T.
Fax To: | Date: |
|
LOAN PAYMENT:
MAVENIR SYSTEMS, INC.
From Account # | To Account # | |
(Deposit Account #) | (Loan Account #) | |
Principal $ | and/or Interest $ | |
Authorized Signature: | Phone Number: | |
Print Name/Title: |
LOAN ADVANCE:
Complete Outgoing Wire Request section below if all or a portion of the funds from this loan advance are for an outgoing wire.
From Account # | To Account # | |
(Loan Account #) | (Deposit Account #) | |
Amount of Term Advance $ |
All Borrowers representations and warranties in the Subordinated Loan and Security Agreement are true, accurate and complete in all material respects on the date of the request for an advance; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date:
Authorized Signature: | Phone Number: | |
Print Name/Title: |
OUTGOING WIRE REQUEST:
Complete only if all or a portion of funds from the loan advance above is to be wired.
Deadline for same day processing is noon, P.S.T.
Beneficiary Name: | Amount of Wire: $ | |
Beneficiary Bank: | Account Number: | |
City and State: | ||
Beneficiary Bank Transit (ABA) #: | Beneficiary Bank Code (Swift, Sort, Chip, etc.): | |
(For International Wire Only) | ||
Intermediary Bank: | Transit (ABA) #: | |
For Further Credit to: | ||
Special Instruction: |
By signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be processed in accordance with and subject to the terms and conditions set forth in the agreements(s) covering funds transfer service(s), which agreements(s) were previously received and executed by me (us).
Authorized Signature: ____________________ | 2nd Signature (if required):_____________________ | |
Print Name/Title: | Print Name/Title: |
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Exhibit 10.27.1
JOINDER AND FIRST LOAN MODIFICATION
TO SUBORDINATED LOAN AND SECURITY AGREEMENT
This Joinder and First Loan Modification to Subordinated Loan and Security Agreement (this Agreement) is entered into as of February 13, 2013 (First Loan Modification Effective Date), by and between (i) SILICON VALLEY BANK, a California corporation with a loan production office located at 14185 Dallas Parkway, Suite 760, Dallas TX 75254 (Bank), (ii) MAVENIR SYSTEMS, INC., a Delaware corporation (Mavenir), MAVENIR HOLDINGS, INC., a Delaware corporation (Holdings), MAVENIR SYSTEMS IP HOLDINGS, LLC, a Delaware corporation (Mavenir IP, and together with Mavenir and Holdings, individually and collectively, jointly and severally, the Borrower) each with offices located at 1651 North Glenville Drive, Suite 216, Richardson, Texas 75081, (iii) MAVENIR SYSTEMS HOLDINGS LIMITED, a company registered under the laws of England and Wales under company number 05181808 whose registered office is at 76 Wallingford Road, Shillingford, Oxfordshire OX10 7EU, United Kingdom (U.K. Holdings), (iv) MAVENIR SYSTEMS UK LIMITED, a company registered under the laws of England and Wales under company number 04388973 whose registered office is at 76 Wallingford Road, Shillingford, Oxfordshire OX10 7EU, United Kingdom (Mavenir U.K. and together with U.K. Holdings, the U.K. Borrower), and (v) MAVENIR SYSTEMS PTE LTD., a company incorporated under the laws of Singapore with registration number 200105057D and having its registered office located at 18 Mohamed Sultan Road, #03-01, Singapore 238967 (Mavenir Singapore or Singapore Borrower, and together with U.K. Holdings and Mavenir U.K., individually and collectively, jointly and severally, the New Borrower).
1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other indebtedness and obligations which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan arrangement dated as of October 18, 2012, evidenced by, among other documents, a certain Subordinated Loan and Security Agreement dated as of October 18, 2012, between Borrower and Bank (as amended, the Loan Agreement). Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement.
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement and the Intellectual Property Collateral, as such term is defined in that certain Intellectual Property Security Agreement dated as of October 18, 2012 between Bank, Mavenir and Holdings and that certain Intellectual Property Security Agreement dated as of the November 16, 2012 between Bank and Mavenir IP (collectively and as amended, the IP Security Agreement, and together with any other collateral security granted by any Borrower or Guarantor to Bank, the Security Documents). Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations shall be referred to as the Existing Loan Documents.
3. JOINDER AND ASSUMPTION. New Borrower is a Subsidiary of Mavenir and an affiliate of each other Borrower. New Borrower hereby joins the Loan Agreement and each of the other appropriate Existing Loan Documents, and agrees to comply with and be bound by all of the terms, conditions and covenants of the Loan Agreement and each of the other appropriate Existing Loan Documents, as if New Borrower were originally named a Borrower and/or a Debtor therein. Without limiting the generality of the preceding sentence, New Borrower hereby assumes and agrees to pay and perform when due all present and future indebtedness, liabilities and obligations of Borrower under the Loan Agreement, including, without limitation, the Obligations. From and after the date hereof, all references in the Existing Loan Documents to Borrower and/or Debtor shall be deemed to refer to and include New Borrower. Further, all references to the Obligations of Borrower shall be deemed to include all present and future Obligations of New Borrower. New Borrower acknowledges that the Obligations are due and owing to Bank from Borrower including, without limitation, New Borrower, without any defense, offset or counterclaim of any kind or nature whatsoever as of the date hereof.
4. GRANT OF SECURITY INTEREST. In addition to any liens, pledges or security interests in the Collateral granted pursuant to the other Security Documents, to secure the payment and performance of all of the Obligations, New Borrower hereby grants to Bank a continuing lien upon and security interest in all of New Borrowers now existing or hereafter arising rights and interest in the Collateral, whether now owned or existing or hereafter created, acquired, or arising, and wherever located, including, without limitation, all of New Borrowers
assets listed on Exhibit A attached to the Loan Agreement and all of New Borrowers books and records relating to the foregoing and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing. New Borrower represents, warrants, and covenants that, upon the filing of appropriate financing statements, continuation statements or other appropriate filings, the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral (subject only to Permitted Liens that expressly or by operation of law have superior priority to Banks Lien in this Agreement). Notwithstanding the foregoing, Banks security interest in the assets of New Borrower securing the Obligations of New Borrower to Bank under the Loan Agreement shall be junior and subordinate to Banks security interest in the assets of New Borrower securing the Obligations of Borrower under the Senior Loan Agreement (as defined in the Loan Agreement). If New Borrower shall acquire a commercial tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of the Loan Agreement, with such writing to be in form and substance reasonably satisfactory to Bank. New Borrower further covenants and agrees that following written notice from Bank, it shall provide all such information, complete all such forms, and take all such actions, and enter into all such agreements, in form and substance reasonably satisfactory to Bank that are reasonably deemed necessary by Bank in order to grant and continue a valid, first perfected security interest to Bank in the Collateral. New Borrower hereby authorizes Bank to file financing statements or any other applicable filings, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Banks interest or rights hereunder, including a notice that any disposition of the Collateral, by either Borrower or any other Person, may be deemed to violate the rights of Bank under the Code. Such financing statements may indicate the Collateral as all assets of the Debtor or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Banks discretion. Bank shall terminate the security interest granted herein in accordance with Section 4.1 of the Loan Agreement.
5. SUBROGATION AND SIMILAR RIGHTS. Borrower (in each case including, without limitation, New Borrower) waives any suretyship defenses available to it under the Code or any other applicable law. Borrower waives any right to require Bank to: (i) proceed against any other Borrower or any other Person; (ii) proceed against or exhaust any security; or (iii) pursue any other remedy. Bank may exercise or not exercise any right or remedy it has against any Borrower or any security it holds (including the right to foreclose by judicial or non-judicial sale) without affecting any Borrowers liability. Notwithstanding any other provision of this Agreement or other related document, so long as any Obligation remains outstanding, each Borrower irrevocably subordinates in priority and payment to the indefeasible repayment in full in cash of the Obligations all rights that it may have at law or in equity (including, without limitation, any law subrogating such Borrower to the rights of Bank under the Loan Agreement) to seek contribution, indemnification or any other form of reimbursement from any other Borrower or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for any payment made by a Borrower with respect to the Obligations in connection with the Loan Agreement or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by any Borrower with respect to the Obligations in connection with the Loan Agreement or otherwise. Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this section shall be null and void. If any payment is made to any Borrower in contravention of this section, such Borrower shall hold such payment in trust for Bank and such payment shall be promptly delivered to Bank for application to the Obligations, whether matured or unmatured. Any Borrower may, acting singly, request Credit Extensions under the Loan Agreement. Each Borrower hereby appoints the other as agent for the other for all purposes under the Loan Agreement, including with respect to requesting Credit Extensions thereunder. Each Borrower shall be jointly and severally obligated to repay all Credit Extensions made under the Loan Agreement or any other Loan Documents, regardless of which Borrower actually received said Credit Extension, as if each Borrower directly received all Credit Extensions.
6. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants to Bank that all representations and warranties in the Loan Documents made on the part of any Borrower are true and correct on the date hereof with respect to New Borrower (provided that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date), with the same force and effect as if New Borrower were originally named as Borrower in the Loan Documents. In addition, Borrower and New Borrower hereby represent and warrant to Bank that this Agreement has been duly executed and delivered by Borrower and New Borrower, and constitutes their legal, valid and binding obligation, enforceable against each in accordance with its terms. Hereafter, each reference to Borrower and/or Debtor) in any Loan Document shall be deemed to reference both Borrower and New Borrower.
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7. DESCRIPTION OF CHANGE IN TERMS.
A. | Modifications to Loan Agreement. |
1 | The Loan Agreement shall be amended by inserting the following text immediately following Section 2.4 thereof: |
2.5 Withholding. Payments received by Bank from Borrower hereunder will be made free and clear of any withholding taxes. Specifically, however, if at any time any governmental authority, applicable law, regulation or international agreement requires Borrower to make any such withholding or deduction from any such payment or other sum payable hereunder to Bank, Borrower hereby covenants and agrees that the amount due from Borrower with respect to such payment or other sum payable hereunder will be increased to the extent necessary to ensure that, after the making of such required withholding or deduction, Bank receives a net sum equal to the sum which it would have received had no withholding or deduction been required and Borrower shall pay the full amount withheld or deducted to the relevant governmental authority. Borrower will, upon request, furnish Bank with proof satisfactory to Bank indicating that Borrower has made such withholding payment provided, however, that Borrower need not make any withholding payment if the amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings and as to which payment in full is bonded or reserved against by Borrower. The agreements and obligations of Borrower contained in this Section 2.5 shall survive the termination of this Agreement.
2 | The Loan Agreement shall be amended by deleting the following text appearing in Section 4.1 thereof: |
4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof.
Borrower acknowledges that it previously has entered, and/or may in the future enter, into Bank Services Agreements with Bank. Regardless of the terms of any Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed to be Obligations hereunder and that it is the intent of Borrower and Bank to have all such Obligations secured by the first priority perfected security interest in the Collateral granted herein (subject only to Permitted Liens that expressly or by operation of law have superior priority to Banks Lien in this Agreement).
and inserting in lieu thereof the following:
4.1 Grant of Security Interest. All Obligations shall be secured by (a) the Collateral as set forth and defined herein, (b) the Collateral as set forth and defined in the U.K. Borrower Debentures, (c) the security constituted by and pursuant to the terms of the U.K. Borrower Share Charges, (d) the Collateral as set forth and defined in the Singapore Security Documents, and (e) any and all other security agreements, mortgages or other documents or instruments creating a security interest in favor of Bank, granted by any Borrower or any Guarantor now or in the future including, without limitation, pursuant to the IP Agreement (together with this Agreement, the Security Documents).
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Without prejudice to the security interests granted in the Security Documents (other than this Agreement), Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof.
Borrower acknowledges that it previously has entered, and/or may in the future enter, into Bank Services Agreements with Bank. Regardless of the terms of any Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed to be Obligations hereunder and that it is the intent of Borrower and Bank to have all such Obligations secured by the first priority perfected security interest in the Collateral granted herein and pursuant to the terms of the other Security Documents (subject only to Permitted Liens that expressly or by operation of law have superior priority to Banks Lien in this Agreement).
3 | The Loan Agreement shall be amended by deleting the following text appearing as Section 4.2 thereof: |
4.2 Priority of Security Interest. Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral (subject only to Permitted Liens that expressly or by operation of law have superior priority to Banks Lien under this Agreement). If Borrower shall acquire a commercial tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank.
and inserting in lieu thereof the following:
4.2 Priority of Security Interest. Borrower represents, warrants, and covenants that, upon the filing of appropriate financing statements, continuation statements or other appropriate filings, the security interest granted herein and in the other Security Documents is and shall at all times continue to be a first priority perfected security interest in the Collateral (subject only to Permitted Liens that expressly or by operation of law have superior priority to Banks Lien under this Agreement). If Borrower shall acquire a commercial tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank.
4 | The Loan Agreement shall be amended by deleting the following text appearing as Section 4.3 thereof: |
4.3 Authorization to File Financing Statements. Borrower hereby authorizes Bank to file financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Banks interest or rights hereunder, including a notice that any disposition of the Collateral, by either Borrower or any other Person, may be deemed to violate the rights of Bank under the Code. Such financing statements may indicate the Collateral as all assets of the Debtor or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Banks discretion.
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and inserting in lieu thereof the following:
4.3 Authorization to File Financing Statements. Borrower hereby authorizes Bank to file financing statements and other similar statements or forms, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Banks interest or rights hereunder, including a notice that any disposition of the Collateral, by either Borrower or any other Person, may be deemed to violate the rights of Bank under the Code or the relevant Security Documents. Such financing statements and other similar statements or forms may indicate the Collateral as all assets of the Debtor or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Banks discretion.
5 | The Loan Agreement shall be amended by inserting the following text at the end of Section 4.4 thereof: |
Borrower agrees to take all such steps as Bank may request in order to establish and maintain such further first priority perfected security interests (subject only to Permitted Liens that expressly or by operation of law have superior priority to Banks Lien under this Agreement). In addition to the foregoing, at Banks request, in its sole discretion, Borrower shall take all such action as may be reasonably required by Bank, to cause Australian Guarantor, Canadian Guarantor and/or any of Borrowers or Guarantors Subsidiaries, to become a co-Borrower under the Loan Documents and grant a continuing pledge and security interest in and to the assets of such entity (substantially as described on Exhibit A hereto).
6 | The Loan Agreement shall be amended by deleting the following text appearing in Section 5.2 thereof: |
5.2 Collateral. Borrower has good title to, has rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien hereunder, free and clear of any and all Liens except Permitted Liens. Borrower has no deposit accounts other than the deposit accounts with Bank, the deposit accounts, if any described in the Perfection Certificate delivered to Bank in connection herewith, or of which Borrower has given Bank notice and taken such actions as are necessary to give Bank a perfected security interest therein. The Accounts are bona fide, existing obligations of the Account Debtors.
and inserting in lieu thereof the following:
5.2 Collateral. Borrower has good title to, has rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien hereunder and under the Security Documents, free and clear of any and all Liens except Permitted Liens. Borrower has no deposit accounts other than the deposit accounts with Bank, the deposit accounts, if any described in the Perfection Certificate delivered to Bank in connection herewith, or of which Borrower has given Bank notice and, upon Banks request, taken such actions as are necessary to give Bank a perfected security interest therein. The Accounts are bona fide, existing obligations of the Account Debtors.
7 | The Loan Agreement shall be amended by deleting the following text appearing as Section 5.5 thereof: |
5.5 Solvency. The fair salable value of Borrowers assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature.
and inserting in lieu thereof the following:
5.5 Solvency. The fair salable value of Borrowers assets (including goodwill minus disposition costs), taken as a whole, exceeds the fair value of its liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature, including, without limitation, within the meaning of the UK Insolvency Act 1986, and has not stopped paying its debts as they fall due.
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8 | The Loan Agreement shall be amended by deleting the following text appearing as Section 6.5(a) thereof: |
(a) Maintain U.S. Borrowers and U.K. Borrowers (i) depository accounts and operating accounts and (ii) securities accounts (which such accounts shall represent at least eighty-five percent (85%) of the dollar value of U.S. Borrowers and U.K. Borrowers securities accounts at all financial institutions worldwide), each with Bank and Banks affiliates with all excess funds maintained at or invested through Bank or an affiliate of Bank, excluding however, cash collateral held at other financial institutions used to secure letters of credit or cash held as lease deposits, in each case as described in the Perfection Certificate.
and inserting in lieu thereof the following:
(a) Maintain U.S. Borrowers and U.K. Borrowers (i) depository accounts and operating accounts and (ii) securities accounts (which such accounts shall represent at least eighty-five percent (85%) of the dollar value of U.S. Borrowers and U.K. Borrowers securities accounts at all financial institutions worldwide), each with Bank and Banks affiliates with all excess funds maintained at or invested through Bank or an affiliate of Bank, excluding however, collections held in the U.K. Blocked Account (as defined in the Senior Loan Agreement) and cash collateral held at other financial institutions used to secure letters of credit or cash held as lease deposits, in each case as described in the Perfection Certificate.
9 | The Loan Agreement shall be amended by deleting the following text appearing as Section 8.5 thereof: |
8.5 Insolvency. (a) Borrower is unable to pay its debts (including trade debts) as they become due or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within thirty (30) days (but no Credit Extensions shall be made while of any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed);
and inserting in lieu thereof the following:
8.5 Insolvency. (a) Any Borrower is, or with respect to any U.K. Borrower is deemed for the purposes of any law applicable to such Borrower to be, unable to pay its debts (including trade debts), including, without limitation, within the meaning of the UK Insolvency Act 1986, as they become due, or otherwise becomes insolvent; (b) any U.K. Borrower or Singapore Borrower admits in writing its inability to pay its debts as they fall due; (c) any U.K. Borrower or Singapore Borrower suspends making payment on any of its uncontested debts or announces an intention to do so; (d) a moratorium is declared in respect of any of any U.K. Borrowers or Singapore Borrowers indebtedness; (e) by reason of actual or anticipated inability to pay debts as they fall due or insolvency, any U.K. Borrower or Singapore Borrower begins negotiations with any creditor for the rescheduling of its indebtedness; (f) any Borrower begins an Insolvency Proceeding; (g) a UK Insolvency Proceeding is begun against any U.K. Borrower; (h) a US Insolvency Proceeding is begun against any Borrower and not dismissed or stayed within thirty (30) days (but no Credit Extensions shall be made while of any of the conditions described in clause (a) through (e) exist and/or until any Insolvency Proceeding against any Borrower is dismissed); or (i) a Singapore Insolvency Proceeding is begun against the Singapore Borrower;
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10 | The Loan Agreement shall be amended by deleting the following text appearing as Section 9.4 thereof: |
9.4 Application of Payments and Proceeds. If an Event of Default has occurred and is continuing, Bank may apply any funds in its possession, whether from Borrower account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of the Collateral, or otherwise, to the Obligations in such order as Bank shall determine in its sole discretion. Any surplus shall be paid to Borrower or to other Persons legally entitled thereto; Borrower shall remain liable to Bank for any deficiency. If Bank, in its good faith business judgment, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Bank shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Bank of cash therefor.
and inserting in lieu thereof the following:
9.4 Application of Payments and Proceeds. Without prejudice to Banks rights under Section 6.3(c) of the Senior Loan Agreement, if an Event of Default has occurred and is continuing, Bank may apply any funds in its possession, whether from Borrower account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of the Collateral, or otherwise, to the Obligations in such order as Bank shall determine in its sole discretion. Any surplus shall be paid to Borrower or to other Persons legally entitled thereto; Borrower shall remain liable to Bank for any deficiency. If Bank, in its good faith business judgment, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Bank shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Bank of cash therefor.
11 | The Loan Agreement shall be amended by deleting the following text appearing as Section 12.13 thereof: |
12.13 Electronic Execution of Documents. The words execution, signed, signature and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.
and inserting in lieu thereof the following:
12.13 Electronic Execution of Documents. With respect to any Loan Documents signed by any party other than U.K. Borrower and Singapore Borrower, the words execution, signed, signature and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.
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12 | The Loan Agreement shall be amended by inserting the following text at the end of Section 12.17 thereof: |
Without limitation to the foregoing, a person who is not party to this Agreement has neither rights under the U.K. Contracts (Rights of Third Parties) Act 1999 nor rights under the Contracts (Rights of Third Parties) Act (Cap. 53B) of Singapore to enforce or enjoy the benefit of any term of this Agreement.
13 | The Loan Agreement shall be amended by deleting the following definition appearing in Section 13.1 thereof: |
Collateral is any and all properties, rights and assets of Borrower described on Exhibit A.
GAAP is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination.
Insolvency Proceeding is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.
Loan Documents are, collectively, this Agreement, the Perfection Certificate, the IP Agreement, the Canadian Guaranty, the Warrants, any Bank Services Agreement, any subordination agreement, any note, or notes or guaranties executed by Borrower and/or any Guarantor, and any other present or future agreement between Borrower and/or any Guarantor and for the benefit of Bank in connection with the foregoing, all as amended, restated, or otherwise modified. For the sake of clarity, the Senior Loan Agreement and the documents and agreements entered into solely with respect to the Senior Loan Agreement shall not be considered Loan Documents under this Agreement.
and inserting in lieu thereof the following:
Collateral is (a) any and all properties, rights and assets of Borrower described on Exhibit A, (b) without limitation on (a) above, is any and all properties, rights and assets of Borrower which are subject to any Lien in favor of Bank.
GAAP is (a) in respect of U.S. Borrower, generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination, (b) in respect of U.K. Borrower, generally accepted accounting principles in the United Kingdom, (c) in respect of Singapore Borrower, generally accepted accounting principles in Singapore.
Insolvency Proceeding is a U.S. Insolvency Proceeding, a U.K. Insolvency Proceeding, a Singapore Insolvency Proceeding or any of them.
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Loan Documents are, collectively, this Agreement, the Perfection Certificate, the IP Agreement, the Canadian Guaranty, the Australian Guaranty the Warrants, any Security Document (including the U.K. Security Documents and the Singapore Security Documents), any Bank Services Agreement, any subordination agreement, any note, or notes payable to Bank or guaranties for the benefit of Bank, executed by Borrower and/or any Guarantor, and any other present or future agreement between Borrower and/or any Guarantor and for the benefit of Bank in connection with the foregoing, all as amended, restated, or otherwise modified. For the sake of clarity, the Senior Loan Agreement and the documents and agreements entered into solely with respect to the Senior Loan Agreement shall not be considered Loan Documents under this Agreement.
14 | The Loan Agreement shall be amended by inserting the following new definitions in Section 13.1 thereof, each in its applicable alphabetical order: |
First Loan Modification Effective Date is February 13, 2013.
Mavenir Singapore is Mavenir Systems Pte Ltd., a company incorporated under the laws of Singapore with registration number 200105057D and having its registered office located at 18 Mohamed Sultan Road, #03-01, Singapore 238967.
Mavenir U.K. is Mavenir Systems UK Limited, a company registered under the laws of England and Wales under company number 04388973 whose registered office is at 76 Wallingford Road, Shillingford, Oxfordshire OX10 7EU, United Kingdom.
Security Documents is defined in Section 4.1.
Singapore Borrower is Mavenir Singapore.
Singapore Debenture is that certain debenture dated as of the First Loan Modification Effective Date granted by Singapore Borrower in favor of Bank, together with any additional debenture granted by any Singapore Borrower thereafter.
Singapore Insolvency Proceeding means in relation to the Singapore Borrower (a) any step is taken with a view to a moratorium or a composition, assignment or similar arrangement with any of its creditors; (b) a meeting of its shareholders, directors or other officers is convened for the purpose of considering any resolution for, to petition for or to make an application to or to file documents with a court or any registrar for, its winding-up, administration or dissolution or any such resolution is passed; (c) an order is made for its winding-up, administration or dissolution, or any Person presents a petition, or makes an application to or files documents with a court or any registrar, for its winding-up, administration or dissolution, or gives notice to the Bank of an intention to appoint an administrator other than, in any case, any winding up petition which is frivolous or vexatious and is discharged, stayed, or dismissed within thirty (30) days of commencement or, if earlier, the date on which it is advertised (but no Credit Extensions shall be made until such petition is dismissed); (d) any liquidator, receiver, judicial manager, administrative receiver, administrator or similar officer is appointed in respect of it or any of its assets; or (e) its shareholders, directors or other officers request the appointment of, or give notice of their intention to appoint, a liquidator, receiver, administrator or similar officer.
Singapore Security Documents is the Singapore Debenture and any other security document as may be entered into by the Singapore Borrower in respect of security granted by the Singapore Borrower in favor of Bank thereafter.
U.K. Blocked Account is defined in Section 6.3(c)(ii) of the Senior Loan Agreement.
U.K. Borrower is the collective reference to Mavenir U.K. and U.K. Holdings.
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U.K. Borrower Debentures means each of (i) that certain mortgage debenture dated as of the First Loan Modification Effective Date granted by Mavenir U.K. in favor of Bank and (ii) that certain mortgage debenture dated as of the First Loan Modification Effective Date granted by U.K. Holdings in favor of Bank, together with any additional mortgage debenture granted by any U.K Borrower thereafter.
U.K. Borrower Share Charges means each of (i) that certain first charge over the entire issued share capital of U.K. Holdings granted by U.S. Holdings as the shareholder of U.K. Holdings to Bank dated as of the First Loan Modification Effective Date and (ii) that certain first charge over the entire issued share capital Mavenir U.K. granted by U.K. Holdings as the shareholder of Mavenir U.K. to Bank dated as of the First Loan Modification Effective Date.
U.K. Holdings is Mavenir Systems Holdings Limited, a company registered under the laws of England and Wales under company number 05181808 whose registered office is at 76 Wallingford Road, Shillingford, Oxfordshire OX10 7EU, United Kingdom.
U.K. Insolvency Proceeding means in relation to any Person: (a) any step is taken with a view to a moratorium or a composition, assignment or similar arrangement with any of its creditors; (b) a meeting of its shareholders, directors or other officers is convened for the purpose of considering any resolution for, to petition for or to make an application to or to file documents with a court or any registrar for, its winding-up, administration or dissolution or any such resolution is passed; (c) an order is made for its winding-up, administration or dissolution, or any Person presents a petition, or makes an application to or files documents with a court or any registrar, for its winding-up, administration or dissolution, or gives notice to Agent of an intention to appoint an administrator other than, in any case, any winding up petition which is frivolous or vexatious and is discharged, stayed, or dismissed within thirty (30) days of commencement or, if earlier, the date on which it is advertised (but no Credit Extensions shall be made until such petition is dismissed); (d) any liquidator, receiver, administrative receiver, administrator or similar officer is appointed in respect of it or any of its assets; or (e) its shareholders, directors or other officers request the appointment of, or give notice of their intention to appoint, a liquidator, receiver, administrator or similar officer.
U.K. Security Documents is the U.K. Borrower Debentures and the U.K. Borrower Share Charges.
United Kingdom or U.K. means the United Kingdom of Great Britain and Northern Ireland.
U.S. Borrower is the collective reference to Mavenir, Holdings and Mavenir IP.
U.S. Insolvency Proceeding is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other similar relief.
8. CONDITIONS PRECEDENT. As a condition precedent to the effectiveness of this Agreement and the Banks obligation to make further Credit Extensions under the Loan Agreement, the Bank shall have received the following documents prior to or concurrently with this Agreement, each in form and substance satisfactory to the Bank:
A. | duly executed original signature pages to the U.K. Security Documents; |
B. | duly executed original signature pages to the Singapore Security Documents; |
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C. | duly executed original certificate of the Secretary or a Director of each U.K. Borrower certifying the memorandum and articles of association, register of charges, specimen signatures, board resolutions authorizing the execution and delivery of this Agreement and the other Loan Documents to which it is a party, and (if required) written resolutions of the sole shareholder of each U.K. Borrower amending its articles of association; |
D. | evidence of the establishment of the U.K. Blocked Account; |
E. | duly executed original certificate of the Secretary or a Director of Singapore Borrower certifying the certificate of incorporation, memorandum and articles of association, register of members, specimen signatures and directors resolutions authorizing the execution and delivery of this Agreement and the other Loan Documents to which it is a party, and (if required) shareholders resolutions of the Singapore Borrower (and if required, amending its constitution documents); |
F. | duly executed original signature pages to the Australian Guaranty, together with Secretarys Certificate and completed Borrowing Resolutions for Australian Guarantor; |
G. | original share certificates representing the shares in each U.K. Borrower charged in favor of Bank pursuant to the terms of the U.K. Share Charges, together with duly executed blank stock transfer forms in respect of such shares; |
H. | a legal opinion of Banks U.K. counsel (authority/enforceability) in respect of U.K. Borrower, in form and substance acceptable to Bank, dated as of the First Loan Modification Effective Date, together with the duly executed signatures thereto; |
I. | a legal opinion of Borrowers Singapore counsel in respect of Mavenir Singapore, in form and substance acceptable to Bank, dated as of the First Loan Modification Effective Date, together with the duly executed signatures thereto; |
J. | such evidence as Bank shall require and obtain confirming that there are no Liens in effect against the Collateral other than Liens in favor of Bank or other Permitted Liens; |
K. | a filed copy, which shall be filed by Bank, acknowledged by the appropriate filing office in the District of Columbia, of UCC Financing Statements, naming each New Borrower as Debtor and Bank as Secured Party; |
L. | a Perfection Certificate of each New Borrower and Mavenir Systems Australia Pty. Limited, together with the duly executed original signature pages thereto; |
M. | evidence satisfactory to Bank that the insurance policies required for New Borrower are in full force and effect, together with appropriate evidence showing lender loss payable and/or additional insured clauses or endorsements in favor of Bank; and |
N. | such other documents as Bank may reasonably request. |
9. DELIVERY OF POST-CLOSING MATTERS. Except as provided for herein, Bank confirms satisfaction of the provisions of Section 6.10 of the Loan Agreement. Notwithstanding the terms and conditions of Section 6.10(e) of the Loan Agreement, Borrower shall use commercially reasonable efforts to deliver a landlords consent in favor of Bank for Borrowers leased location at 1700 International Parkway, Suite 200, Richardson, Texas 75081 by the respective landlord thereof, together with the duly executed original signature pages thereto. Within five (5) Business Days following the First Amendment Effective Date (or such later date as the Bank shall determine in its sole discretion) Borrower shall deliver to Bank the Particulars of the Charge(s) created under the Singapore Debenture, this Agreement and the Senior Loan Agreement to be registered with ACRA within 30 days of creation of the charges.
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10. FEES. Borrower shall reimburse Bank for all reasonable legal fees and expenses incurred in connection with the Existing Loan Documents and this Agreement.
11. AUTHORIZATION TO FILE. Borrower hereby authorizes Bank to file UCC financing statements without notice to Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in order to further perfect or protect Banks interest in the Collateral, including a notice that any disposition of the Collateral, by either the Borrower or any other Person, shall be deemed to violate the rights of the Bank under the Code.
12. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.
13. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and reaffirms all terms and conditions (as they may be modified by this Agreement) of all security or other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.
14. NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and Borrower hereby RELEASES Bank from any liability thereunder.
15. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the existing Obligations, Bank is relying upon Borrowers representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Banks agreement to modifications to the existing Obligations pursuant to this Agreement in no way shall obligate Bank to make any future modifications to the Obligations. Nothing in this Agreement shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker will be released by virtue of this Agreement.
16. RIGHT OF SET-OFF. In consideration of Banks agreement to enter into this Agreement, Borrower hereby reaffirms and hereby grants to Bank, a lien, security interest and right of set off as security for all Obligations to Bank, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity under the control of Silicon Valley Bank (including a Bank subsidiary) or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Bank may set off the same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the loan. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
17. JURISDICTION/VENUE. Section 11 of the Loan Agreement is hereby incorporated by reference in its entirety.
18. COUNTERSIGNATURE. This Agreement shall become effective only when it shall have been executed by Borrower and Bank.
[The remainder of this page is intentionally left blank]
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This Agreement is executed as of the date first written above.
MAVENIR SYSTEMS, INC. | ||
By | /s/ Terrence Hungle | |
Name: | Terrence Hungle | |
Title: | Chief Financial Officer | |
MAVENIR HOLDINGS, INC. | ||
By | /s/ Terrence Hungle | |
Name: | Terrence Hungle | |
Title: | Chief Financial Officer | |
MAVENIR SYSTEMS IP HOLDINGS, LLC | ||
By | /s/ Terrence Hungle | |
Name: | Terrence Hungle | |
Title: | Vice President | |
MAVENIR SYSTEMS HOLDINGS LIMITED | ||
By | /s/ Terrence Hungle | |
Name: | Terrence Hungle | |
Title: | Director | |
MAVENIR SYSTEMS UK LTD. | ||
By | /s/ Terrence Hungle | |
Name: | Terrence Hungle | |
Title: | Director | |
MAVENIR SYSTEMS PTE LTD. | ||
By | /s/ Terrence Hungle | |
Name: | Terrence Hungle | |
Title: | Director | |
BANK:
SILICON VALLEY BANK | ||
By | /s/ Jennifer Bentley | |
Name: | Jennifer Bentley | |
Title: | Relationship Manager |
[Signature page to Joinder and First Loan Modification to Subordinated Loan Agreement]
Exhibit 10.27.2
SECOND LOAN MODIFICATION
TO SUBORDINATED LOAN AND SECURITY AGREEMENT
This Second Loan Modification to Subordinated Loan and Security Agreement (this Agreement) is entered into as of June 4, 2013 (Second Loan Modification Effective Date), by and between (i) SILICON VALLEY BANK, a California corporation with a loan production office located at 14185 Dallas Parkway, Suite 760, Dallas TX 75254 (Bank), (ii) MAVENIR SYSTEMS, INC., a Delaware corporation (Mavenir), (iii) MAVENIR HOLDINGS, INC., a Delaware corporation (Holdings), (iv) MAVENIR SYSTEMS IP HOLDINGS, LLC, a Delaware limited liability company (Mavenir IP) each with offices located at 1700 International Parkway, Suite 200, Richardson, TX 75081, (v) MAVENIR SYSTEMS HOLDINGS LIMITED, a company registered under the laws of England and Wales under company number 05181808 whose registered office is at 76 Wallingford Road, Shillingford, Oxfordshire OX10 7EU, United Kingdom (U.K. Holdings), (vi) MAVENIR SYSTEMS UK LIMITED, a company registered under the laws of England and Wales under company number 04388973 whose registered office is at 76 Wallingford Road, Shillingford, Oxfordshire OX10 7EU, United Kingdom (Mavenir U.K. and together with U.K. Holdings, the U.K. Borrower), and (vii) MAVENIR SYSTEMS PTE LTD., a company incorporated under the laws of Singapore with registration number 200105057D and having its registered office located at 18 Mohamed Sultan Road, #03-01, Singapore 238967 (Mavenir Singapore or Singapore Borrower, and together with U.K. Holdings and Mavenir U.K., Mavenir, Holdings, and Mavenir IP, individually and collectively, jointly and severally, the Borrower).
1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other indebtedness and obligations which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan arrangement dated as of October 18, 2012, evidenced by, among other documents, a certain Subordinated Loan and Security Agreement dated as of October 18, 2012, between Borrower and Bank, as amended by that certain Joinder and First Loan Modification to Senior Loan and Security Agreement dated as of February 13, 2013 (as amended, the Loan Agreement). Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement.
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement and the Intellectual Property Collateral, as such term is defined in that certain Intellectual Property Security Agreement dated as of October 18, 2012 between Bank, Mavenir and Holdings and that certain Intellectual Property Security Agreement dated as of the November 16,2012 between Bank and Mavenir IP (collectively and as amended, the IP Security Agreement, and together with any other collateral security granted by any Borrower or Guarantor to Bank, the Security Documents). Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations shall be referred to as the Existing Loan Documents.
3. DESCRIPTION OF CHANGE IN TERMS.
A. | Modifications to Loan Agreement. |
1 | The Loan Agreement shall be amended by inserting the following text at the end of Section 4.4 thereof: |
If Borrower is required to add one or more Subsidiaries as co-borrowers or guarantors of its obligations pursuant to the Silver Lake Subordinated Indebtedness and to cause such Subsidiaries to grant a security interest on their assets to secure the Silver Lake Subordinated Indebtedness or if Borrower desires to Transfer assets to one or more Subsidiaries, and any such Subsidiaries have not granted a security interest in favor of Bank, Borrower shall notify Bank of same and shall cause such Subsidiaries to grant a first priority security interest (subject only to Permitted Liens that expressly or by operation of law have superior priority to Banks Lien under this Agreement) on their assets consistent with the description of Collateral set forth in Exhibit A in favor of Bank unless Bank waives such obligation in writing. |
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2 | The Loan Agreement shall be amended by deleting the following text appearing as Section 7.1 thereof: |
7.1 Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, Transfer), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of Equipment or other property which is worn out, obsolete, being replaced by Equipment or property of reasonably equivalent or better value or usefulness, or no longer necessary for the business of Borrower or such Subsidiary; (c) in connection with Permitted Liens and Permitted Investments, (d) of non-exclusive licenses for the use of the property of Borrower or any of its Subsidiaries in the ordinary course of business and consistent with past practice; (e) of Demonstration Systems to customers or prospective customers in the ordinary course of business and consistent with past practice; (f) of property from one Borrower to another Borrower; and (g) otherwise expressly permitted pursuant to this Agreement. |
and inserting in lieu thereof the following: |
7.1 Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, Transfer), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of Equipment or other property which is worn out, obsolete, being replaced by Equipment or property of reasonably equivalent or better value or usefulness, or no longer necessary for the business of Borrower or such Subsidiary; (c) in connection with Permitted Liens and Permitted Investments, (d) of non-exclusive licenses for the use of the property of Borrower or any of its Subsidiaries in the ordinary course of business and consistent with past practice; (e) of Demonstration Systems to customers or prospective customers in the ordinary course of business and consistent with past practice; (f) of property from one Borrower to another Borrower (or to a non-Borrower Subsidiary which has granted a lien on its assets to Bank pursuant to Section 4.4); and (g) otherwise expressly permitted pursuant to this Agreement. |
3 | The Loan Agreement shall be amended by deleting the following text appearing as Section 7.5 thereof: |
7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of the Collateral, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, permit any Collateral not to be subject to the first priority security interest granted herein, or enter into any agreement, document, instrument or other arrangement (except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrowers or any Subsidiarys Intellectual Property, except as is otherwise permitted in Section 7.1 hereof and the definition of Permitted Liens herein. |
and inserting in lieu thereof the following: |
7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of the Collateral, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, permit any Collateral not to be subject to the first priority security interest granted herein, or enter into any agreement, document, instrument or other arrangement (except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting |
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Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrowers or any Subsidiarys Intellectual Property included in the Collateral, except as is otherwise permitted in Section 7.1 hereof and the definition of Permitted Liens herein. |
4 | The Loan Agreement shall be amended by deleting the following text appearing as Sections 8.6 thereof: |
8.6 Other Agreements. There is, under any agreement to which Borrower or any Guarantor is a party with a third party or parties (other than the Senior Loan Agreement), (a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount individually or in the aggregate in excess of Two Hundred Fifty Thousand Dollars ($250,000.00); or (b) any default under any material agreement of Borrower or Guarantor that could have a material adverse effect on Borrowers or Guarantors business, taken as a whole; |
and inserting in lieu thereof the following: |
8.6 Other Agreements. There is, under any agreement to which Borrower or any Guarantor is a party with a third party or parties (other than the Senior Loan Agreement), (a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount individually or in the aggregate in excess of Two Hundred Fifty Thousand Dollars ($250,000.00); or (b) any default under any material agreement of Borrower or Guarantor that could have a material adverse effect on Borrowers or Guarantors business, taken as a whole; provided, however, that the Event of Default under this Section 8.6 caused by the occurrence of a breach or default under such other agreement shall be cured or waived for purposes of this Agreement upon Bank receiving written notice from the party asserting such breach or default of such cure or waiver of the breach or default under such other agreement, if at the time of such cure or waiver under such other agreement (x) Bank has not declared an Event of Default under this Agreement in writing; (y) any such cure or waiver does not result in an Event of Default under any other provision of this Agreement or any Loan Document; and (z) in connection with any such cure or waiver under such other agreement, the terms of any agreement with such third party are not modified or amended in any manner which could in the good faith business judgment of Bank be materially less advantageous to Borrower or any Guarantor. |
5 | The Loan Agreement shall be amended by deleting the following text appearing as Sections 8.9 thereof: |
8.9 Subordinated Debt. Any document, instrument, or agreement evidencing any Subordinated Debt shall for any reason be revoked or invalidated or otherwise cease to be in full force and effect, any Person shall be in breach thereof or contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Obligations shall for any reason be subordinated or shall not have the priority contemplated by this Agreement; |
and inserting in lieu thereof the following: |
8.9 Subordinated Debt. Any document, instrument, or agreement evidencing any Subordinated Debt shall for any reason be revoked or invalidated or otherwise cease to be in full force and effect (other than a result of the full payment thereof, to the extent permitted in accordance with any intercreditor agreement, subordination agreement or other similar agreement relating thereto), any Borrower or Guarantor shall be in breach thereof or contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder (other than a result of the full payment |
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thereof, to the extent permitted in accordance with any intercreditor agreement, subordination agreement or other similar agreement relating thereto), or the Obligations shall for any reason be subordinated or shall not have the priority contemplated by this Agreement; provided, however, that the Event of Default under this Section 8.9 caused by the occurrence of such breach, revocation or similar event specified above, under the Silver Lake Subordinated Indebtedness shall be cured or waived for purposes of this Agreement upon Bank receiving written notice from Silver Lake asserting of such cure or waiver of such breach, revocation or similar event specified above under the Silver Lake Subordinated Indebtedness, if at the time of such cure of such other agreement (x) Bank has not declared an Event of Default under this Agreement in writing; (y) any such cure does not result in an Event of Default under any other provision of this Agreement or any Loan Document; and (z) in connection with any such cure under such other agreement, the terms of any agreement with such third party are not modified or amended in any manner which could in the good faith business judgment of Bank be materially less advantageous to Borrower or any Guarantor. |
6 | The Loan Agreement shall be amended by deleting the following clause (f) appearing in the definition of Permitted Indebtedness in Section 13.1 thereof: |
(f) (i) (X) unsecured Indebtedness of any Subsidiary owed to a Loan Party plus (Y) unsecured guarantee obligations of Borrower with respect to leases or commercial contacts of any other Borrower or any Subsidiary entered into in the ordinary course of business, in an aggregate amount for all such Indebtedness permitted pursuant to this clause (i), together with Investments permitted in connection with clause (d) of the definition of Permitted Investments, not to exceed Five Million Five Hundred Thousand Dollars ($5,500,000.00) in the aggregate for any trailing three-month period, for reasonable operating expenses and capital expenditures of such Borrower or Subsidiaries incurred in the ordinary course of business, in amounts and in a manner consistent with past practices, (ii) Indebtedness of any Borrower owing to any other Borrower and (iii) Indebtedness of any Subsidiary (which is not a Loan Party) to any other Subsidiary (which is not a Loan Party); |
and inserting in lieu thereof the following: |
(f) (i) (X) unsecured Indebtedness of any Subsidiary owed to a Loan Party plus (Y) unsecured guarantee obligations of Borrower with respect to leases or commercial contacts of any other Borrower or any Subsidiary entered into in the ordinary course of business, in an aggregate amount for all such Indebtedness permitted pursuant to this clause (i), together with Investments permitted in connection with clause (d) of the definition of Permitted Investments, not to exceed Eight Million Dollars ($8,000,000.00) in the aggregate for any trailing three-month period, for reasonable operating expenses and capital expenditures of such Borrower or Subsidiaries incurred in the ordinary course of business, in amounts and in a manner consistent with past practices, (ii) Indebtedness of any Borrower owing to any other Borrower and (iii) Indebtedness of any Subsidiary (which is not a Loan Party) to any other Subsidiary (which is not a Loan Party); |
7 | The Loan Agreement shall be amended by deleting the following clause (d) appearing in the definition of Permitted Investments in Section 13.1 thereof: |
(d) (i) Investments by a Loan Party in any Subsidiary, in an aggregate amount for all such Investments, together with Indebtedness permitted in connection with clause (f) of the definition of Permitted Indebtedness, not to exceed Five Million Five Hundred Thousand Dollars ($5,500,000.00) in the aggregate for each trailing three-month period, for reasonable operating expenses and capital expenditures of such Borrower or Subsidiaries incurred in the ordinary course of business, in amounts and in a manner consistent with past practices, (ii) Investments by any Borrower in any other Borrower and (iii) Investments by any Subsidiary in any Loan Party; |
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and inserting in lieu thereof the following: |
(d) (i) Investments by a Loan Party in any Subsidiary, in an aggregate amount for all such Investments, together with Indebtedness permitted in connection with clause (f) of the definition of Permitted Indebtedness, not to exceed Eight Million Thousand Dollars ($8,000,000.00) in the aggregate for each trailing three-month period, for reasonable operating expenses and capital expenditures of such Borrower or Subsidiaries incurred in the ordinary course of business, in amounts and in a manner consistent with past practices, (ii) Investments by any Borrower in any other Borrower and (iii) Investments by any Subsidiary in any Loan Party; |
8 | The Loan Agreement shall be amended by deleting the following clause (h) appearing in the definition of Permitted Liens in Section 13.1 thereof: |
(h) Liens granted by Borrower to Bank under the Senior Loan Agreement and related documents and agreements; |
and inserting in lieu thereof the following: |
(h) (i) Liens granted by Borrower to Bank under the Subordinated Loan Agreement and related documents and agreements and (ii) Liens granted by Borrower to Silver Lake Waterman Fund, L.P., as agent, pursuant to the documents providing for and securing the Silver Lake Subordinated Indebtedness; |
9 | The Loan Agreement shall be amended by deleting the following definition appearing in Section 13.1 thereof: |
Subordinated Debt is indebtedness incurred by Borrower subordinated to all of Borrowers now or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered into between Bank and the other creditor), on terms acceptable to Bank. |
and inserting in lieu thereof the following: |
Subordinated Debt is (i) Silverlake Subordinated Indebtedness, and (ii) indebtedness incurred by Borrower subordinated to all of Borrowers now or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered into between Bank and the other creditor), on terms acceptable to Bank. |
10 | The Loan Agreement shall be amended by inserting the following new definitions in Section 13.1 thereof, each in its applicable alphabetical order: |
Second Loan Modification Effective Date is June 4, 2013. |
Silver Lake Subordinated Indebtedness is Subordinated Indebtedness in an aggregate principal amount not to exceed Fifteen Million Dollars ($15,000,0000) incurred by Mavenir, Holdings and Mavenir IP, pursuant to the Loan and Security Agreement entered into by Mavenir, Holdings and Mavenir IP, Silver Lake Waterman Fund, L.P ., as agent, and the lenders named therein, executed on or after the Second Loan Modification Effective Date, as such Loan and Security Agreement may be amended, modified, renewed or extended in accordance with the terms of the subordination, intercreditor, or other similar agreement entered into between Bank and Silver Lake Waterman Fund, L.P.). |
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4. LIMITED WAIVER. Borrower has disclosed to Bank certain indebtedness owing by one or more of the Borrowers and their Subsidiaries to one or more of the other Borrowers and their Subsidiaries as of the Effective Date. Bank hereby waives any Default and Event of Default arising from the absence of disclosing such intercompany obligations from the Perfection Certificate and such obligations are hereby incorporated into the Perfection Certificate as if fully set forth therein.
5. CONDITIONS PRECEDENT. As a condition precedent to the effectiveness of this Agreement and the Banks obligation to make further Credit Extensions under the Loan Agreement, the Bank shall have received the following documents prior to or concurrently with this Agreement, each in form and substance satisfactory to the Bank:
A. | duly executed original signature pages to this Agreement; |
B. | duly executed original signature pages to the Second Loan Modification to Senior Loan and Security Agreement; and |
C. | such other documents as Bank may reasonably request. |
6. FEES. Borrower shall reimburse Bank for all reasonable legal fees and expenses incurred in connection with the Existing Loan Documents and this Agreement.
7. AUTHORIZATION TO FILE. Borrower hereby authorizes Bank to file UCC financing statements without notice to Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in order to further perfect or protect Banks interest in the Collateral, including a notice that any disposition of the Collateral, by either the Borrower or any other Person, shall be deemed to violate the rights of the Bank under the Code.
8. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.
9. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and reaffirms all terms and conditions (as they may be modified by this Agreement) of all security or other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.
10. NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and Borrower hereby RELEASES Bank from any liability thereunder.
11. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the existing Obligations, Bank is relying upon Borrowers representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Banks agreement to modifications to the existing Obligations pursuant to this Agreement in no way shall obligate Bank to make any future modifications to the Obligations. Nothing in this Agreement shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker will be released by virtue of this Agreement.
12. RIGHT OF SET-OFF. In consideration of Banks agreement to enter into this Agreement, Borrower hereby reaffirms and hereby grants to Bank, a lien, security interest and right of set off as security for all Obligations to Bank, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity under the control of Silicon
6
Valley Bank (including a Bank subsidiary) or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Bank may set off the same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the loan. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
13. JURISDICTIONNENUE. Section 11 of the Loan Agreement is hereby incorporated by reference in its entirety.
14. COUNTERSIGNATURE. This Agreement shall become effective only when it shall have been executed by Borrower and Bank.
[The remainder of this page is intentionally left blank]
7
This Agreement is executed as of the date first written above.
MAVENIR SYSTEMS, INC. | ||
By | /s/ Terry Hungle | |
Name: | Terry Hungle | |
Title: | Chief Financial Officer |
MAVENIR HOLDINGS, INC. | ||
By | /s/ Terry Hungle | |
Name: | Terry Hungle | |
Title: | Chief Financial Officer |
MAVENIR SYSTEMS IP HOLDINGS, LLC | ||
By | /s/ Terry Hungle | |
Name: | Terry Hungle | |
Title: | Vice President |
MAVENIR SYSTEMS HOLDINGS LIMITED | ||
By | /s/ Terry Hungle | |
Name: | Terry Hungle | |
Title: | Director |
MAVENIR SYSTEMS UK LTD. | ||
By | /s/ Terry Hungle | |
Name: | Terry Hungle | |
Title: | Director |
MAVENIR SYSTEMS PTE LTD. | ||
By | /s/ Terry Hungle | |
Name: | Terry Hungle | |
Title: | Director |
BANK: | ||
SILICON VALLEY BANK | ||
By | ||
Name: | ||
Title: |
[Signature page to Second Loan Modification Subordinated Loan and Security Agreement]
This Agreement is executed as of the date first written above.
MAVENIR SYSTEMS, INC. | ||
By | ||
Name: | Terry Hungle | |
Title: | Chief Financial Officer |
MAVENIR HOLDINGS, INC. | ||
By | ||
Name: | Terry Hungle | |
Title: | Chief Financial Officer |
MAVENIR SYSTEMS IP HOLDINGS, LLC | ||
By | ||
Name: | Terry Hungle | |
Title: | Vice President |
MAVENIR SYSTEMS HOLDINGS LIMITED | ||
By | ||
Name: | Terry Hungle | |
Title: | Director |
MAVENIR SYSTEMS UK LTD. | ||
By | ||
Name: | Terry Hungle | |
Title: | Director |
MAVENIR SYSTEMS PTE LTD. | ||
By | ||
Name: | Terry Hungle | |
Title: | Director |
BANK: | ||
SILICON VALLEY BANK | ||
By | /s/ Brendan P. Quinn | |
Name: | Brendan P. Quinn | |
Title: | V P |
[Signature page to Second Loan Modification Subordinated Loan and Security Agreement]
Exhibit 10.28
INTELLECTUAL PROPERTY SECURITY AGREEMENT
INTELLECTUAL PROPERTY SECURITY AGREEMENT dated as of October 18, 2012 by and among SILICON VALLEY BANK, a California corporation with a loan production office located at 14185 Dallas Parkway, Suite 760, Dallas TX 75254 (Bank), MAVENIR SYSTEMS, INC., a Delaware corporation (Mavenir), MAVENIR HOLDINGS, INC., a Delaware corporation, (Holdings and together with Mavenir, individually and collectively, jointly and severally, the Grantor) each with offices located at 1651 North Glenville Drive, Suite 216, Richardson, Texas 75081.
RECITALS
A. Bank has agreed to make certain advances of money and to extend certain financial accommodation to Grantor (the Loans) in the amounts and manner set forth in (i) that certain Senior Loan and Security Agreement by and among Bank and Grantor, dated as of October 18, 2012 (the Senior Loan Agreement) and (ii) that certain Subordinated Loan and Security Agreement by and among Bank and Grantor, dated as of October 18, 2012 (the Subordinated Loan Agreement and together with the Senior Loan Agreement, each as the same may be amended, modified or supplemented from time to time, collectively the Loan Agreements; capitalized terms used herein are used as defined in the Loan Agreement). Bank is willing to make the Loans to Grantor, but only upon the condition, among others, that Grantor shall grant to Bank a security interest in certain Copyrights, Trademarks, Patents, and Mask Works (as each term is described below) to secure the obligations of Grantor under the Loan Agreements.
B. Pursuant to the terms of the Loan Agreements, Grantor has granted to Bank a security interest in all of Grantors right, title and interest, whether presently existing or hereafter acquired, in, to and under all of the Collateral.
C. Banks security interest in the assets of Grantor securing the Obligations of Grantor to Bank under the Subordinated Loan Agreement shall be junior and subordinate to Banks security interest in the assets of Grantor securing the Obligations of Grantor under the Senior Loan Agreement.
NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, and intending to be legally bound, as collateral security for the prompt and complete payment when due of its obligations under the Loan Agreements, Grantor hereby represents, warrants, covenants and agrees as follows:
AGREEMENT
To secure its obligations under the Loan Agreements, Grantor grants and pledges to Bank a security interest in all of Grantors right, title and interest in, to and under its intellectual property (all of which shall collectively be called the Intellectual Property Collateral), including, without limitation, the following:
1. Any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing, created, acquired or held, including without limitation those set forth on Exhibit A attached hereto (collectively, the Copyrights);
2. Any and all trade secrets, and any and all intellectual property rights in computer software and computer software products now or hereafter existing, created, acquired or held;
3. Any and all design rights that may be available to Grantor now or hereafter existing, created, acquired or held;
4. All patents, patent applications and like protections including, without limitation, improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same, including without limitation the patents and patent applications set forth on Exhibit B attached hereto (collectively, the Patents);
5. Any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Grantor connected with and symbolized by such trademarks, including without limitation those set forth on Exhibit C attached hereto (collectively, the Trademarks);
6. All mask works or similar rights available for the protection of semiconductor chips, now owned or hereafter acquired, including, without limitation those set forth on Exhibit D attached hereto (collectively, the Mask Works);
7. Any and all claims for damages by way of past, present and future infringements of any of the rights included above, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the intellectual property rights identified above;
8. All licenses or other rights to use any of the Copyrights, Patents, Trademarks, or Mask Works and all license fees and royalties arising from such use to the extent permitted by such license or rights;
9. All amendments, extensions, renewals and extensions of any of the Copyrights, Trademarks, Patents, or Mask Works; and
10. All proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the foregoing.
Notwithstanding the foregoing, the security interest shall not apply to any Excluded Property (as defined in the Loan Agreement).
This security interest is granted in conjunction with the security interest granted to Bank under the Loan Agreements. The rights and remedies of Bank with respect to the security interest granted hereby are in addition to those set forth in the Loan Agreements and the other Loan Documents, and those which are now or hereafter available to Bank as a matter of law or equity. Each right, power and remedy of Bank provided for herein or in the Loan Agreement or any of the Loan Documents, or now or hereafter existing at law or in equity shall be cumulative and concurrent and shall be in addition to every right, power or remedy provided for herein and the exercise by Bank of any one or more of the rights, powers or remedies provided for in this Intellectual Property Security Agreement, the Loan Agreements or any of the other Loan Documents, or now or hereafter existing at law or in equity, shall not preclude the simultaneous or later exercise by any person, including Bank, of any or all other rights, powers or remedies.
2
[Signature page follows.]
3
IN WITNESS WHEREOF, the parties have caused this Intellectual Property Security Agreement to be executed as a sealed instrument under the laws of the State of New York, as of the first date written above.
GRANTORS: | ||||||
Address of Grantor: |
MAVENIR SYSTEMS, INC. | |||||
Mavenir Systems, Inc. |
||||||
14185 Dallas Parkway, Suite 760 Dallas TX 75254 Attn: Sam Garrett, General Counsel |
By | /s/ Terry Hungle | ||||
Name: | Terry Hungle | |||||
Title: | Chief Financial Officer |
MAVENIR HOLDINGS, INC. | ||||||
Mavenir Holdings, Inc. |
||||||
14185 Dallas Parkway, Suite 760 | By | /s/ Terry Hungle | ||||
Dallas TX 75254 | Name: | Terry Hungle | ||||
Attn: Sam Garrett, General Counsel | Title: | Secretary and Chief Financial Officer |
[Signature Page to IP Security Agreement]
BANK: | ||||||
Address of Bank: |
SILICON VALLEY BANK | |||||
Silicon Valley Bank |
By: | /s/ Jennifer Bentley | ||||
14185 Dallas Parkway, Suite 780 |
Name: | Jennifer Bentley | ||||
Dallas, Texas 75254 |
Title: | Relationship Manager | ||||
Attn: Jennifer Bentley Fax: (972) 212-7289 Email: jbentley@svb.com |
[Signature Page to IP Security Agreement]
EXHIBIT A
Copyrights
Description | Registration/ Application Number |
Registration/ Application Date | ||
None |
EXHIBIT B
US Patents
TITLE |
Application Number |
Application Date |
Patent Number |
Patent Date | ||||||||
AUTHENTICATION INTERWORKING |
11/550,343 | 17-Oct-06 | ||||||||||
PROVIDING MOBILE CORE SERVICES INDEPENDENT OF A MOBILE DEVICE |
11/550,334 | 17-Oct-06 | 7,813,730 | 12-Oct-10 | ||||||||
DISCOVERING CELLULAR NETWORK ELEMENTS |
12/119,633 | 13-May-08 | ||||||||||
ACCESSING CORE NETWORK SERVICES |
12/417,486 | 2-Apr-09 | ||||||||||
PROVIDING ENHANCED EDGE SERVICES TO DEVICES IN FEMTOZONES |
12/510,992 | 28-Jul-09 | ||||||||||
SWITCHING DATA STREAMS BETWEEN CORE NETWORKS |
12/846,718 | 29-Jul-10 | ||||||||||
INTERNETWORKING FOR CIRCUIT SWITCHED FALLBACK |
13/480,792 | 25-May-12 | ||||||||||
CONTEXT-SENSITIVE MULTIMEDIA MESSAGE SERVICE RESPONSE |
11/234,648 | 23-Sep-05 | ||||||||||
METHOD FOR PROCESSING A MESSAGE |
11/559,463 | 14-Nov-06 | 8,073,473 | 6-Dec-11 | ||||||||
APPARATUS AND METHOD FOR IMPROVING SHORT MESSAGE SERVICE DEPENDABILITY |
11/351,566 | 10-Feb-06 | 7,774,006 | 20-Aug-10 | ||||||||
APPARATUS AND METHOD FOR ROUTING MULTIMEDIA MESSAGES BETWEEN A USER AGENT AND MULTIPLE MULTIMEDIA MESSAGE SERVICE CENTERS |
10/747,366 | 23/30/3003 | 7,649,895 | 19-Jan-10 | ||||||||
MEASURING MEDIA DISTRIBUTION AND IMPACT IN A MOBILE COMMUNICATION NETWORK |
11/674,355 | 13-Feb-07 | 7,760,684 | 20-Jul-10 | ||||||||
TERMINAL DEVICE CONTROL SERVER AND METHOD THEREFOR |
11/849,940 | 4-Sep-07 | ||||||||||
METHOD AND SYSTEM FOR MANAGING MESSAGE-BASED APPLICATIONS AND APPLICATIONS PROVIDERS IN A COMMUNICATIONS NETWORK |
10/164,605 | 10-Jun-02 | 7,283,539 | 16-Oct-07 |
METHOD AND APPARATUS FOR PROVIDING SERVICE SELECTION, REDIRECTION AND MANAGING OF SUBSCRIBER ACCESS TO MULTIPLE WAP (WIRELESS APPLICATION PROTOCOL) GATEWAYS SIMULTANEOUSLY |
09/933,781 | 20-Aug-11 | 7,039,037 | 2-May-06 |
Foreign Patents
TITLE |
Application Number |
Application Date |
Patent Number |
Patent Date |
Country | |||||||||
INTERNETWORKING FOR CIRCUIT SWITCHED FALLBACK |
|
PCT/US2012 /039641 |
|
25-May-12 | WIPO | |||||||||
APPARATUS AND METHOD FOR PROVIDING A CONTEXT- SENSITIVE MULTIMEDIA MESSAGE SERVICE RESPONSE |
06790702.2 | 19-Sep-06 | EP | |||||||||||
METHOD FOR PROCESSING A MESSAGE |
6804726.5 | 14-Nov-06 | EP | |||||||||||
APPARATUS AND METHOD FOR IMPROVING SHORT MESSAGE SERVICE DEPENDABILITY |
07719360.5 | 30-Jan-07 | 1985071 | 2-Mar-11 | EP | |||||||||
APPARATUS AND METHOD FOR IMPROVING SHORT MESSAGE SERVICE DEPENDABILITY |
07719360.5 | 30-Jan-07 | 1985071 | 2-Mar-11 | ES | |||||||||
APPARATUS AND METHOD FOR IMPROVING SHORT MESSAGE SERVICE DEPENDABILITY |
07719360.5 | 30-Jan-07 | 1985071 | 2-Mar-11 | FI | |||||||||
APPARATUS AND METHOD FOR IMPROVING SHORT MESSAGE SERVICE DEPENDABILITY |
07719360.5 | 30-Jan-07 | 1985071 | 2-Mar-11 | FR | |||||||||
APPARATUS AND METHOD FOR IMPROVING SHORT MESSAGE SERVICE DEPENDABILITY |
07719360.5 | 30-Jan-07 | 1985071 | 2-Mar-11 | GB | |||||||||
APPARATUS AND METHOD FOR IMPROVING SHORT MESSAGE SERVICE DEPENDABILITY |
07719360.5 | 30-Jan-07 | 1985071 | 2-Mar-11 | IE | |||||||||
APPARATUS AND METHOD FOR IMPROVING SHORT MESSAGE SERVICE DEPENDABILITY |
07719360.5 | 30-Jan-07 | 1985071 | 2-Mar-11 | NL | |||||||||
APPARATUS AND METHOD FOR IMPROVING SHORT MESSAGE SERVICE DEPENDABILITY |
07719360.5 | 30-Jan-07 | 1985071 | 2-Mar-11 | PL | |||||||||
APPARATUS AND METHOD FOR IMPROVING SHORT MESSAGE SERVICE DEPENDABILITY |
07719360.5 | 30-Jan-07 | 1985071 | 2-Mar-11 | EP | |||||||||
APPARATUS AND METHOD FOR IMPROVING SHORT MESSAGE SERVICE DEPENDABILITY |
07719360.5 | 30-Jan-07 | 1985071 | 2-Mar-11 | ES |
APPARATUS AND METHOD FOR IMPROVING SHORT MESSAGE SERVICE DEPENDABILITY |
07719360.5 | 30-Jan-07 | 1985071 | 2-Mar-11 | CZ | |||||||||
APPARATUS AND METHOD FOR IMPROVING SHORT MESSAGE SERVICE DEPENDABILITY |
07719360.5 | 30-Jan-07 | 1985071 | 2-Mar-11 | DE | |||||||||
APPARATUS AND METHOD FOR ROUTING MULTIMEDIA MESSAGES BETWEEN A USER AGENT AND MULTIPLE MULTIMEDIA MESSAGE SERVICE CENTERS |
20040309859 | 30-Dec-04 | 20040309859 (B2) | 11-Sep-08 | AU | |||||||||
APPARATUS AND METHOD FOR ROUTING MULTIMEDIA MESSAGES BETWEEN A USER AGENT AND MULTIPLE MULTIMEDIA MESSAGE SERVICE CENTERS |
04802386.5 | 30-Dec-04 | 1704683 | 11-May-11 | EP | |||||||||
APPARATUS AND METHOD FOR ROUTING MULTIMEDIA MESSAGES BETWEEN A USER AGENT AND MULTIPLE MULTIMEDIA MESSAGE SERVICE CENTERS |
04802386.5 | 30-Dec-04 | 1704683 | 11-May-11 | CZ | |||||||||
APPARATUS AND METHOD FOR ROUTING MULTIMEDIA MESSAGES BETWEEN A USER AGENT AND MULTIPLE MULTIMEDIA MESSAGE SERVICE CENTERS |
04802386.5 | 30-Dec-04 | 1704683 | 11-May-11 | FI | |||||||||
APPARATUS AND METHOD FOR ROUTING MULTIMEDIA MESSAGES BETWEEN A USER AGENT AND MULTIPLE MULTIMEDIA MESSAGE SERVICE CENTERS |
04802386.5 | 30-Dec-04 | 1704683 | 11-May-11 | FR | |||||||||
APPARATUS AND METHOD FOR ROUTING MULTIMEDIA MESSAGES BETWEEN A USER AGENT AND MULTIPLE MULTIMEDIA MESSAGE SERVICE CENTERS |
04802386.5 | 30-Dec-04 | 1704683 | 11-May-11 | DE | |||||||||
APPARATUS AND METHOD FOR ROUTING MULTIMEDIA MESSAGES BETWEEN A USER AGENT AND MULTIPLE MULTIMEDIA MESSAGE SERVICE CENTERS |
04802386.5 | 30-Dec-04 | 1704683 | 11-May-11 | IE |
APPARATUS AND METHOD FOR ROUTING MULTIMEDIA MESSAGES BETWEEN A USER AGENT AND MULTIPLE MULTIMEDIA MESSAGE SERVICE CENTERS |
04802386.5 | 30-Dec-04 | 1704683 | 11-May-11 | NL | |||||||||
APPARATUS AND METHOD FOR ROUTING MULTIMEDIA MESSAGES BETWEEN A USER AGENT AND MULTIPLE MULTIMEDIA MESSAGE SERVICE CENTERS |
04802386.5 | 30-Dec-04 | 1704683 | 11-May-11 | PL | |||||||||
APPARATUS AND METHOD FOR ROUTING MULTIMEDIA MESSAGES BETWEEN A USER AGENT AND MULTIPLE MULTIMEDIA MESSAGE SERVICE CENTERS |
04802386.5 | 30-Dec-04 | 1704683 | 11-May-11 | ES | |||||||||
APPARATUS AND METHOD FOR ROUTING MULTIMEDIA MESSAGES BETWEEN A USER AGENT AND MULTIPLE MULTIMEDIA MESSAGE SERVICE CENTERS |
04802386.5 | 30-Dec-04 | 1704683 | 11-May-11 | UK | |||||||||
METHOD AND SYSTEM FOR MANAGING MESSAGE-BASED APPLICATIONS AND APPLICATIONS PROVIDERS IN A COMMUNICATIONS NETWORK |
20030233737 | 6-Jun-03 | 2003233737 (B2) | 4-Jun-09 | AU | |||||||||
METHOD AND SYSTEM FOR MANAGING MESSAGE-BASED APPLICATIONS AND APPLICATIONS PROVIDERS IN A COMMUNICATIONS NETWORK |
03727107.9 | 6-Jun-03 | 1516477 | 28-Sep-11 | EP | |||||||||
METHOD AND SYSTEM FOR MANAGING MESSAGE-BASED APPLICATIONS AND APPLICATIONS PROVIDERS IN A COMMUNICATIONS NETWORK |
03727107.9 | 6-Jun-03 | 1516477 | 28-Sep-11 | ES | |||||||||
METHOD AND SYSTEM FOR MANAGING MESSAGE-BASED APPLICATIONS AND APPLICATIONS PROVIDERS IN A COMMUNICATIONS NETWORK |
03727107.9 | 6-Jun-03 | 1516477 | 28-Sep-11 | FI |
METHOD AND SYSTEM FOR MANAGING MESSAGE-BASED APPLICATIONS AND APPLICATIONS PROVIDERS IN A COMMUNICATIONS NETWORK |
03727107.9 | 6-Jun-03 | 1516477 | 28-Sep-11 | FR | |||||||||
METHOD AND SYSTEM FOR MANAGING MESSAGE-BASED APPLICATIONS AND APPLICATIONS PROVIDERS IN A COMMUNICATIONS NETWORK |
03727107.9 | 6-Jun-03 | 1516477 | 28-Sep-11 | GB | |||||||||
METHOD AND SYSTEM FOR MANAGING MESSAGE-BASED APPLICATIONS AND APPLICATIONS PROVIDERS IN A COMMUNICATIONS NETWORK |
03727107.9 | 6-Jun-03 | 1516477 | 28-Sep-11 | IE | |||||||||
METHOD AND SYSTEM FOR MANAGING MESSAGE-BASED APPLICATIONS AND APPLICATIONS PROVIDERS IN A COMMUNICATIONS NETWORK |
03727107.9 | 6-Jun-03 | 1516477 | 28-Sep-11 | NL | |||||||||
METHOD AND SYSTEM FOR MANAGING MESSAGE-BASED APPLICATIONS AND APPLICATIONS PROVIDERS IN A COMMUNICATIONS NETWORK |
03727107.9 | 6-Jun-03 | 1516477 | 28-Sep-11 | PL | |||||||||
METHOD AND SYSTEM FOR MANAGING MESSAGE-BASED APPLICATIONS AND APPLICATIONS PROVIDERS IN A COMMUNICATIONS NETWORK |
03727107.9 | 6-Jun-03 | 1516477 | 28-Sep-11 | CZ | |||||||||
METHOD AND SYSTEM FOR MANAGING MESSAGE-BASED APPLICATIONS AND APPLICATIONS PROVIDERS IN A COMMUNICATIONS NETWORK |
03727107.9 | 6-Jun-03 | 1516477 | 28-Sep-11 | DE | |||||||||
METHOD AND SYSTEM FOR MANAGING MESSAGE-BASED APPLICATIONS AND APPLICATIONS PROVIDERS IN A COMMUNICATIONS NETWORK |
20050000158 | 6-Jun-03 | 200500158 (A) | 29-Mar-06 | DE | |||||||||
METHOD AND SYSTEM FOR CONTROLLING MESSAGES IN A COMMUNICATION NETWORK |
03739916.9 | 3-Jul-02 | 1523837 | 10.10.2007 | DE | |||||||||
METHOD AND SYSTEM FOR CONTROLLING MESSAGES IN A COMMUNICATION NETWORK |
03739916.9 | 3-Jul-02 | 1523837 | 10.10.2007 | DE |
METHOD AND SYSTEM FOR CONTROLLING MESSAGES IN A COMMUNICATION NETWORK |
03739916.9 | 3-Jul-02 | 1523837 | 10.10.2007 | DE | |||||||||||
METHOD AND SYSTEM FOR CONTROLLING MESSAGES IN A COMMUNICATION NETWORK |
03739916.9 | 3-Jul-02 | 1523837 | 10.10.2007 | DE | |||||||||||
METHOD AND SYSTEM FOR CONTROLLING MESSAGES IN A COMMUNICATION NETWORK |
03739916.9 | 3-Jul-02 | 1523837 | 10.10.2007 | DE | |||||||||||
METHOD AND SYSTEM FOR CONTROLLING MESSAGES IN A COMMUNICATION NETWORK |
03739916.9 | 3-Jul-02 | 1523837 | 10.10.2007 | DE | |||||||||||
METHOD AND SYSTEM FOR CONTROLLING MESSAGES IN A COMMUNICATION NETWORK |
03739916.9 | 3-Jul-02 | 1523837 | 10.10.2007 |
EXHIBIT C
Trademarks
Trademark Description |
Application Number |
Registration Number |
Application Date |
Registration Date | ||||
MAVENIR SYSTEMS |
78/925,401 | 3,648,937 | 7/10/2006 | 6/30/2019 | ||||
mOne |
77/871,140 | 3,986,497 | 11/12/2009 | 6/28/2011 |
EXHIBIT D
Mask Works
Description |
Registration/ Application Number |
Registration/ Application Date |
None
Exhibit 10.29
EXECUTION COPY
[***] indicates material that has been omitted pursuant to a Request for Confidential Treatment filed with the Securities and Exchange Commission. A complete copy of this agreement, including redacted portions so indicated, has been filed separately with the Securities and Exchange Commission.
RESELLER OEM AGREEMENT
This Reseller OEM Agreement (this Agreement) is made this 28th day of October, 2008 (Effective Date) between Starent Networks, Corp., a Delaware corporation, with offices at 30 International Place, Tewksbury, Massachusetts 01876 (Starent) and Mavenir Systems, Inc., a Delaware corporation, with offices at 1651 N Glenville, Suite 201, Richardson, TX 75081 (Mavenir). (Mavenir and Starent are referred to individually as a Party and collectively as the Parties).
WHEREAS, Mavenir develops, manufactures, sells and licenses Mavenir Products, consisting of hardware and software;
WHEREAS, Starent develops, manufactures, sells and licenses Starent Products, consisting of hardware and software; and
WHEREAS, Starent and Mavenir desire to cooperate to permit Starent to offer and provide Mavenir Products to Starents customers; and
NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained, Starent and Mavenir hereby agree as follows:
1. DEFINITIONS
1.1 Acceptance has the meaning set forth in Section 6.
1.2 Acceptance Criteria means the criteria established by any End User or Distributor in connection with the Acceptance of a Mavenir Product.
1.3 Affiliate means, with respect to a given entity, any company or other legally recognizable entity that is Controlled by, Controls, or is under common Control with such entity. Control means direct or indirect (e.g., through any number of successive tiers) ownership of (a) more than 50% of the outstanding shares having the right to vote for the election of directors or other managing authority of the subject entity; (b) in the case of an entity which does not have outstanding shares (e.g. a partnership, joint venture or unincorporated association), more than 50% of the ownership interests having the right to make decisions for the subject entity; or (c) the power, directly or indirectly, to direct or cause the direction of the management and policies of such entity, whether through the ownership of voting securities, interests, or otherwise. Each such corporation, company, or entity will be deemed an Affiliate only so long as such ownership or control exists.
1.4 CDMA Femto Solution shall mean a solution set forth in the statement of work attached hereto as Appendix G, which generally is comprised of Starents P/I/S CSCF and security gateway, Mavenirs Tunneled IOS, ICS, SCC AS, Domain Selection and IM TAS products as well as various other third party components that shall be provided by a third party or by Starent as the overall systems integrator (such as HSS and MGCF/MGW).
1.5 Deliverables means Mavenir Product and Mavenir Services.
Confidential and Proprietary
1.6 Distributor shall mean any Starent reseller, distributor or any system integrator.
1.7 End User shall mean the final end user or licensee which has acquired the Mavenir Product from Starent or Starents Distributors specifically for its own internal use and not for resale, marketing or distribution to any third party.
1.8 Escrow Agreement means the escrow agreement attached as Appendix D hereto.
1.9 Fees shall mean the fees set forth on Appendix B hereto.
1.10 Field Trial means product demonstration and/or interoperability tests that are conducted in a real network environment designated or organized by Starent in conjunction with an End User.
1.11 Intellectual Property shall mean (a) patents, patent applications, patent disclosures and all related continuation, continuation-in-part, divisional, reissue, reexamination, utility model, certificate of invention and design patents, patent applications, registrations and applications for registrations; (b) trademarks, service marks, trade dress, Internet domain names, logos, trade names and corporate names and registrations and applications for registration thereof; (c) copyrights and registrations and applications for registration thereof; (d) mask works and registrations and applications for registration thereof; (e) computer software, software tools, source code, data and documentation; (f) inventions, trade secrets and confidential business information, whether patentable or non-patentable and whether or not reduced to practice, know-how, manufacturing and product processes and techniques, research and development information, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and Mavenir lists and information; (g) any other information relating to any research project, work in process, future development or product roadmap, scientific, engineering, manufacturing, marketing or business plan or financial or personnel matter or other type of information relating to either Party hereto or its Affiliates; and (h) copies and tangible embodiments thereof.
1.12 Interoperability Support means assistance in product setup, configuration and troubleshooting of the Mavenir Product in the course of interoperability testing of any Mavenir Product with an End Users network and equipment and/or Starent Product, as needed from time to time.
1.13 Laboratory Test means product demonstration and/or interoperability tests, conducted in Starent laboratories or other laboratories selected by mutual agreement of Starent and Mavenir, for an End User or any Distributor.
1.14 Mavenir Documentation means the End User documentation provided by Mavenir to Starent relating to the Mavenir Product.
1.15 Mavenir EULA means the Mavenir End User License Agreement, the form of which is attached hereto as
Appendix H.
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1.16 Mavenir Hardware means the hardware products identified in Appendix A, as well as any hardware procured by Starent from a Mavenir-approved supplier to be used by Starent or Mavenir to produce a Mavenir Product, whether or not re-branded as a Starent product.
1.17 Mavenir Maintenance and Support means commercial product support that Mavenir shall provide and offer to Starent in connection with Mavenir Products distributed by or for Starent, as set forth in Appendix C.
1.18 Mavenir Products means the hardware and software provided by Mavenir to Starent hereunder from time to time, including, without limitation, Mavenir Hardware, Mavenir Software and Mavenir Documentation.
1.19 Mavenir Services shall mean any services provided by Mavenir pursuant to the terms of this Agreement.
1.20 Mavenir Software means the software identified in Appendix A.
1.21 Mavenir Trademarks means the any registered or unregistered trademarks of Mavenir included but not limited to the following: (i) the Mavenir logo, and (ii) any additional trademark owned by Mavenir which Mavenir submits to Starent in writing from time to time pursuant to the notice requirements set forth in Section 16.3. All Mavenir Trademarks shall be considered to be the exclusive property of Mavenir, (subject only to applicable license agreements) whether or not such marks are submitted to Starent.
1.22 Malicious Technology means any software, electronic, mechanical or other means, device or function (e.g. key node, lock, time-out, back door, trapdoor, booby trap, drop dead device, data scrambling device, Trojan Horse) that would allow either Party or a third party to: (i) monitor or gain unauthorized access to the other Party or the customer system of the other Party, (ii) use any electronic self-help mechanism or (iii) restrict, disable, limit or impair the performance of the other Party or the customer system of the other Party.
1.23 Software Updates means commercially available releases of the Mavenir Products that include feature functionality and/or performance improvements and/or corrections to feature deficiencies and/or operation affecting performance and/or documented operation problems.
1.24 Software Upgrades means commercially available releases of the Mavenir Product that include new feature functionality as Mavenir furnishes to its then-current Maintenance and Support End Users or as included in sales by Mavenir of its then current version of any Mavenir Product.
1.25 Starent House Account Customers means the Starent customers set forth on Appendix E and their Affiliates, as amended from time to time.
1.26 Starent Product means any hardware and software developed, sold or licensed by Starent, excluding any Mavenir Product.
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1.27 Support Fees means the annual fees for Mavenir Maintenance and Support set forth on Appendix B hereto.
1.28 Territory means worldwide.
1.29 [***].
1.30 Warrant shall mean that certain Series C Preferred Stock Purchase Warrant in the form attached hereto as
Appendix F.
2. LICENSES AND RESTRICTIONS
2.1 Commercial Distribution Rights.
(a) Subject to and on the terms and conditions set forth herein, (i) Mavenir agrees to sell to Starent Mavenir Hardware ordered by Starent for distribution to End-Users or Starents Distributors in the Territory either under Mavenirs brand name or, at Starents discretion, rebranded as Starent products, upon reasonable advanced written notice to Mavenir (all such rebranding shall comply with the terms of this Agreement, (ii) Mavenir hereby grants Starent a non-exclusive (except as otherwise set forth in Section 2.7 of this Agreement), sublicensable to End Users or Starent Distributors only, non-transferable (except as permitted pursuant to Section 16.12 hereof), royalty-bearing (as defined herein), worldwide license in the Territory to (x) use and sublicense the Mavenir Software in executable form only solely or in connection with the Mavenir Hardware, and (y) offer to sell, import, and distribute, regardless of the number of layers of distribution, sublicenses to use the Mavenir Software solely or in connection with the Mavenir Hardware.
(b) Mavenir will provide [***] to Starent and each Starent Distributor at least five (5) copies of the Mavenir Software to the extent reasonably necessary for backup, archival or disaster recovery purposes only. Starent is not licensed to create copies of the Mavenir Software on its own for any reason. Starent will not alter, remove or destroy any proprietary markings or proprietary legends placed on or contained within the Mavenir Software or Mavenir Documentation.
(c) Mavenir acknowledges that certain End Users have outsourced, or may in the future outsource, their networks to third party outsourcing contractors. Mavenir agrees, upon request by Starent or any Starent Distributor and upon such third party outsourcing contractor agreeing in writing to the terms of all applicable licenses to the Mavenir Products as set forth herein,
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to work with Starent in good faith on a case-by-case basis to timely issue such licenses or sublicenses that would have otherwise been issued to the End User with respect to the Mavenir Product and the Mavenir Documentation to enable such third party outsourcing contractor to, inter alia, operate, upgrade and maintain the applicable End Users network.
(d) Starent shall resell, and Mavenir shall supply, Mavenir Products and Mavenir Services in accordance with this Agreement. To the extent any opportunity requires back-to-back terms and conditions which vary in any material respect from the terms and conditions of this Agreement, and subject to any confidentiality restrictions, Starent agrees to provide a copy of such back-to-back terms and conditions to Mavenir in advance if it may do so without violating its confidentiality obligations to a third party and obtain Mavenirs written agreement to abide by such terms and conditions, which agreement shall not be unreasonably withheld. In the event that Mavenir does not agree to abide by the terms and conditions that vary in any material respect from the terms and conditions of this Agreement or Starent is unable to provide a copy of such back-to-back terms and conditions to Mavenir in advance without violating its confidentiality obligations to a third party, then Starent shall assume all liability for the terms and conditions that vary in any material respect from the terms and conditions of this Agreement.
(e) Starent agrees to use its reasonable best efforts to cause each End User to enter into a Mavenir EULA. In the event that Starent is unable to cause an End User to enter into a Mavenir EULA, then Starent shall cause each End User to agree to licensing terms that are at least as protective of Mavenir and its rights as set forth herein and in the Mavenir EULA.
(f) In the event that Starent does not cause an End User to enter into a Mavenir EULA but does cause such End User to agree to equally protective licensing terms (as described in Section 2.1(e)) and such End User breaches such equally protective licensing terms, Starent shall take, in Starents sole discretion, commercially reasonable efforts to enforce such licensing terms.
2.2 Documentation License.
(a) Mavenir hereby grants a non-exclusive (except as otherwise set forth in Section 2.7 of this Agreement), sublicensable to End Users or Starent Distributors only, and non-transferable (except as permitted pursuant to Section 16.12 hereof), world-wide, royalty-free right and license in the Territory to use, reproduce, translate and modify the Mavenir Documentation, and to distribute the Mavenir Documentation solely in conjunction with the Mavenir Products or in conjunction with marketing activities associated with such products. Starent may combine such Documentation with the documentation Starent provides to End Users or its Distributors.
(b) Starent may make, or have made on its behalf, a reasonable number of copies of the Mavenir Documentation to the extent necessary for Starents internal business purposes. In such event, Starent agrees to reproduce Mavenirs copyright on all copied materials.
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2.3 Evaluation Laboratory License.
(a) Mavenir hereby grants Starent a non-exclusive (except as otherwise set forth in Section 2.7 of this Agreement), sublicensable to Starent Distributors in accordance with Section 2.5(b), non-transferable (except as permitted pursuant to Section 16.12 hereof), royalty-free license to grant object code sublicenses to the Mavenir Software for use in connection with the Mavenir Hardware solely for evaluation and testing of the Mavenir Products in connection with Starent Product which sublicenses are not for commercial use. Evaluation and testing software licenses and all related Hardware shall be provided to Starent and its Distributors [***].
(b) Mavenir will provide [***] to Starent a reasonably sufficient number of copies of the Mavenir Software (not to exceed ten (10) or such larger number as Mavenir shall approve in its sole discretion) for internal use only testing purposes.
2.4 Evaluation Trial License. Mavenir hereby grants Starent a non-exclusive (except as otherwise set forth in Section 2.7 of this Agreement), non-transferable (except as permitted pursuant to Section 17.13 hereof), royalty-free license to grant object code sublicenses to the Mavenir Software for use in connection with the Mavenir Hardware, for each new customer of Starent and for the initial trial for each Mavenir Product that is introduced by Starent to each such customer, capped at five free trials per year in the aggregate. Additionally, Mavenir shall provide one [***] Field Trial per year for each Starent Distributor. The trial period and scope will be mutually agreed upon in writing by Mavenir and Starent or Starents Distributor. A written trial agreement between Mavenir and the End User will be required for any Field Trial conducted by Starent or a Starent Distributor with any End User. The terms and conditions of all additional Field Trials must be mutually agreed to in writing by the Parties. Mavenirs agreement to the terms and conditions of each trial agreement, including, without limitation, the trial period and scope, shall not be umeasonably withheld. Mavenir agrees to provide Mavenir Software [***] for all trials of all Mavenir Products.
2.5 Product Restrictions.
(a) Except as expressly permitted herein, Starent agrees not to copy, modify, translate, decompile, reverse engineer, disassemble, or otherwise determine or attempt to determine source code for the executable code of the Mavenir Products or to create any derivative works based upon the Mavenir Products.
(b) Starent may sublicense the Mavenir Software to End Users or Starents Distributors pursuant to Starents software license agreement as long as it provides substantially the same protections as follows: (a) restrict use of the Mavenir Software to object code only; (b) prohibit the decompiling, reverse engineering, reverse compiling, or modifying of the Mavenir Software, except to the extent permitted by law; (c) prohibit title of the Mavenir Software from passing to the End User, and (d) obtain written agreement from all such End Users or Starent Distributors to comply with the terms of this Section 2.5.
2.6 Mavenir Trademark and Copyright License.
(a) Starent may re-brand any Mavenir Product provided by Mavenir under this Agreement as a Starent product, so long as such rebranding complies with the terms set forth herein. Notwithstanding anything herein to the contrary, Starents re-branding may not include, among other items, (i) revising the Mavenir Software graphical user interface, (ii) modifying source or object code, or (iii) revising or modifying any Mavenir Documentation to reflect the Starent brand. Mavenir hereby grants Starent all necessary rights and licenses to re-brand any Mavenir Product as a Starent product as provided by this Section 2.6.
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(b) Mavenir hereby grants to Starent, and Starent accepts, a nontransferable, non-sublicensable (except to End Users or Starent Distributors), and non-exclusive license (except as set forth in Section 2.7 of this Agreement) to use the Trademarks in connection with Starents distribution, marketing, branding, promotion and advertising of the Mavenir Products, and as contained in the packaging, software and Mavenir Documentation. Mavenir also agrees that Starent may accurately reproduce in physical or electronic form any marketing collateral of Mavenir with respect to the Mavenir Products in connection with its performance of this Agreement.
2.7 Exclusivity.
(a) Subject to Section 2.7(b), Starent is hereby granted the exclusive right to market and sell Mavenirs CDMA Femto Solution, and any successor product of Mavenir, within the Territory and Mavenir agrees not to market or sell any of Mavenirs CDMA Femto Solution or successor products within the Territory during the term of this Agreement and for one year after the termination of this Agreement.
(b) In the event a Starent customer or potential customer provides Starent with written notice that it does not wish to procure Mavenirs CDMA Femto Solution from Starent, and Starent has had no more than 60 days to discuss a potential sale with such Starent customer or potential customer, then Starent shall provide a copy of such written notice to Mavenir within twenty-four (24) hours of the earlier of (i) the end of such 60 day period or (ii) such time as Starent discontinues its discussions with the customer or potential customer, and Starents exclusive right to sell the CDMA Femto solution solely with respect to that specific opportunity with that specific Starent customer or potential customer shall terminate immediately.
(c) Without limiting Starents rights pursuant to clause (b) above, in the event that Starent brings a sales opportunity for any Mavenir Products (other than the CDMA Femto Solution which is governed by clause (b) above) to Mavenir with respect to a customer or potential customer and Starent presents a reasonable account plan with respect to such customer or potential customer, Starent will have (i) one (1) year of exclusivity with respect to sales of Mavenir Products with respect to that specific customer or potential customer if the customer or potential customer [***], or (ii) six (6) months of exclusivity with respect to sales of Mavenir Products with respect to that specific customer or potential customer if the customer or potential customer [***].
2.8 Section 365(n) Bankruptcy Election. All rights and licenses granted under or pursuant to any Section of this Agreement, including Section 2.1, 2.2, 2.3 and 2.4 hereof, are rights to intellectual property (as defined in Section 101(56) of Title 11 of the United States Code, as amended (the Bankruptcy Code)). The Parties agree that each Party may elect to retain and may fully exercise all of its rights and elections under the Bankruptcy Code with respect to intellectual property.
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3. DELIVERY; INTEROPERABILITY TESTING
3.1 Delivery of Mavenir Software. Mavenir shall deliver to Starent, upon Starents request from time to time, the latest revision of the requested Mavenir Software.
3.2 Mavenir Documentation. Mavenir shall also provide to Starent, upon Starents reasonable request and [***], source files for the Mavenir Documentation in a format that can be easily converted and integrated into Starents End User documentation library. These files may not be modified without Mavenirs written approval, and any such Mavenir Documentation added to or integrated into the Starent End User documentation library shall be noted by a separate heading and clearly identified as Mavenir Documentation.
3.3 Field Trials and Laboratory Testing. Starent and Mavenir shall cooperate in the Field Trial and Laboratory Testing process for each End User or Distributor, as applicable, to promote a successful result and enable sales by Starent. Except as may be mutually agreed in writing otherwise, Starent agrees that it will be responsible for logistical and tactical aspects of Field Trials and Laboratory Testing, as well as supply of any necessary third party equipment. Mavenir agrees that it will provide, for the [***] trials set forth in Section 2.4 and for the fees and costs agreed upon by the Parties for all other Field Trials, Mavenir Products, the Interoperability Support and any necessary additional expertise to assist Starent in the foregoing, including, without limitation, the provision of any Software Updates and Software Upgrades as reasonably requested by Starent from time to time to address concerns identified during Field Trials or Laboratory Testing.
3.4 Expenses. Except for reasonable travel and lodging expenses incurred by Mavenir in connection with the provision of on-site support by Mavenir at Starents request, Starent and Mavenir agree that each Party is solely responsible for its own expenses in connection with performing its obligations under this Agreement.
3.5 Lab Systems for Starent. Withion thirty (30) days of the Effective Date, Mavenir shall provide one Lab System to Starent [***] in order to support the T Mobile account and which is configured substantially the same as the Lab System previously purchased by Starent from Mavenir prior to the Effective Date. Upon request by Starent, Mavenir will provide to Starent each lab system requested by Starent for a fee [***].
3.6 Coordinators. The Parties agree to designate managers to coordinate the activities contemplated by this Agreement, including the receipt and dispatch of communications and coordinating technical liaisons between the parties. Each Party may change its program manager at any time by written notification to the other Party.
3.7 Performance. Starent may, upon reasonable notice and not more than twice per year, inspect Mavenirs performance of its obligations under this Agreement, however, Starents inspection (or lack of inspection) will not be an acceptance of any Deliverables, a waiver of any right or warranty, or preclude Starent from rejecting non-conforming services or Deliverables in accordance with the terms hereof. Such inspection will not interfere with Mavenirs performance hereunder. Such inspections will take place at a mutually agreeable time and location.
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3.8 Mavenir Personnel. Mavenir will replace any of its personnel that are working directly with Starent on any opportunity that derives from this Agreement that Starent reasonably requests to have replaced. Any replacement personnel, whether replaced upon request of Starent or otherwise, will be individuals possessing reasonably comparable or greater experience, qualifications and credentials as the persons being replaced and will be subject to Starents prior written approval (which will not be unreasonably withheld or delayed). In the case of any permitted replacements of personnel, Mavenir will use commercially reasonable efforts to provide overlapping service time with replaced personnel, however there will be no adjustment to the scheduled delivery date for services or Deliverables. Any request to replace personnel pursuant to this Section 3.8 must be made by one of Starents executive officers that directly reports to the Chief Executive Officer of Starent.
3.9 Use of Subcontractors. Mavenir will not use any subcontractors to work directly with Starent on any opportunity that derives from this Agreement without the prior written consent of Starent, other than those subcontractors Mavenir uses in its manufacturing process. Upon Starents request, Mavenir will deliver to Starent a reasonably detailed written explanation of the reasons for engaging the subcontractor, an explanation of its qualifications and its rates. Mavenir will not be relieved of its obligations under this Agreement by use of any such subcontractors and will be responsible for any subcontractors acts or omissions as if they were acts or omissions of Mavenir. If Starent reasonably determines that the performance or conduct of any Mavenir subcontractor is unsatisfactory, Starent may notify Mavenir of its determination in writing, indicating the reasons therefore, and Mavenir will promptly take all reasonably necessary actions to remedy the performance or conduct of such subcontractor. Any request for information or to replace a subcontractor pursuant to this Section 3.9 must be made by one of Starents executive officers that directly reports to the Chief Executive Officer of Starent.
3.10 Background Checks. To the extent permitted by law:
(a) Mavenir will perform reasonable background checks on all Mavenir personnel that will be supporting the Starent account. Background checks will include: (i) criminal history, (ii) education (if degree indicated), (iii) employment history (last 3 positions or last 5 years if with same employer), (iv) references (if any of items (i) through (iii) cannot be completed), and (v) drug screen;
(b) To Mavenirs knowledge, its personnel that support the Starent account will not include anyone with a positive drug test or any felony conviction; and
(c) Mavenir must immediately remove any Mavenir personnel with a felony conviction or positive drug test from the Starent account.
4. MAINTENANCE AND SUPPORT; TRAINING
4.1 Mavenir Maintenance and Support. Mavenir shall provide the Mavenir Maintenance and Support to Starent and its Distributors, subject to the fees specified in Section 5.1.
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4.2 Training. Mavenir will provide to Starent reasonable product training at Mavenirs premises, at mutually agreeable times, at no charge for the Mavenir Products to ensure Starents personnel are able to effectively present, demonstrate, install, configure and service the Mavenir Products. Mavenir shall provide at its discretion and at no charge (i) refresher training on the Mavenir Products from time to time and (ii) additional training on new versions of the Mavenir Products. Starent shall be responsible for its own expenses in attending the Mavenir training, and for Mavenirs travel expenses if the Parties agree that the training be conducted at Starents premises.
4.3 Root Cause Analysis. Upon Mavenirs discovery of, or, if earlier, Mavenirs receipt of a notice from Starent regarding a failure in any Mavenir Products or Mavenir Services, Mavenir will promptly (and in any event within five (5) Business Days) perform a root-cause analysis to identify the cause of such failure. Within the five (5) Business Days after such discovery or notice, Mavenir will provide Starent with a written report detailing the cause of, and procedure for correcting, such failure and providing Starent with reasonable evidence that failures within Mavenirs control will not recur.
4.4 Return Authorizations. Upon request by Starent for a return authorization for credit, refund, repair, correction or replacement of any Mavenir Products pursuant to Section 10.3 hereof, Mavenir will advance replace the defective product, shipping overnight at Mavenirs expense. If request for return authorization is received prior to noon CST, Mavenir will ship advance replacement the same business day. If request for return authorization is received after noon CST, Mavenir will ship the advance replacement the next business day. Unless otherwise provided in this Agreement, all returns of Mavenir Products are at Mavenirs expense.
5. FEES, PAYMENTS AND PAYMENT TERMS
5.1 Fees. Starent shall pay to Mavenir the Fees for each Mavenir Product distributed hereunder in a manner consistent with Appendix B hereto. Mavenir agrees to assist Starent, if requested, in the selling and promotion of all Mavenir Products.
5.2 Most Favored Customer.
(a) Notwithstanding anything herein to the contrary, Mavenir represents, warrants and covenants that, during the term of this Agreement, the Fees, terms and conditions hereunder with respect to the Mavenir Products and Services which are contained within Mavenirs CDMA Femto Solution, are and will be no less favorable than those offered by Mavenir to any other customer, and, without limiting the above, shall be competitive within the industry as reasonably determined by applicable market indices (the CDMA Femto Solution Competitive Pricing).
(b) Notwithstanding anything herein to the contrary, Mavenir represents, warrants and covenants that, during the term of this Agreement, the Fees, terms and conditions hereunder, in connection with Mavenir Products and Mavenir Services are and will be no less favorable than those provided by Mavenir to its other customers including reseller customers of substantially similar volume or amount of sales of Mavenir Products with substantially similar features and functionality, other than Mavenirs CDMA Femto Solution (the Other Products Competitive Pricing, and together with the CDMA Femto Solution Competitive Pricing, the Competitive Pricing).
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(c) If at any time Mavenir is not compliant with its Competitive Pricing obligation, Mavenir will (a) immediately inform Starent of such non-compliance in writing, (b) apply the lower price to all pending and subsequent orders throughout the remainder of the term, (c) reissue all paid and unpaid invoices originally issued to Starent for Mavenir Products and Mavenir Services as of the date such lower price was offered to the Mavenir customer at the lower offered price, which reissued invoices shall show the difference between the net price originally invoiced to Starent and the reduced net price and all applicable sales tax reductions resulting from the price reduction (the Net Price Reduction), and (d) at Starents option, issue a credit or pay cash to Starent in an amount equal to the Net Price Reduction. Any credit issued pursuant to this section shall be valid for two (2) years following the date of its issuance and only for future purchases of Mavenir Products and Mavenir Services.
(d) Beginning one (1) year after the Effective Date and continuing through the term of this Agreement, Mavenir will annually audit its Mavenir Product and Mavenir Services pricing given to its resellers and customers in the preceding year and will deliver to Starent a certificate which states Mavenirs compliance with its Competitive Pricing obligations within sixty (60) days after each annual anniversary of the Effective Date (Competitive Pricing Certificate). The Competitive Pricing Certificate shall be signed by an authorized officer of Mavenir and shall certify that (i) Mavenir has conducted a pricing audit of Mavenir Products and Mavenir Services provided to Mavenir customers during the preceding year, and (ii) Mavenir has complied with its Competitive Pricing obligations under this Agreement, and identifying what, if any, prices charged to Starent have been decreased as a result of Mavenirs compliance with this Section 5.2. Starent shall have the right, not more than once per year, at a time and place to be mutually agreed upon, to audit Mavenirs books and records related to the pricing of Mavenir Products sold to other customers to ascertain Mavenirs compliance with its obligations hereunder.
5.3 Support Fees. Starent shall pay the Maintenance and Support Fees set forth in Appendix B at the end of the calendar quarter in which Starent receives payment from its End User or Distributor for such services. In the event Starent requests that Mavenir have a technician provide on-site services at an End User location for any Tier 1 or Tier 2 services, such services shall be provided on a time and materials basis by Mavenir at the professional services rate set forth in Appendix B.
5.4 Payment Terms. Starent will pay Mavenir all fees hereunder within thirty (30) days after End User or Starents Distributor has paid Starent for the applicable Mavenir Product. In the event an End User or Distributor makes a progress or other interim payment to Starent in connection with any Mavenir Product, Starent shall make a similar pro-rata payment to Mavenir, as long as the underlying invoice is not in dispute. Payment of an invoice without asserting a dispute is not a waiver of any claim or right. Where Starent disputes a portion of an invoice, Starent will not withhold payment of undisputed amounts. All payments hereunder shall be made by wire transfer to such bank and account as Mavenir may from time to time designate in writing. All payments shall be made in U.S. Dollars. Whenever any payment hereunder shall be stated to be due on a day which is not a day that banks are open for business in Boston, Massachusetts (a Business Day), such payment shall be made on the immediately succeeding Business Day. Payments hereunder shall be considered to be made as of the day on which they are received at Mavenirs designated bank. Any amounts payable by Starent hereunder which remain unpaid after the due date shall be subject to a late charge equal to the lesser of 1.25% per month or the maximum rate allowed by law.
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5.5 Milestone Invoicing; Holdbacks.
(a) With respect to any purchase order, or portion thereof, that designates fees to be paid on a milestone basis, Mavenir may invoice Starent for the amount set forth as the Amount to be invoiced in connection with the applicable Milestone upon the occurrence of the Milestone (provided that all prior events listed as milestones have previously occurred).
(b) With respect to any purchase order, or portion thereof, that designates fees to be paid on a holdback basis, Mavenir may invoice Starent for 80% of the total amount when due and payable in accordance with the purchase order and may invoice Starent for the aggregate balance of such amounts upon satisfactory completion and Starents Acceptance of the Mavenir Products or Mavenir Services.
(c) All amounts payable under this Agreement are exclusive of tax. Starent shall pay any taxes, including sales, use, personal property, value-added, excise, customs fees, import duties or stamp duties or other taxes and duties imposed by governmental agencies of whatever kind and imposed with respect to all transactions under this Agreement including penalties and interest but specifically excluding any income taxes payable by Mavenir.
5.6 Starent shall maintain accurate and complete records relating to its activities under this Agreement sufficient for Mavenir to determine Starents compliance with the provisions of this Section 5, and shall retain such records for a period of three years after the calendar year in which such activities related. Mavenir shall have the right (not more than once per calendar year), on its own or using an independent auditor or agent, upon thirty (30) days prior written notice to Starent, to inspect, during normal business hours and at mutually agreeable times, Starents records to verify compliance by Starent with the terms of this Section 5. Starent agrees to cooperate reasonably with Mavenir in any such inspection.
5.7 Prompt Invoicing. Mavenir must not (a) invoice Starent more than ninety (90) days after Mavenir is permitted to issue an invoice under this Agreement (Late Invoices) or (b) initially raise a claim for payment under a previously issued invoice more than 365 days after the invoice date (Late Claims). Starent is not obligated to pay Late Invoices or Late Claims and Mavenir waives all rights and remedies related to Late Invoices and Late Claims.
5.8 Delivery. Starent shall from time to time place written purchase orders for Mavenir Products under this Agreement. Orders shall specify the quantity of Mavenir Products to be delivered, delivery destination, and a requested shipment date. Mavenir shall ship all Mavenir Products in accordance with the lead-time or delivery date that is set forth on a purchase order and accepted by Mavenir, provided that, in no event shall any lead-time less than twelve (12) weeks before the requested customer delivery dates be effective under any purchase order unless accepted in writing by Mavenir. If Mavenir accepts the purchase order but is unable to ship the Mavenir Products by the agreed upon shipment date, and such delay results in Starent paying damages to an End User or Distributor, then Mavenir shall reimburse Starent for such damages to the extent specifically caused by Mavenirs delay, such damages not to exceed the delay damages set forth in
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Starents agreement with its End User or Distributor. At Starents option, such credit shall be paid in cash or applied against future purchases and reflected in future invoices. Mavenir shall accept or reject each purchase order submitted by Starent within five (5) business days of Mavenirs receipt of such purchase order. If Mavenir does not reject an order within five (5) business days of receipt, the order will be deemed accepted. If Mavenir is more than 30 days late in shipping any Deliverables specified in the applicable purchase order, Starent may, without liability, terminate any undelivered portion of the purchase order and any other undelivered purchase orders for the same or substantially similar Deliverables. Starents acceptance of all or any part of the Deliverables does not waive any claim that Starent may have for delay damages under this Section.
5.9 Shipping Terms. All deliveries under this Agreement shall be FCA Mavenirs facility (Incoterms 2000). Title to all Mavenir Products will pass to Starent upon delivery. In the absence of specific shipping instructions from Starent, Mavenir will select a common and/or freight forwarder carrier. Mavenir will ship Mavenir Products to the location specified in the applicable purchase order using the method of shipping and the carrier specified in the applicable purchase order. In the absence of written shipping directions, Mavenir will select the carrier and insurance that is consistent with the Parties past practice, using Mavenirs reasonable commercial efforts. All shipments will be identified with large, easily readable type, including the shipping location, the purchase order number, and any other special purchase or shipping instructions required by Starent. Mavenir may not ship partial orders of Mavenir Products without Starents prior written consent.
5.10 Issuance of Warrant. Upon execution of this Agreement, Mavenir shall execute and deliver to Starent the Warrant. Mavenir represents that it has reserved a sufficient number of shares of its Series C Convertible Preferred Stock (Series C Shares) to permit the full exercise of the Warrant, and agrees to maintain during the term of the Warrant a sufficient number of Series C Shares to permit exercise of the Warrant in accordance with its terms.
5.11 No Volume Commitment. This Agreement does not commit Starent to purchase any Mavenir Product or Mavenir Services. Starents issuance of a purchase order referencing this Agreement is Starents agreement to pay for Mavenir Products or Mavenir Services.
6. ACCEPTANCE, ROADMAP, DEVELOPMENT, SUPPORT
6.1 Acceptance. Acceptance of Deliverables will occur after Starent or Starents End User or Distributor submits to Mavenir a written, signed certificate confirming the Deliverables conform with the Acceptance Criteria (Acceptance). Starent shall provide prompt notification to Mavenir of any acceptance by an End User or Distributor pursuant to the terms of such End User or Distributor agreement within five (5) days of receipt of such acceptance. If Starent or its End User notifies Mavenir that the Deliverable does not meet the Acceptance Criteria, Mavenir will promptly investigate the alleged nonconformity and will correct such nonconformity within five (5) business days (or as otherwise reasonably required given the nature of the nonconformity). Upon Mavenirs notice to Starent that Mavenir has cured such nonconformity, Starent or Starents End User or Distributor will re-test the defective Deliverable. If the Deliverable again fails the applicable Acceptance Criteria, Starent or Starents End User or Distributor may return the rejected Deliverables to Mavenir and may suspend or cancel any existing or future purchase orders for the same or similar Deliverables which has not passed Acceptance or which is dependent on another Mavenir Product that has not passed Acceptance, and obtain replacement deliverable(s) from third parties at Mavenirs expense.
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6.2 Mavenirs Roadmap; Changes to Specifications. Mavenir will provide Starent with Mavenirs product roadmap, as updated from time to time by Mavenir. In addition, Mavenir may not materially modify Deliverables that Starent has already purchased or licensed under this Agreement in such a way that will materially adversely affect functionality or performance of such Deliverables without at least ninety (90) days prior written notice to Starent. Examples of such material modifications include: (i) modifying the operation of the Deliverables from the level of performance set forth in any specification; (ii) affecting the performance or functionality of Deliverables; and (iii) engineering changes that affect installation or configuration of the Deliverables.
6.3 Replacement Parts. Mavenir will continue to manufacture or otherwise provide replacement parts to support any Deliverable purchased by Starent for at least five (5) years after the end of life of any Mavenir Product. Mavenir will provide Starent with at least twelve (12) months advanced written notice of the issuance of any end of life notice for any Mavenir Product.
6.4 Chronic Conditions
(a) Definition. A Deliverable is considered chronically defective when a documented, repetitive defect occurs more than three (3) times over thirty (30) days in any single unit of Deliverable, or when a documented, repetitive defect occurs in multiple units of a Deliverable when those units represent more than 25% of the existing field population in a given metropolitan area of such Deliverables distributed by Starent, which is attributable to a failure of the Deliverable to perform in accordance with its specifications. Starent will provide reasonable documentation to support its final decision on the existence of a chronic condition.
(b) Remedies. If Starent determines that a Deliverable is chronically defective and Starent provides Mavenir with written notice of such status, Mavenir will submit to Starent a remedial plan within five (5) business days of receiving Starents chronic condition notice. Starent will review and approve or disapprove the plan within 5 days. If Starent accepts the plan, Mavenir will accept return of all chronically defective Deliverables and replace the chronically defective Deliverables according to the approved plan. If Starent does not accept the plan, in exchange for the returned Deliverables, Mavenir shall provide Starent with equivalent replacement Deliverables, which resolves the chronically defective Deliverables, at [***].
6.5 Malicious Technology. Mavenir warrants that at the time of delivery the Deliverables will not: (i) contain any Malicious Technology, (ii) contain any files or features that will disable or destroy any functionality of the Deliverables, (iii) monitor any use of the Deliverables; (iv) replicate, transmit or activate itself without control of a person operating the computing equipment on which it resides; or (v) alter, damage or erase any data or computer programs without control of a person operating the computing equipment on which it resides. If Mavenir is in breach of this subsection, no right to cure period will apply. Starent reserves the right to pursue any available civil or criminal action against Mavenir for violation of this provision. Mavenir acknowledges that it does not have any right to electronically repossess or use any electronic self-help related to the Deliverables.
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6.6 Compatibility. Mavenir warrants that its Software will be backwards compatible to N-2 major releases to the current release, where N-2 refers to the number to the left of the decimal point of the software release. For example, a current software release will be backwards compatible with the prior two (2) major releases.
6.7 Development.
(a) Mavenir agrees to develop certain solutions (collectively, the Solutions) for Starent as set forth in the Statement of Work (the SOW) attached hereto as Appendix G. The Parties agree that the timely development of the Solutions is critical to the success of the Parties relationship and their go-to-market strategies, and that Starent considers the timely development of the Solutions as core to its decision to invest in Mavenir and to enter into this Agreement with Mavenir. As a result, the Parties have agreed to establish a total of three milestones in connection with the development of the Solutions, as more fully set forth in the SOW (each, a Milestone and collectively, the Milestones). Each Milestone shall be completed on or before the date set forth in the SOW with respect to such Milestone (each, a Milestone Date), except as otherwise set forth herein. In the event that Starent believes that any Milestone will not be achieved due to circumstances that are beyond the reasonable control of Mavenir, then the Parties will negotiate a reasonable, extended Milestone Date for such Milestone. To assure prompt performance of the Milestones, the Parties have agreed that Mavenir shall be subject to liquidated damages in the aggregate amount of up to $[***] (US) (the Liquidated Damages), which amount shall be divided evenly among the three Milestones as set forth in the SOW. Accordingly, the Parties agree that, in the event Mavenir fails to achieve any Milestone and Mavenir fails to cure such failure on or before the expiration of the applicable Milestone Cure Period (defined below), Mavenir shall pay to Starent in cash, immediately upon the expiration of the applicable Milestone Cure Period, the applicable Liquidated Damage set forth in the SOW which corresponds to the milestone for which Mavenir is the cause of the failure to achieve. The aggregate Liquidated Damages are payable in full to Starent notwithstanding any limitation of liability provision set forth in Section 13. The Milestone Cure Period shall commence upon Mavenirs receipt of written notice from Starent of any alleged missed milestone, and (a) with respect to the Milestone 1, shall be for a period of ninety (90) days, and (b) with respect to Milestones 2 and 3, shall be for a period of thirty (30) days. If any Milestone Cure Period shall expire without Mavenir having cured its failure to achieve such milestone, Starent shall not be required to provide Mavenir with any demand or notice of any nature whatsoever in connection with the assessment, payment or collection of any Liquidated Damage. The Parties agree that damages incurred by Starent resulting from any uncured delay would be substantial and difficult to ascertain, and that the Liquidated Damages provide a reasonable and agreed-upon estimate of such damages. In no event shall Mavenir be liable for any Liquidated Damages if the failure to achieve any Milestone or cure any such failure within the applicable Milestone Cure Period for such Milestone is primarily caused by or attributable to a party other than Mavenir.
(b) In the event that the Milestone Date for any Milestone is extended to a date more than three (3) years following the date of this Agreement for any reason, then the Liquidated Damages potentially payable by Mavenir with respect to the failure to achieve such Milestone on or before its Milestone Date shall terminate as of the close of business on the third anniversary of the date of this Agreement and Mavenir shall no longer be subject to Liquidated Damages with respect to that Milestone.
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6.8 Business Reviews. Starent may request that quarterly business reviews be held between Starent and Mavenir to review delivery performance, quality metrics, or any other relevant information related to the performance of Mavenir. Additionally, Starent may request that Mavenir provide regular reports regarding delivery performance, quality metrics, or other relevant information if deemed necessary by Starent.
7. CO-MARKETING/PRE-SALES COOPERATION
7.1 The Parties will work together to mutually prioritize target customers, define sales engagement models and outline specific roles and responsibilities of the respective organizations involved in promoting the Mavenir Products in conjunction with use of the Starent Product.
7.2 The Parties will work together to mutually develop marketing strategies and customer value propositions for the Mavenir Products by Starent in conjunction with the Starent Product.
7.3 During any exclusivity period pursuant to Section 2.7 with respect to the sale of Mavenir Products to a customer or potential customer, Starent shall drive all interactions with, and be the sole contact with, such customer or potential customer. Starent shall drive all interactions with, and be the sole contact with, Starents customers, prospective customers and partners, including, without limitation, the Starent House Account Customers set forth on Appendix E, with respect to the sale of Starent Product. Mavenir will support Starents efforts as requested by Starent from time to time in connection therewith, and in connection with any bid and proposal in which Starent intends to bid Mavenir Product, whether or not rebranded by Starent. Mavenir shall not make any statements, representations or commitments of any kind on behalf of Starent with any third party, including, without limitation, any Starent House Account Customer or any other existing or potential customer.
7.4 During the term of this Agreement and for a period of one year following termination of or expiration of this Agreement, Mavenir shall not compete with Starent with respect to the CDMA Femto Solution within the Territory; provided, however, that the Parties agree that Mavenir may continue its existing business relationship with Motorola solely with respect to the RFP issued by Sprint for a Femto solution, and not other business opportunity with Motoroal. Mavenir agrees to work with Starent as contemplated by this Section 7 in connection with each Starent House Account Customer identified in Appendix E, as long as Starent has an existing contractual relationship with such customer.
7.5 Starent and Mavenir will conduct regular review of progress with such customers. Mavenir agrees to work with Starent in all markets within the Territory.
7.6 The Parties collaboration obligations under this Agreement are non-exclusive and, except as and solely to the extent expressly set forth in Section 2.7, and except with respect to each Partys confidentiality obligations regarding the use of the other partys Confidential
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Information, neither Party is precluded or limited by this Agreement from deploying, offering, promoting or developing, whether alone or in collaboration with others, any software, services, platforms or products that compete with the software developed under this Agreement or the other partys software, services, platforms or products, nor is either party obligated to disclose to the other any third parties with whom such party collaborates on any of the foregoing.
8. OWNERSHIP OF INTELLECTUAL PROPERTY
8.1 Mavenir Products. Starent acknowledges and agrees that (i) Mavenir shall retain all of its Intellectual Property associated with the Mavenir Products, including without limitation, any improvements or modifications made by Mavenir to the Mavenir Products arising out of, relating to or resulting from this Agreement; and (ii) Starent has no right or license to Mavenirs Intellectual Property or products, except as expressly set forth in this Agreement. Starent shall own the Intellectual Property associated with any improvements or modifications to the Mavenir Products made by Starent (the Starent Modifications) to the extent and only to the extent that such Intellectual Property does not incorporate any Mavenir Products or Mavenir Intellectual Property. To be clear, Starent shall not own nor have any ownership rights in any Mavenir Products, Mavenir Intellectual Property or any improvements or modifications to the Mavenir Products solely made by Mavenir. Furthermore, Mavenir shall have a perpetual, nonexclusive, fully transferable, sublicensable, royalty-free, worldwide license to use, disclose, reproduce, sell, import, distribute (regardless of the number of layers of distribution), make, have made, license, sublicense and otherwise exploit the Starent Modifications in connection with the Mavenir Products.
8.2 Starent Product. Mavenir acknowledges and agrees that (i) Starent shall retain all Intellectual Property associated with the Starent Product, including without limitation, any improvements or modifications made by Starent to such Starent Product arising out of, relating to or resulting from this Agreement; and (ii) Mavenir has no right or license to any of Starents Intellectual Property or products. Mavenir shall own the Intellectual Property associated with any improvements or modifications to the Starent Products made by Mavenir (the Mavenir Modifications) to the extent and only to the extent that such Intellectual Property does not incorporate any Starent Products or Starent Intellectual Property. To be clear, Mavenir shall not own nor have any ownership rights in any Starent Products, Starent Intellectual Property or any improvements or modifications to the Starent Products solely made by Starent. Furthermore, Starent shall have a perpetual, nonexclusive, fully transferable, sublicensable, royalty-free, worldwide license to use, disclose, reproduce, sell, import, distribute (regardless of the number of layers of distribution), make, have made, license, sublicense and otherwise exploit the Starent Modifications in connection with the Starent Products.
8.3 Assignments. Each Party agrees to execute such documentation from time to time as is reasonably necessary for the other Party to establish and enforce its rights under this Section 8.
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9. CONFIDENTIALITY
9.1 Confidentiality Obligation. Each of Starent and Mavenir in the capacity of receiving information from the other Party (the Receiving Party) shall keep strictly confidential any information disclosed in writing, orally or in any other manner by the other Party (the Disclosing Party) or otherwise made available to the Receiving Party concerning the Disclosing Partys performance of this Agreement or otherwise concerning pricing, the business, operations, Intellectual Property, trade secrets or other proprietary information of the Disclosing Party, provided that such written information is marked as confidential or proprietary and such oral information is identified as confidential or proprietary at or within three (3) days after the time of disclosure (Confidential Information), using at least the same degree of care that it uses to protect its own confidential or proprietary information but in no event less than reasonable care for the telecommunications software industry. Confidential Information shall not include information:
(a) which is or becomes generally available to the public other than as a result of disclosure thereof by the Receiving Party in violation of this Section 9;
(b) which is lawfully received by the Receiving Party on a non-confidential basis from a third party that is not itself under any obligation of confidentiality or nondisclosure to the Disclosing Party with respect to such information;
(c) which by written evidence can be shown by the Receiving Party to have been independently developed by the Receiving Party; or
(d) which was in the Receiving Partys possession at the time of disclosure by the Disclosing Party.
9.2 Nondisclosure of Confidential Information. The Receiving Party shall use Confidential Information solely for the purposes of this Agreement and shall not disclose or disseminate any Confidential Information to any Person at any time, except for disclosure to those of its directors, officers, employees, accountants, attorneys, advisers and agents whose duties reasonably require them to have access to such Confidential Information, provided that such directors, officers, employees, accountants, attorneys, advisers and agents are required to maintain the confidentiality of such Confidential Information to the same extent as if they were Parties hereto.
9.3 Independent Development/Use of Residuals. The terms of confidentiality under this Section 9 shall not be construed to limit either the Disclosing Party or the Receiving Partys right to independently develop or acquire products without use of the other partys Confidential Information. Further, the Receiving Party shall be free to use for any purpose the residuals resulting from access to or work with the Confidential Information of the Disclosing Party, provided that the Receiving Party shall not disclose the Confidential Information except as expressly permitted pursuant to the terms of this Agreement. The term residuals means information in intangible form, which is retained in memory by persons who have had access to the Confidential Information, including ideas, concepts, know-how or techniques contained herein. The Receiving Party shall not have any obligation to limit or restrict the assignment of such persons or to or to pay royalties for any work resulting from the use of residuals. However, this Section 9.3 shall not be deemed to grant to the Receiving Party a license under the Disclosing Partys copyrights or patents.
9.4 Press Releases. No Party to this Agreement shall originate any publicity, news release or other public announcement, written or oral, whether relating to this Agreement or any arrangement between the Parties, without the prior written consent of the other Party, except to the extent such publicity, news release or other public announcement is required by law; provided
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that in such event, the Party issuing same shall use its reasonable efforts to secure confidential treatment of such information in consultation with the other Party prior to its disclosure or filing and disclose only the minimum necessary to comply with such requirements, shall still be required to consult with the other Party or Parties named in such publicity, news release or public announcement a reasonable time (being not less than 48 hours) prior to its release to allow the named Party or Parties to comment on the use of its name and, after its release, shall provide the named Party or Parties with a copy thereof. Neither Party shall use the name of the other for advertising or promotional claims without the prior written consent of the other Party.
9.5 Exception. The foregoing confidentiality and nondisclosure obligations shall not prohibit the disclosure of Confidential Information, to the extent such disclosure is required by law or by regulation; provided, however, that, in such event, the Party required by law or by regulation to provide such disclosure shall provide the other Party with prompt advance notice of such disclosure so that the other Party has the opportunity if it so desires to seek a protective order or other appropriate remedy and in such event the Party required by law or by regulation to provide such disclosure shall use its reasonable efforts to secure confidential treatment of such information in consultation with the other Party prior to its disclosure or filing and disclose only the minimum necessary to comply with such requirements.
9.6 Feedback. The Receiving Party may from time to time provide suggestions, comments or other feedback (Feedback) to the Disclosing Party regarding the Disclosing Partys products with respect to Confidential Information provided originally by the Disclosing Party. Both Parties agree that all Feedback is and shall be given entirely voluntarily. Feedback, even if designated as confidential by the Party offering Feedback, shall not, absent a separate written agreement, create any confidentiality obligation for the receiver of the Feedback. Furthermore, except as otherwise provided in a separate subsequent written agreement between the Parties, the receiver of the Feedback shall be free to use, disclose, reproduce, license or otherwise distribute, and exploit the Feedback provided to it, royalty free, entirely without obligation or restriction of any kind on account of intellectual property rights or otherwise.
10. WARRANTIES AND COVENANT
10.1 Mutual Warranties. Each Party represents and warrants to the other Party that:
(a) the execution and delivery of this Agreement will not violate any applicable statute rule or regulation to which such Party is subject, or conflict with, result in a breach of, or constitute a default under any agreement to which such Party is a party;
(b) such Party has obtained all necessary approvals to enter into this Agreement and to perform its obligations hereunder; and
(c) in performing this Agreement, each party will comply with all applicable laws, regulations, rules, orders, and other requirements of governmental and other authorities having jurisdiction of such party.
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10.2 Mavenir Warranty. A. Mavenir Products. Mavenir represents and warrants to Starent:
(a) for a period of twelve (12) months from the date of final acceptance by the End User, the Mavenir Software shall function substantially in the manner described in the Mavenir Documentation;
(b) for a period of twelve (12) months from the date of final acceptance by the End User, the Mavenir Hardware shall be free from defects in materials and workmanship;
(c) the Mavenir Hardware and Mavenir Software (i) do not and will not infringe any patent, copyright, trade secret, or other intellectual property or proprietary right held by any third party other than patents; and (ii) do not include any third party software that is incorporated in a manner which is not in compliance with any license or other requirements applicable thereto; and
(d) no claims, actions or proceedings are pending or threatened in writing against Mavenir that would, if adversely determined, reasonably be expected to have an adverse effect on Mavenirs ability to perform its obligations under this Agreement.
(e) that any open source software included in any Mavenir Product sold or licensed hereunder shall not cause any product or software owned or used by Starent or any End User to become open source software.
B. Mavenir Services. Mavenir warrants that the Mavenir Services shall be acceptable to Starent and shall be performed in a professional and workmanlike manner consistent with generally accepted industry standards.
10.3 Remedies. Mavenir will promptly and at no charge to Starent (i) re-perform any Mavenir Services that do not meet the requirements of this Agreement and (ii) correct all failures of any Deliverables hereunder to perform in accordance with the requirements of this Agreement. Starent will promptly notify Mavenir in writing of any such failure. In the event of any breach of warranty hereunder, Starent shall return the Deliverables to Mavenir, at Mavenirs expense, for correction or replacement or credit, even if the period to perform those corrections extends beyond the Deliverables warranty period (provided that notice of such warranty claim was provided to Mavenir prior to the end of the applicable warranty period). No remedy set forth in this Agreement (except to the extent specifically stated herein) is intended to be exclusive of any other remedy, and each remedy will be in addition to every other remedy given hereunder, or now or hereafter existing at law, in equity, by statute, or otherwise.
10.4 EXCEPT FOR THE EXPRESS WARRANTIES PROVIDED IN THIS SECTION, MAVENIR DISCLAIMS ALL OTHER WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. EXCEPT WITH RESPECT TO THE EXPRESS WARRANTIES PROVIDED BY MAVENIR UNDER THIS AGREEMENT, STARENT SHALL NOT MAKE ANY OTHER WARRANTY COMMITMENT, WHETHER WRITTEN OR ORAL, ON MAVENIRS BEHALF.
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11. INDEMNIFICATION
11.1 Indemnity.
(a) Mavenir Indemnity. Mavenir agrees to indemnify, defend and hold harmless Starent and its Affiliates, officers, directors, employees, customers and agents from and against any and all third party claims or actions of any kind whatsoever, arising directly or indirectly out of claims that the use, distribution, sublicensing, or sale of the Mavenir Products, the use of any Mavenir Trademarks, or the provision of Mavenir Services hereunder infringes on a patent, trademark, trade name, copyright or other intellectual property right of a third party or constitutes a misappropriation of the trade secrets of a third party. Such indemnity shall extend to the payment of any final award of damages assessed against Starent resulting from such claim or action or any settlement amount agreed to by Mavenir, as well as any costs and attorneys fees reasonably incurred by Starent. Such obligations are subject to Starent providing Mavenir with prompt written notice of any such claim; Mavenir having sole control and authority with respect to the defense and settlement of any such claim; and Starent cooperating fully with Mavenir, at Mavenirs sole cost and expense, in the defense of any such claim. Mavenir shall not agree to any settlement of any such claim that does not include a complete release of Starent from all liability with respect thereto or that imposes any liability, obligation or restriction on Starent with the prior written consent of Starent. Starent may participate in the defense of any claim through its own counsel, and at its own expense.
(b) General Indemnity. Each Party agrees to indemnify, defend, and hold harmless the other Party and its Affiliates, officers, directors, employees, and agents from and against any and all third party claims or actions of any kind whatsoever, arising directly or indirectly from such Partys intentional or grossly negligent actions.
11.2 Procedure. In the event that the use, distribution, sublicensing, or sale of any Mavenir Product infringes on the a patent, copyright or other intellectual property right of a third party or constitutes a misappropriation of the trade secrets of a third party or if Mavenir reasonably believes that the use, distribution, sublicensing, or sale of any Mavenir Product may constitute such an infringement or a misappropriation, Mavenir shall, at its sole cost and expense, and at its option, either (i) procure for Starent and its Distributors and End Users the right to continue to exercise its rights to such Mavenir Product hereunder, (ii) modify such Mavenir Product so that it becomes non-infringing or no longer constitutes a misappropriation, without diminishing the functionality or performance of such Mavenir Product; provided, however, that if (i) and (ii) are not reasonably possible, then Mavenir shall have the right to terminate this Agreement by giving Starent sixty (60) days prior written notice and providing a refund of all amounts paid by Starent for such infringing Mavenir Product and all less depreciation for use assuming straight line depreciation over a period of five (5) years commencing upon delivery of the applicable Mavenir Product. Nothing in this Section 11 shall enable Mavenir to terminate a license of a Mavenir Product to any End User.
11.3 Exclusions. Mavenir shall have no obligation for any claim of infringement to the extent arising from: (i) any combination of a Mavenir Product with products not supplied by Mavenir, where such infringement would not have occurred but for such combination; (ii) the adaptation or modification of a Mavenir Product by Starent or any third party, where such infringement would not have occurred but for such adaptation or modification; (iii) a claim based on a Starent Product or intellectual property rights owned by Starent; (iv) use of any Mavenir Products in a manner not strictly in accordance with this Agreement; (v) Mavenirs modification of any Mavenir Products in compliance with Starents designs or specifications, provided that such designs
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or specifications did not allow for a non-infringing alternative; or (vi) use of other than Mavenirs most current release of the Mavenir Products provided to Starent at no charge if the claim or action would have been avoided by use of the most current release. Starent will defend, or at its option settle, and indemnify Mavenir for any claims brought against Mavenir referred to in clause (iii) of this subsection in the same manner as provided above.
11.4 THE FOREGOING STATES THE PARTIES SOLE OBLIGATIONS AND EXCLUSIVE REMEDIES FOR INTELLECTUAL PROPERTY RIGHTS INFRINGEMENT.
12. ESCROW
12.1 Starent, as Beneficiary, and Mavenir, as Depositor, each hereby agrees to enter into the Escrow Agreement on the Effective Date, together with Exhibits A, B and C thereto and all other documents required thereby. Capitalized terms used in this Section 12 but not defined herein shall have the meanings set forth in the Escrow Agreement.
12.2 Mavenir further agrees (i) that the Deposit Materials (as defined in the Escrow Agreement) shall include all source code, object code and documentation relating to the Mavenir Products covered by this Agreement to enable Starent only in the event of a release event (A) to modify, enhance and create derivative works of the Mavenir Software incorporated into the CDMA Femto Solution only and (B) to enable Starent to perform Mavenirs support and maintenance obligations hereunder with respect to all Mavenir Products that Starent has sold to Distributors and End Users pursuant to this Agreement and (ii) to deposit the Deposit Materials with Iron Mountain (as Escrow Agent) simultaneously herewith, if such Deposit Materials have not already been deposited with Iron Mountain, and to supplement the Deposit Materials with all necessary documentation and source code for each Software Update and Software Upgrade provided to Starent in object code form hereunder within fifteen (15) days of the end of each calendar quarter. The Parties agree that (a) with respect to release events described in Section 12.5(a)(d), the Deposit Materials to be released shall be those Deposit Materials relating only to such Mavenir Products that Starent has sold to Distributors and End Users during the term of this Agreement, as reflected by the records of Mavenir and (b) with respect to the release event described in Section 12.5(e), the Deposit Materials to be released shall be those Deposit Materials relating only to the CDMA Femto Solution. For the avoidance of doubt, the Deposit Materials for the CDMA Femto Solution shall include all source code necessary for the Mavenir platform and Mavenir Products contained within the CDMA Femto Solution, the assignment of all rights to all third party product that contained within such platform and products, and all documentation necessary for the manufacture and sale of the Mavenir Hardware.
12.3 Mavenir will negotiate in good faith to provide similar escrow terms to customers and Distributors of the Mavenir Products that require such terms in order to acquire such products from, or resell such products for, Starent.
12.4 Mavenir and Starent shall each pay [***] for adding Starent as a beneficiary.
12.5 During the term of this Agreement, the Parties agree to include the following release events in the Escrow Agreement with respect to the Mavenir Products:
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(a) Mavenir is determined to be insolvent by a court of competent jurisdiction, a court of competent jurisdiction enters an order or decree under Title 11, U.S. Code, or any similar Federal, foreign or state law for the relief of debtors (collectively, Bankruptcy Law) that is for relief with respect to Mavenir, Mavenir makes a general assignment for the benefit of its creditors, or Mavenir commences a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any Bankruptcy Law (if such insolvency or related event is not lifted within 30 days);
(b) Mavenir ceases to do business as a going concern for more than 30 days (other than the acquisition of Mavenir, whether by merger, consolidation, reorganization, stock purchase or otherwise, or by the acquisition of all or substantially all of its assets);
(c) a receiver or custodian is appointed for the business of Mavenir and such receiver or custodian is not dismissed within 30 days;
(d) Mavenir is dissolved or liquidated pursuant to any law in force for the winding up or liquidation of corporations or other entities; and
(e) Starent terminates this Agreement pursuant to Section 14.1 hereof for Mavenirs material breach or material failure of performance of its obligations under this Agreement, following Mavenirs failure to cure such material breach or material failure prior to the end of the cure period set forth in Section 14.1.
(f) any material and repeated failure by any successor to Mavenir, whether by merger, sale of assets or otherwise, to perform Mavenirs obligations hereunder, including, without limitation, Mavenirs maintenance and support and development obligations set forth in Appendix C.
Notwithstanding anything herein to the contrary, in no event shall the acquisition of Mavenir, whether by merger, consolidation, reorganization, stock purchase or otherwise, or by the acquisition of all or substantially all of its assets, be deemed to be a release event under this Agreement or the Escrow Agreement.
12.6 Upon a release event under the Escrow Agreement Mavenir hereby grants to Starent (a) with respect to the Deposit Materials for the CDMA Femto Solution released pursuant to the release events described in Section 12.5(a)-(e), a royalty-bearing, worldwide, perpetual license to access, use, copy, modify and create derivative works of the source code for the Mavenir Software incorporated into the CDMA Femto Solution and to make, have made, use, import, offer to sell and sell the CDMA Femto Solution, and (b) with respect to the Deposit Materials for the Mavenir Products released pursuant to Sections 12.5(a)-(d), other than the CDMA Femto Solution, that Starent has sold to Distributors and End Users during the term of this Agreement, a limited, personal, non-assignable, non-transferable, non-sublicensable, royalty-free license to internally use the Deposit Materials for such Mavenir Products solely for the support and maintenance of such Mavenir Products to Starents Distributors and End Users, and to issue additional licenses to such distributors and end users. In exchange for the license provided in Section 12.6(a) and the addiotnal licenses issued pursuant to Section 12.6 (b) above, Starent shall pay to Mavenir or its successor-in interest a royalty of [***] of the Net Sales from each sale or license of such Mavenir
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*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
Products, up to a maximum of [***] in the one year period commencing on the first sale or license by Starent pursuant to this Section 12.6 and in each one year period commencing on each anniversary of such date thereafter. In such event, Starent will not owe any fees hereunder in exchange for such sale or license of the applicable Mavenir Product. For the purposes of this Section 12.6, Net Sales shall mean the actual amounts received by Starent from the sale or license of the applicable Mavenir product, less (i) taxes, (ii) rebates and refunds, (iii) sales commissions payable to third parties and (iv) shipping and insurance costs. Starent shall own all Intellectual Property rights in all modifications, enhancements and derivative works created by Starent pursuant to this Section 12.6 with respect to the CDMA Femto solution only, and Mavenir shall own all Intellectual Property rights in all modifications, enhancements and derivative works created by Starent pursuant to this Section 12.6 with respect to all Mavenir Products other than the CDMA Femto solution.
13. LIMITATION OF LIABILITY
13.1 EXCEPT FOR EACH PARTYS INDEMNIFICATION OBLIGATIONS UNDER SECTION 11, VIOLATIONS OF A PARTYS CONFIDENTIALITY OBLIGATIONS, MAVENIRS INDEMNIFICATION OBLIGATIONS UNDER SECTION 16.4, AND THE VIOLATION OF THE OTHER PARTYS INTELLECTUAL PROPERTY RIGHTS, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR TO ANY THIRD PARTY FOR SPECIAL, INCIDENTAL, CONSEQUENTIAL, EXEMPLARY, PUNITIVE, MULTIPLE OR OTHER INDIRECT DAMAGES, OR FOR LOSS OF PROFITS, LOSS OF DATA OR LOSS OF USE DAMAGES, ARISING OUT OF THIS AGREEMENT, WHETHER BASED UPON WARRANTY, CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR LOSSES.
13.2 EXCEPT FOR EACH PARTYS INDEMNIFICATION OBLIGATIONS UNDER SECTION 11, VIOLATIONS OF A PARTYS CONFIDENTIALITY OBLIGATIONS, MAVENIRS INDEMNIFICATION OBLIGATIONS UNDER SECTION 17.5, THE VIOLATION OF THE OTHER PARTYS INTELLECTUAL PROPERTY RIGHTS, MAVENIRS BREACH OF SECTION 5.10 TO DELIVER THE WARRANT, AND STARENTS FAILURE TO PAY AMOUNTS DUE HEREUNDER, IN NO EVENT SHALL (I) STARENTS LIABILITY UNDER THIS AGREEMENT EXCEED THE AGGREGATE AMOUNT OF FEES PAID BY STARENT UNDER THIS AGREEMENT, AND (II) MAVENIRS LIABILITY UNDER THIS AGREEMENT EXCEED THE AGGREGATE AMOUNT OF LIABILITY FOR WHICH STARENT MAY BE LIABLE UNDER THE LIMITATION OF LIABILITY PROVISIONS OF ITS APPLICABLE CONTRACT WITH ITS DISTRIBUTOR OR END USER UNDER THIS AGREEMENT PLUS ALL LIQUIDATED DAMAGES ARISING IN FAVOR OF STARENT UNDER THIS AGREEMENT.
14. TERM AND TERMINATION
14.1 Term; Voluntary Termination. This Agreement shall continue in full force and effect until the fourth (4th) anniversary of the Effective Date, provided that Starent may elect by written notice to Mavenir not less than sixty (60) days prior to the expiration of this Agreement to extend this Agreement for up to two (2) additional one (1) year terms. This Agreement shall then be
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renewed automatically on every anniversary thereof, unless, within sixty (60) days prior to each anniversary of the Effective Date, a Party delivers written notice of termination to the other Party. If a Party materially breaches, or materially fails to perform, its obligations under this Agreement and fails to cure such breach or nonperformance within thirty (30) days after receiving written notice thereof, the non-breaching Party in its sole discretion may terminate this Agreement upon prior notice to the defaulting Party.
14.2 Effect of Termination or Expiration. In the event of expiration or termination of this Agreement, (a) all outstanding payment obligations will continue to apply; (b) neither Party shall be deemed to release the other Party hereto from any liability which at such time has already accrued or which thereafter accrues from a breach or default prior to such termination, provided that neither Party shall have any obligation to the other Party, or to any employee of the other Party, for compensation or for damages of any kind, whether on account of the loss by the other Party or such employee of present or prospective sales, investments, compensation or goodwill as a result of such termination or expiration, (c) all licenses for the Mavenir Software previously distributed by Starent, or for which Starent has contractually committed to deliver prior to such termination, shall continue in full force and effect (unless otherwise provided herein), (d) provided this Agreement is not terminated by Mavenir as a result of breach of the license granted hereunder, (i) Starent shall continue to have a license to use the Mavenir Software solely to support and maintain all End Users, and (ii) Mavenir shall return to Starent all support fees paid for the most recent support period, if any, prorated to reflect the portion of such support period which has expired prior to such expiration or termination. Each Party, for itself and on behalf of each of its employees and sub-Distributors, hereby waives any rights which are not expressly granted to it or them by this Agreement.
14.3 Survival. All clauses in the Agreement, that by their sense and context should survive the expiration or termination of this Agreement, shall survive expiration or termination of this Agreement. Within thirty (30) calendar days after termination of this Agreement, Starent shall pay to Mavenir all undisputed sums then due and owing which are not subject to setoff. Any other such undisputed sums which are not subject to setoff shall subsequently be promptly paid as they become due and owing. Notwithstanding the termination of this Agreement, all End User sublicenses, which have been granted by Starent and/or its Distributors pursuant to this Agreement prior to its termination, shall also survive (unless otherwise provided herein). Notwithstanding the termination of this Agreement for any or no reason, Mavenir shall offer Maintenance and Support services to Starent under its then current published pricing, for all Mavenir Products already deployed by Starent at the time of expiration or termination, for at least five (5) years from the last commercial sale of the Mavenir Product by Starent prior to such expiration or termination unless Starent ceases to pay all Support Fees.
15. INSURANCE.
15.1 General Requirements; Minimum Insurance Coverage. Mavenir will obtain and maintain during the term of this Agreement the following minimum insurance coverage:
(a) Commercial general liability, including bodily injury, property damage, personal and advertising injury liability, and contractual liability covering operations, independent contractor and products/completed operations hazards, with limits of not less than $1,000,000 combined single limit per occurrence and $2,000,000 annual aggregate, naming Starent, its Affiliates, officers, directors and employees as additional insureds;
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(b) Workers compensation as provided for under any workers compensation or similar law in the jurisdiction where work is performed with an employers liability limit of not less than $500,000 for bodily injury by accident or disease;
(c) Business auto liability covering ownership, maintenance or use of all owned, hired and non-owned autos with limits of not less than $1,000,000 combined single limit per accident for bodily injury and property damage liability, naming Starent, its officers, directors and employees as additional insureds;
(d) Umbrella/excess liability with limits of not less than $5,000,000 combined single limit per occurrence and annual aggregate in excess of the commercial general liability, business auto liability and employers liability, naming Starent, its Affiliates, officers, directors and employees as additional insureds; and
(e) All Risk property insurance covering not less than the full replacement cost of Mavenirs, and its subcontractor, if any, personal property, with a waiver of subrogation in favor of Starent as it is agreed that Starent will not be held liable for loss or damage to any such property from any cause whatsoever. Starent will be named as a loss payee as its interest may appear.
15.2 Subcontractor Insurance Requirements. If Mavenir utilizes subcontractors in performance of this Agreement, the subcontractors must meet the same insurance requirements as the Mavenir. If a subcontractor does not meet the coverage requirements of this Section, subcontractor must either supplement the deficient areas of coverage or Mavenir must certify that Mavenir has acquired sufficient coverage to supplement any deficiency of subcontractor.
15.3 Certificate of Insurance. Mavenir will obtain and maintain the required coverage with insurers with A.M. Best ratings of not less than A-, VII and are licensed to do business in all jurisdictions where work is performed under this Agreement. Mavenir will provide Starent a certificate of insurance, (ACORD Form 25S or equivalent), evidencing that all the required coverages are in force and provide that no policy will be canceled without first giving Starent 30 days prior written notice. All policies will be primary to any insurance or self-insurance Starent may maintain for acts or omissions of Mavenir or anyone for whom Mavenir is responsible. Upon request, Mavenir will include copies of relevant endorsements or policy provisions with the required certificate of insurance. At the request of Starent, Mavenir will provide a certified copy of each insurance policy required under this Agreement, provided that Starent has been named as an additional insured on such policy and there has been an occurrence for which such policy provides coverage.
16. ENVIRONMENTAL HEALTH AND SAFETY
16.1 Mavenir shall comply and remain in compliance with industry standards and regulations regarding environmental, health, and safety. Upon request by Starent, Mavenir shall provide Starent, within thirty (30) days of such request or such other period of time as mutually agreed by the parties, with a certificate of compliance with respect to any law, regulation, directive and/or standard set forth herein.
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16.2 Mavenir shall comply and remain in compliance with all regulations, laws and directives in all jurisdictions within the Territory restricting the use of substances, whichever is more stringent, including, but not limited to, implementing the European Directive 2002/95/EC (EU RoHS) and the China Ministry of Information Industry Order No. 39, Management Methods for Controlling Pollution by Electronic Information Products, and its associated standards (China RoHS) to the extent Mavenir Products are or are to be used in applications in the scope of such laws, regulations, and/or directives. Mavenir must be in compliance with ISO 14000 or an equivalent environmental management system within sixty (60) days after the Effective Date. Upon the request of Starent, Mavenir shall provide documentation which provies and establishes compliance with ISO 14000 an equivalent environmental management system.
16.3 According to the applicable national laws on waste from electrical and electronic equipment implementing the directive 2002/96/EC (WEEE Directive) the general rule provides that the producer or distributor (Mavenir) shall be responsible for the proper collection and recovery/recycling of waste resulting from electrical and or electronic items delivered to Reseller. Mavenir will, at its own cost and expense, collect the Mavenir Products at Starents primary manufacturing facility located at Tewksbury, Massachusetts within ten (10) business days of Mavenirs receipt of Starents request for collection, and recycle such Mavenir Products; provided, however, that Mavenir shall not be obligated to collect such Mavenir Products more than once per calendar quarter.
16.4 Mavenir shall comply with all environmental, health, and safety requirements and standards required by regulation, law and directives in any jurisdiction in which Mavenir Products are sold by Starent and to an End User or Distributor.
16.5 In addition, Mavenir must provide certification on all board and chassis level product to show compliance with the following:
(a) UL60950Standard for Safety for Information Technology Equipment, 3rd Edition;
(b) European Union EN 60950 (CE Mark);
(c) Telcordia GR-1089-Core, Network Equipment-Building System (NEBS) Requirements: Electromagnetic Compatibility and Electrical Safety Criteria for Network Telecommunication Equipment (NEBS Level 3 Certified);
(d) FCC, Part 15 B, Class A Requirements for Non-residential Equipment;
(e) ETSI EN 300 019;
(f) ETSI 300 386;
(g) ETSI/EN 300 386-2 Electrical Fast Transients;
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(h) SBC TP76200MP;
(i) Telcordia GR-63-Core, Network Equipment-Building System (NEBS) Requirements: Physical Protection;
(j) Taiwan Bureau of Standards, Metrology and Inspection.
17. MISCELLANEOUS
17.1 Entire Agreement. This Agreement supersedes and cancels any previous agreements or understandings, whether oral, written or implied, heretofore in effect, and sets forth the entire agreement between the Parties with respect to the subject matter hereof. No modification or change may be made in this Agreement except by written instrument duly signed by a duly authorized representative of each Party.
17.2 Relationship of the Parties. Nothing herein contained will be construed to imply a joint venture, franchise, partnership or principal-agent relationship between Starent and Mavenir. Each Party shall perform its obligations as an independent contractor. Personnel supplied by either Party will be deemed employees of such Party and will not for any purpose be considered employees or agents of the other Party. Except as may otherwise be provided in this Agreement, each Party shall be solely responsible for the supervision, daily direction and control of its employees and payment of their salaries (including withholding of appropriate payroll taxes), workers compensation, disability and other benefits. Neither party has the authority to make any statements, representations or commitments of any kind on behalf of the other party.
17.3 Notices. All notices, reports, requests, acceptances and other communications required or permitted under this Agreement will be in writing. Notices will be deemed given when actually received. All communications will be sent to the receiving Partys address as first set forth above or to such other address that the receiving Party may have provided for purposes of receiving notices, together with an additional copy at the same address directed to the General Counsel.
17.4 Export. The exportation of Mavenir Products is controlled under the United States Department of Commerce Export Administration Regulations (EAR) for National Security and Anti-Terrorism reasons. Starent shall not sell, transfer or otherwise dispose of the Mavenir Products in violation of U.S. export laws. Upon Starents request, Mavenir shall provide Starent with all information Mavenir possesses regarding the export classification of the Mavenir Products, as necessary to permit Starent to determine how to comply with all such export restrictions. Mavenir shall indemnify Starent for any claim or damage incurred by Starent and arising as a result of any inaccurate or incomplete information provided by Mavenir which results in any failure to classify, improper classification of Mavenir Products or other liability under EAR. Starent shall indemnify and hold harmless Mavenir for all liability under the EAR other than that which results from any inaccurate or incomplete information provided by Mavenir as described in the immediately preceding sentence. Starent shall include a clause in their agreements with their customers which (i) advises Starents customer that the products being sold to the customer may be subject to EAR restrictions and (ii) restricts Starents customers from exporting or re-exporting such products in violation of U.S. export laws.
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17.5 Binding Nature. This Agreement shall be binding on and inure to the benefit of the parties and their respective successors and permitted assigns.
17.6 Contract Interpretation.
(a) Captions; Section Numbers. Article, section and paragraph numbers and captions are provided for convenience of reference and do not constitute a part of this Agreement. Any references to a particular section of this Agreement will be deemed to include reference to any and all subsections thereof.
(b) Neither Party Deemed Drafter. Despite the possibility that one party or its representatives may have prepared the initial draft of this Agreement or any provision or played a greater role in the preparation of subsequent drafts, the Parties agree that neither of them will be deemed the drafter of this Agreement and that, in construing this Agreement, no provision hereof will be construed in favor of one party on the ground that such provision was drafted by the other.
17.7 Force Majeure. Each Party hereto shall be excused from default or delay in the performance of its obligations hereunder if and to the extent that such default or delay is caused by an act of God, or other cause beyond its reasonable control, including but not limited to, work stoppages, war, fires, riots, accident, explosion, flood, storm, or failures or fluctuations in electrical power, heat light, air conditioning or telecommunications equipment. In such event, the nonperforming Party shall be excused from performance as long as such circumstances prevail and shall as soon as practicable notify the other by telephone (to be confirmed promptly in writing) of any actual or anticipated delay.
17.8 Severability. If any provision of this Agreement, or the application thereof, shall for any reason and to any extent be determined by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions of this Agreement shall be interpreted so as best to reasonably effect the intent of the parties. The parties further agree to replace any such invalid or unenforceable provisions with valid and enforceable provisions designed to achieve, to the extent possible, the business purposes and intent of such invalid and unenforceable provisions.
17.9 Governing Law; Dispute Resolution.
(a) This Agreement shall be construed and governed according to, and any arbitration hereunder shall apply, the laws of State of New York applicable to contracts made and to be fully performed therein, excluding its principles of conflicts of laws. The Parties agree that the Uniform Computer Information Transaction Act (UCITA), or any version of UCITA adopted by any state, including Delaware, will not govern or be used to interpret this Agreement. The United Nations Convention on Contracts for the International Sale of Goods (UNCCISG) does not apply to this Agreement.
(b) Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity thereof, shall be finally settled by binding arbitration conducted in the English language in New York, New York under the commercial arbitration rules of the American Arbitration Association, which shall administer the arbitration and
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act as appointing authority. The arbitration shall be conducted by a single arbitrator jointly appointed by the Parties; provided, however, that if they cannot agree within thirty (30) days after the initiation of the arbitration, then the arbitrator shall be appointed by the President of the American Arbitration Association. Disputes about arbitration procedure shall be resolved by the arbitrator or failing agreement, by the American Arbitration Association. The arbitrator may proceed to an award notwithstanding the failure of the other party to participate in the proceedings. Discovery shall be limited to mutual exchange of documents relevant to the dispute, controversy or claim; depositions shall not be permitted unless agreed to by both parties. The arbitrator shall be authorized to grant interim relief, including to prevent the destruction of goods or documents involved in the dispute, protect trade secrets and provide for security for a prospective monetary award. The limitations on liability set out in this Agreement shall apply to an award of the arbitrator. Any purported award of punitive or multiple damages or of other damages not permitted under this Agreement shall be beyond the arbitrators authority, void, and unenforceable. The prevailing party shall be entitled to an award of reasonable attorney fees incurred in connection with the arbitration in such amount as may be determined by the arbitrator. The award of the arbitrator shall be the sole and exclusive remedy of the parties and shall be enforceable in any court of competent jurisdiction, subject only to revocation on grounds of fraud or clear bias on the part of the arbitrator. Notwithstanding anything contained in this Section to the contrary, each party shall have the right to institute judicial proceedings against the other party or anyone acting by, through or under such other party, in order to enforce the instituting partys rights hereunder through reformation of contract, specific performance, injunction or similar equitable relief.
17.10 No Waiver. No waiver or failure to exercise any option, right or privilege under the terms of this Agreement by either of the parties hereto on any occasion or occasions shall be construed to be a waiver of the same on any other occasion or of any other option, right or privilege.
17.11 Headings and References. The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to Sections or Exhibits shall, unless otherwise provided, refer to Sections hereof or Exhibits attached hereto, all of which Exhibits are incorporated herein by this reference.
17.12 Assignment. This Agreement and all related exhibits and agreements may not be assigned by either Party without the prior consent of the other Party, which shall not be unreasonably withheld, except that this Agreement may be assigned to, and be binding upon, any successor in connection with a merger, consolidation or sale of all or substantially all of that Partys business related to this Agreement without the consent of the other Party. Any assignment made in violation of this Section 16.12 shall be deemed null and void.
17.13 Equitable Relief. Except as otherwise expressly provided herein, no remedy granted to either Party herein shall be exclusive of any other remedy, and each remedy shall be cumulative with every other remedy herein or now or hereafter existing at law, in equity, by statute or otherwise. All claims or causes seeking injunctive or other equitable relief will be heard in any court of competent jurisdiction in New York, New York, and the parties hereby submit to the jurisdiction thereof.
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17.14 Counterparts and Facsimile. This Agreement may be executed in counterparts, each of which shall be deemed an original, but each together shall constitute one and the same instrument. For purposes hereof, a facsimile copy of this Agreement, including the signature pages hereto, shall be deemed to be an original. Notwithstanding the foregoing, the parties shall deliver original signature copies of this Agreement to the other party as soon as practicable following execution thereof.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized representatives to execute and deliver this Distribution Agreement as of the day and year first indicated above.
MAVENIR SYSTEMS, INC. | STARENT NETWORKS, CORP. | |||||||
By: | /s/ Pardeep Kohli | By: | /s/ Paul Milbury | |||||
Name: | Pardeep Kohli | Name: | Paul Milbury | |||||
Title: | President & CEO | Title: | Vice President Operations and Chief Financial Officer |
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Appendix A
Mavenir Products
There are three main components of a Mavenir solution: System software, computing hardware, application software and an optional integrated media gateway, provided in a telco grade rack for telecom central office environment. Media gateways are selected from certified vendors (3rd party OEM vendor) based on the applications.
Mavenir solutions are:
| Converged Voice Solution: |
| Connecting VoIP to an existing Mobile Core (GSM, 3G, CDMA) |
| Connecting an existing Radio Access Network (RAN) to an IMS Core (GSM, 3G, CDMA) |
| Intelligent Femto Gateway (UMTS and CDMA and Future LTE) |
| 2G/3G/CDMA MSC as Voice Telephony Application Server |
| Converged Messaging Solution: |
| Universal Message Routing (SMS Offload) |
| Messaging Gateway (SMS to SIP) |
| Instant Messaging Platform (IMP) |
| IMS Services with each item below as a standalone option: |
| Presence Server |
| S/I-CSCF |
| SCC AS, including Domain Selection (making HSS appear as HLR for roaming networks) |
| Telephony Application Server |
Mavenirs solution is designed and built for IP and SS7, Broadband and Narrowband, streaming communication needs. Mavenir solution applications include voice, messaging, session control, and presence. Using Mavenir solutions, Operators can:
1. | Connect VoIP natively to an existing MSC core; |
2. | Provide gateway (connector) function for voice, messaging, and presence into an IMS network |
3. | Offload SMS traffic from their core SS7 and SMS-C networks; |
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4. | Provide high capacity Session control for serving and interrogating CSCF in and IMS environment; |
5. | Detect and maintain presence of subscribers and inform the community of interest. |
6. | Provide Femtocell Aggregation capability with ability to provide domain selection |
Mavenir hardware is based on High Availability hardware, middleware and software components, including off-the-shelf ATCA hardware, and proven middleware such as Linux operating system and [***]. Mavenir supports a very scalable, high capacity solution that will enable network providers to start from a small deployment supporting a few thousand subscribers, to a large scale network deployment supporting millions of subscribers. Mavenir solution integrates the functionality necessary to deliver a full networking solution:
| Session Management and Subscriber Authentication, |
| Service Adaptation and Protocol Interworking |
| Multi-Domain Resource Management for Mobility and Features |
Mavenirs solution incorporates both 1:N and 1:1 redundancy for the application cards supporting each application and service described above.
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*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
Appendix B
Fee Schedule
Part Number |
Description |
Transfer Price/Unit | ||||
100-101-100 |
Standard 42U Telco Frame (siesmic) | $ | [***] | |||
100-102-100 |
PDU -150 AMPS | $ | [***] | |||
200-100-100 |
ATCA Chassis 12 U | $ | [***] | |||
200-101-100 |
Shelf Manager | $ | [***] | |||
200-103-100 |
Fan Tray | $ | [***] | |||
300-100-100 |
Switch Engine (SE) | $ | [***] | |||
300-101-100 |
Switch Engine (SE) - RTM | $ | [***] | |||
300-200-100 |
Administration Manager Card | $ | [***] | |||
300-300-100 |
Resource Manager Card | $ | [***] | |||
300-400-100 |
Signaling Interface Card | $ | [***] | |||
300-500-100 |
Application Card | $ | [***] | |||
500-100-100 |
Terminal Server-48 ports | $ | [***] | |||
500-101-100 |
Router L2 | $ | [***] | |||
500-102-100 |
Router L3 | $ | [***] | |||
500-103-100 |
Storage Array - RAID 5 (per 5 TB) | $ | [***] | |||
500-104-100 |
Reporting Server | $ | [***] | |||
500-105-100 |
Subscriber Database | $ | [***] | |||
900-100-100 |
RAWB (rear air management) | $ | [***] | |||
900-101-100 |
FAWB (front air management) | $ | [***] | |||
900-102-100 |
Miscellaneous Kit | $ | [***] | |||
900-104-100 |
Isolation Pad Assembly | $ | [***] | |||
900-105-100 |
Assembly, Configuration, Test, & Burn-In | $ | [***] | |||
900-106-100 |
Packaging with Crate | $ | [***] | |||
900-107-100 |
System Staging | $ | [***] | |||
900-108-100 |
Cable Assembly | $ | [***] | |||
Part Number |
Software Description |
Transfer Price/Unit | ||||
800-100-100 |
Platform SW (per chassis) | $ | [***] | |||
800-101-100 |
Third Party S/W License (per Chassis) | $ | [***] | |||
800-102-100 |
Application SW - Minimum Module (per Chassis) | $ | [***] | |||
800-300-100 |
GSM VoIP (per BHCA) | $ | [***] | |||
800-301-100 |
UMTS VoIP (per BHCA) | $ | [***] | |||
800-302-100 |
MSC as IMS TAS (per BHCA) | $ | [***] | |||
800-306-100 |
COMA ICS (CDMA P-CSCF) | $ | [***] | |||
800-400-100 |
I/S-CSCF Application (per TPS) | $ | [***] | |||
800-501-100 |
CDMA-IMS Domain Manager (per Subscriber) | $ | [***] | |||
800-600-100 |
CDMA Femto Services GW (Tunneled IOS) | $ | [***] | |||
800-601-100 |
UMTS Femto Services GW (per BHCA) | $ | [***] | |||
800-602-100 |
3GPP2 IMTAS (per Subscriber) | $ | [***] | |||
800-700-100 |
Messaging Router (per TPS) | $ | [***] | |||
800-701-100 |
Messaging Gateway (per TPS) | $ | [***] | |||
800-702-100 |
Messaging Server (per TPS) | $ | [***] | |||
800-800-100 |
Presence Server (per TPS) | $ | [***] |
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*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
Mavenir mOne Applications |
Requiring Optional 3rd party |
Requiring Optional 3rd Party Media Servers (announcements, DTMF, conferencing, bridging) |
Requiring Optional 3rd Party Session Border Controller (SBC) |
|||||||
GSM VoIP |
X | X | ||||||||
UMTS VoIP |
X | X | ||||||||
MSC as IMS TAS (per BHCA) |
X | X | ||||||||
CDMA ICS (CDMA P-CSCF) with non IP RAN |
X | |||||||||
CDMA Femto Services GW (Tunneled IOS) |
X | |||||||||
UMTS Femto Services GW (per BHCA) |
X | |||||||||
3GPP2 IMTAS (per Subscriber) |
X |
Notes
1. | The Parties agree that if Motorola is selected for the Sprint Femto RFP which is pending as of the Effective Date, Mavenir shall have the option to sell directly to Motorola or indirectly through Starent. |
2. | Starent has the option to procure Mavenir Hardware directly from Mavenirs supplier or any other supplier approved by Starent for such hardware, in which case such Mavenir Hardware may be governed in whole or in part by the contract between Starent and such supplier. |
3. | If Starent elects to procure Mavenir Hardware from any such supplier, then the Parties agree to co-operate to cause any Mavenir supplier to pool the aggregate volume of purchases of the Mavenir Hardware in order to obtain the maximum discount for such hardware from that supplier. |
4. | With respect to maintenance and support, Starent will provide Tier 1 and Tier 2 support and Mavenir will provide Tier 3 support to Starent. |
5. | The Parties [***] basis all maintenance and support revenue received by Starent in connection with Mavenir Products sold or licensed by Starent. |
6. | If requested by Starent, the parties may mutually agree on alternative pricing for Mavenir Products on a case-by-case basis. |
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*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
Appendix C
Mavenir Maintenance and Support Services
In consideration of the Maintenance and Support Fees set forth in Appendix B, Mavenir will provide Starent with maintenance and support services as further described herein. At a minimum, Mavenirs maintenance and support services consist of the following: (a) 24 x 7 x 365 TAC and phone support, (b) Hardware defect support, (c) Software defect support, (d) Software Updates, (e) Software Upgrades, (f) Hardware RMA service, (g) Hardware advanced replacement, (h) Hardware maintenancekeeping Hardware up to last Engineering Change Orders, (i) Network maintenanceanalyzing system logs and trends, (j) FOA support, and (k) cut over support.
1. DEFINITIONS. The following definitions apply to this Appendix C:
1.1. | Supported End Users. End users of the Mavenir Product for whom Maintenance and Support Fees have been paid for the current period. The term End Users shall include Distributors as well as End Users |
1.2. | Support Request. A Problem or Technical Query reported by Starent to Mavenir which Mavenir shall assign a tracking reference number. |
1.3. | Fault. Any deficiency or malfunction of the Mavenir Product. Table 1 outlines the Fault Severity Levels: |
Table 1. Fault Severity Levels.
Severity |
Description | |
Critical | Any condition that severely impacts end user service, capacity/traffic, billing or maintenance capabilities and require immediate corrective action. | |
A loss of service comparable to total loss of effective functional capability of the entire switch or transport system. | ||
A reduction in capacity or traffic handling capability such that expected loads cannot be supported | ||
Any loss of safety or emergency services | ||
Major | Conditions that severely impact system operation, maintenance or administration and which require immediate attention. The urgency is less than a critical situation because of a lesser immediate or impending impact on system performance and customers. | |
Material reduction in capacity/traffic measurement function | ||
Any loss of functional visibility and/or diagnostic capability | ||
Short outages equivalent to system or subsystem outages, with accumulated duration of >2 minutes in any 24 hour period or that repeat for longer periods |
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Repeated degradation of interface speeds | ||
Prevention of access for administrative activity | ||
Degradation of access for maintenance or recovery procedures | ||
Degradation of the systems ability to provide any required critical or major trouble notification | ||
Corruption of system or billing databases |
Minor | Conditions that do not significantly impair function of the system. Problems that do not significantly impair the functioning of the system and do not significantly impact service to customers or traffic. | |
Priority | ||
1. | Multiple subscribers impacted and/or service outage; no workaround available | |
2. | Multiple subscribers impacted and/or service outage; workaround is available | |
3. | Non subscriber impacting and/or no service outage | |
4. | Configuration or operational change request |
1.4. | Problem. A possible Fault, as described above, reported by Starent to Mavenir. Table 2 outlines the possible Problem Severity Levels: |
Table 2. Problem Severity Levels
Problem Severity |
Problem Description | |
Critical Problem | A problem that has the symptoms of a Critical Fault. Critical Problems to be communicated to Mavenir by phone, web interface, or email. | |
Major Problem | A problem that has the symptoms of a Major Fault. Major Problems to be communicated to Mavenir by phone, web interface or email. | |
Minor Problems | A problem that has the symptoms of a Minor Fault. Minor Problems to be communicated and described to Mavenir by phone, web interface or email. |
1.5. | Technical Query. A technical question involving the Mavenir Product from Starent to Mavenir. |
1.6. | Problem Qualification. In connection with the issuance of any Support Request to Mavenir, and if the support request is motivated by a Problem, Starent will qualify whether the Problem is or is not a Fault, and if so, whether Critical, Major or Minor and communicate the results to Mavenir. |
1.7. | Response Time. Time since Mavenir receives the appropriate notification outlined in Table 2 above from Starent about a Problem or Query until a qualified technician from Mavenir provides a verbal or written response to Starent acknowledging the receipt by Mavenir of the Problem or Query. |
1.8. | Work Around. Temporary measures that bring the system back to working order but not under fully functional conditions. A Work Around shall not imply nor be deemed to be a Fault Resolution. Work Around measures do not apply for minor faults. |
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1.9. | Work Around Time. Time since Mavenir receives notification (by means set forth above) until the system is brought back to work. |
1.10. | Resolution. In cases of Faults, Resolution will mean that a solution is actually delivered to Starent which eliminates the Problem that caused the Fault. In case of Queries, a Resolution means an accurate and relevant response provided to the query. For the resolution of a Fault, Mavenir will deliver the solution (which may be a Software Patch, a new Minor Software Release or a procedure to modify the system configuration) to Starent and / or to Starents customer. |
1.11. | Resolution Time. Means the time since Mavenir receives notification, including all relevant diagnostic information from Starent until Mavenir provides Starent a final solution (for Faults), or an accurate and relevant answer (for Queries). |
2. MAINTENANCE SOFTWARE.
2.1. | Software Updates. For so long as this Agreement shall be in effect an in exchange for the Support Fees paid to Mavenir, Starent will receive new Software Updates and Software Upgrades, when and if available, and accompanying documentation from Mavenir for each license that is currently under the maintenance period and for all internal Starent lab licenses. Starent may install the Software Updates and Software Upgrades at each of the Supported End Users and at Starents laboratory. Mavenir will provide the following Software Updates and Software Upgrades as mutually agreed: |
(a) | Major Release. Major Software Releases will include new functionality and a seamless upgrade procedure from previous Major Software Releases. Mavenir will provide support for N-2 major releases or two years, which ever is longer (n = current software release). |
(b) | Minor Software Release. During the support period for a Major Release, Mavenir may produce Minor software releases that correct software faults and consolidate all software patches up to that date. |
(c) | Software Patch. During the support period of a Major Release and in between Minor Software Releases, Mavenir may produce a Software Patch to correct software faults. For software minor releases, Mavenir will maintain upgrade capabilities for N-2 minor releases or two years, whichever is longer (N = current software release). |
(d) | As part of each Major and Minor Release and Software Patch, Mavenir will provide to Starent release notes documenting: |
i. | Any new or changed functionality; configuration documentation should also be included if functionality is new or changed in a Minor Release or Software Patch. |
ii. | A list of resolved faults if any from the previous Major or Minor Release. |
iii. | A list of outstanding unresolved faults documenting known conditions under which the fault occurs and any possible workarounds. |
(e) | Mavenir shall also provide Starent with the process to downgrade a system from a current release in case faults are experienced by the system during an upgrade. |
(f) | Mavenir will provide substantially the same Software Upgrades and Software Updates to Starent that Mavenir makes commercially available to any other customers of the Mavenir Products, when and if available, within the same timeframe that such Software Upgrades and Software Updates are provided to those customers. |
3. MAINTENANCE SUPPORT
3.1. | Under the terms of Mavenir Software Maintenance Mavenir shall maintain trained staff reachable 24 hours a day, every day in the year, capable of responding to Support Requests from Starent related to the Mavenir Product. |
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3.2. | Mavenir shall offer Maintenance and Support services to Starent for at least five (5) years after the end of life of each Mavenir Product unless Starent ceases to pay the applicable support fees. |
3.3. | Processing of Support Requests. Mavenir will use the following process to manage Starent Support Requests: |
(a) | Support Request Reception. Mavenir shall acknowledge the reception of a Support Request, and assign a tracking number. |
(b) | Support Request Qualification. If the Support Request is not a Technical Query, Mavenir, acting at all times in good faith, shall confirm whether the Problem is actually a Fault and verify whether the reported severity level in the Support Request is correct and communicate to Starent within the period specified for response to that fault depending on its classification. The result of the qualification will be communicated back to Starent. |
(c) | Work Around. For any Critical or Major Fault, Mavenir shall provide to Starent a Work Around within the timeframes specified in Work Around Timeframes |
(d) | Resolution. For any and all Faults, Mavenir shall provide to Starent all necessary support to deliver a Final Solution to Starent and / or Starents End Users. Mavenir will provide regular updates to Starent reporting all progress within the timeframes specified in Response Timeframes. Fault Resolution may include Software Updates that will be released to Starent for further testing and deployment in customer network. |
(e) | Support Request Closure. Support Requests consisting of Faults will be closed upon providing a complete solution to Starent (as described in Section 1.10 of this Appendix C), Support Requests consisting of Technical Queries will be closed upon providing a complete technical answer to Starent. Support Requests including problems not qualified, as Faults will be closed upon providing a detailed explanation of why such problem is not attributable to the Mavenir Product. |
(f) | At any point in time during the problem resolution process, Starent may elect to escalate an issue to the Mavenir management team. |
3.4 | Hardware Maintenance. Mavenir will repair the defective product or parts and/or deliver to Starent an equivalent product or part to replace the defective item in accordance with, inter alia, Section 4 of the Agreement and this Appendix C. All replaced products will become the property of Mavenir. With respect to Mavenirs repair services, the repaired or replaced item will be shipped to Starent not later than thirty (30) days after Mavenir receives the defective product. |
3.5 Mavenir Response and Resolution Times. Table 3.4 outlines the responses times for each Fault Severity level:
Table 3.5 Response and Resolution Times. SLA Timeframes:
18. Severity Levels |
Response Time |
Work Around Time | Resolution Time | Status Updates | ||||||||||
1 |
15 mins | 1 hour | 24 hours | 30 mins | ||||||||||
2 |
15 mins | 2 hours | 72 hours | 60 mins | ||||||||||
3 |
30 mins | 8 hours | 96 hours | 120 mins | ||||||||||
4 |
24 hours | 5 days | 30 days | 24 hours |
3.6 The following liquidated damages shall apply for Mavenirs failure to meet the applicable Work Around Time, Resolution Time and Availability. Starent, in its sole discretion, may require payment in cash or credit for each assessed liquidated damage. Credits may be applied against any and all purchases by Starent of any Mavenir Product.
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Liquidated Damages for Failure to Meet Work Around Time:
| ||||
Severity Levels |
Outage Duration |
Compensation per Hour | ||
1 | Greater then 1 hour | For each hour after 1 hour, $[***] per hour | ||
2 | Greater then 2 hours | For each hour after 2 hours, $[***] per hour | ||
3 | Greater then 8 hours | For each hour after 8 hours, $[***] per hour | ||
4 | Greater then 5 days | For each hour after 5 days, $[***] per hour |
Penalties associated with Time to Resolution:
| ||||
Severity Levels |
Outage Duration |
Compensation per Hour | ||
1 | Greater then 24 hours | For each hour after 24 hours, $[***] per hour | ||
2 | Greater then 72 hours | For each hour after 72 hours, $[***] per hour | ||
3 | Greater then 96 hours | For each hour after 96 hours, $[***] per hour | ||
4 | Greater then 30 days | For each hour after 30 days, $[***] per hour |
Additionally, the following shall apply with respect to Availability:
Availability falls between 99.995 99.999% during the applicable measurement period, Starent will be entitled to a credit from Mavenir of at least [***]% of the service fees applicable to that month
Availability falls between 99.990 99.995% during the applicable measurement period, Starent will be entitled to a credit from Mavenir of at least [***]% of the service fees applicable to that month
Availability falls between 99.980 99.990% during the applicable measurement period, Starent will be entitled to a credit from Mavenir of [***]% of the service fees applicable to that month
Availability falls below 99.980% during the applicable measurement period, Starent will be entitled to a credit from Mavenir of [***]% of the service fees applicable to that month.
19. |
Availability is defined as the time in which the applicable Mavenir Product is available and functioning within specifications in an End Users network. Availability is determined in accordance with the following formula: (total time in service since inception stated in seconds) (total time in outage since inception stated in seconds) / (total time in service since inception stated in seconds) *100 = % (availability). Starent will provide the flow-down measurement period to Mavenir on a case-by-case basis.
Exceptions to availability include outages (i) resulting from scheduled or unscheduled maintenance activities, (ii) resulting from third party products, and (iii) caused by Force Majeure. Outages caused by any of the above shall not be included in the calculation of availability.
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Delay penalties shall accrue at [***] of the net price of the delayed product if the delay is caused by Mavenir.
Unless required by an End User, liquidated damages shall not be cumulative.
3.7 | Flow Down Provisions; Non-Standard Service Level Agreements. Notwithstanding anything to the contrary herein, with respect to sales made to accounts other than T-Mobile, if requested by the applicable customer and as long as the aggregate service level agreement and related liquidated damages that may be assessed against Starent and flowed down to Mavenir are substantially the same or less stringent in the aggregate than those stated above, and other flow-down terms are substantially the same or less stringent than the applicable remaining terms set forth in this Agreement, Mavenir agrees to provide back-to-back maintenance and support for Mavenir Products sold to Starent or its customers on the same terms and conditions that Starent has with each such customer, including, without limitation, warranty and non-warranty hardware and software support, service level agreements and the flow down of all related penalties which are directly attributable to Mavenirs maintenance and support obligations. For all T-Mobile sales and accounts, the minimum back-to-back standard terms and conditions for maintenance and support and related liquidated damages are set forth in Exhibit C to the Master Agreement between T-Mobile USA, Inc. and Mavenir Systems dated March 24, 2008 (the SMS Offload Agreement), a copy of which is attached hereto as Exhibit C-1, and the terms and conditions of his Agreement; provided, however, that the notice and cure provisions in Section 3.6 below shall be included in such back-to-back terms. In the event that Starent negotiates different terms and conditions with T-Mobile USA that differ materially from those set forth in Exhibit C-1, then, upon request by Starent, Mavenir and Starent shall replace Exhibit C-1 with the service level agreement that Starent eventually negotiates with T-Mobile USA. |
3.5 | The parties agree to work together in good faith with respect to all flow down and back-to-back terms and conditions for all accounts. |
3.6 | Starent shall provide Mavenir with written notice in the event that Mavenir materially breaches its maintenance and support obligations hereunder. Notwithstanding the thirty (30) day cure period set forth in Section 14.1 of the Agreement, (a) in the event Mavenir is in material default of its Work Around or Resolution Time metrics in connection with a Critical Fault or a Major Fault, Mavenir shall be entitled to a seven (7) calendar day cure period from the date of receipt of notice, and (b) in the event Mavenir is in material default of its Work Around or Resolution Time metrics in connection with a Minor Fault or Technical Inquiry, Mavenir shall be entitled to a fifteen (15) calendar day cure period from the date of receipt of notice. Mavenir shall be deemed to be in material breach of its maintenance support obligations and this Agreement, for purposes of, among other things, the Escrow Agreement if (a) Starent issues three distinct notices of cure to Mavenir within any thirty (30) day period, and (b) Mavenir fails to cure each such default within the applicable cure period for the applicable notice. |
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Exhibit C-1
Exhibit C to the SMS Offload Agreement
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Exhibit C
Support Services and
Service Level Agreement
SMS Offload Solution (SOS)
Service & Support Specification | Strictly Confidential Information | Page l of 20 |
1. INTRODUCTION |
3 | |||
2. DEFINITIONS |
3 | |||
3. SERVICE DESCRIPTION |
6 | |||
3.1. PLACE AND TIMES OF SUPPORT SERVICES |
6 | |||
3.2. SERVICE COMPONENTS |
6 | |||
3.3. INCIDENT SEVERITY CLASSIFICATION |
12 | |||
3.4. INCIDENT HANDLING |
14 | |||
3.5. ALTERATION AND EXTRA WORK |
14 | |||
3.6. T-MOBILE SUPPORT REPRESENTATIVE ACTIVITIES |
15 | |||
3.7. OPERATIONAL SERVICE MANAGEMENT |
15 | |||
3.8. DOCUMENTATION |
16 | |||
3.9. SERVICE UPTIME OR AVAILABILITY |
16 | |||
3.10. PERFORMANCE PENALTIES |
17 | |||
4. SERVICE GUIDELINES |
18 | |||
4.1. QUICK OVERVIEW OF THIS SERVICE AGREEMENT |
18 | |||
4.2. SERVICE HANDLING CHART |
18 | |||
4.3. T-MOBILE SHIPPING ADDRESS |
19 | |||
5. SERVICE NOT COVERED UNDER SUPPORT PROGRAM |
19 |
Service & Support Specification | Strictly Confidential Information | Page 2 of 20 |
This Exhibit C shall be construed together with and is governed by the terms and conditions of that certain Master Agreement between Supplier and T-Mobile dated as of [March 26, 2008] (the Agreement). Supplier and T-Mobile shall each be referred to herein individually as a Party and collectively as the Parties. In consideration of the mutual promises contained in the Agreement and this Exhibit C, T-Mobile and Supplier hereby agree that Supplier will provide support and maintenance services (Support Services) to T-Mobile in accordance with this Exhibit C.
1. Introduction
This Exhibit C (Service Specification) delineates Suppliers obligations in relation to the supply of the System Support Services and sets out any specific T-Mobile obligations for such services. The System Support Service is intended to support the maintenance of the Software and Hardware included in the System.
This Service Level Agreement is a statement of Suppliers obligations in relation to the performance of the System Support Services and sets out any specific T-Mobile obligations for such Support Services. The System support service is intended to support the maintenance of the Software and Hardware included in the System.
2. Definitions
Agreement means these General terms and Conditions, and attached Annexes.
Acceptance Test(s) means following:
1) | Acceptance test(s) performed by Supplier to check and establish whether the Products comply with the functions, features and properties set forth in the Specifications, before the Products or Systems can be handed over to T-Mobile. |
2) | Acceptance test(s) performed by T-Mobile to check and establish whether the Products comply with the functions, features and properties set forth in the Specifications. |
3) | Acceptance Test(s) is not meant to replace Suppliers responsibility to verify fix(s) or upgrade(s) made by Supplier. Contract has to ensure that any function, feature, fix or upgrade submitted to T-Mobile has passed rigorous test processes and certification. |
Add-on means a product that is certified by Supplier to work in combination with a Supplier System. The goal for an Add-on product is to increase the traffic for T-Mobile, add additional function or feature, or to integrate T-Mobile System with Equipment and/or Software in T-Mobile;s organization.
Contacts means the people designated by T-Mobile and accepted by Supplier (which acceptance shall not be unreasonably withheld or delayed) to act as T-Mobiles contacts and substitute contacts.
T-Mobile has the definition first set forth above in this Agreement, and includes its legal successors in title and any permitted assignees.
Day(s) means calendar day(s).
Final Acceptance means the date T-Mobile has signed Suppliers Final Acceptance Certificate upon satisfactory completion of the installation and all Acceptance Tests of the System.
Final Solution means the correction of a Problem by a Patch or Improved Version of the Software such that the Software is operating within the applicable Specifications.
Final Solution Time means the permanent Software repair time deadline for each severity level as defined in Section 3, which becomes part of the released Software.
First Response time is the time between T-Mobile reporting the problem or the Software or System reporting the problem if applicable, and Suppliers first contact to T-Mobile, as a result of a System Element problem or emergency situation.
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Incident means any event that is not part of the standard operation of the System, or which causes the System to perform outside the standards and performance criteria set forth in the Specifications and this Agreement or which causes, or may cause, an interruption to, or a reduction in, the quality, performance of the System, end user experience or financial impact, T-Mobile revenue impact, System operational instability, T-Mobile Operational sustainment impact and etc.
Incident Report means all electronic information of an Incident as described in Supplier Incident management System as reported by T-Mobile and Supplier.
Installation means the installing and/or copying of the Software into the Equipment and configuring the Equipment and/or Software in such a way that the Software functions in accordance with the agreed Specifications. Installation also includes configuration or work to properly integrate the System with T-Mobiles infrastructure to provide agreed functions and features.
MDA Message Delivery Attempt (MDA) means the end-to-end delivery of an SMS message, regardless of the number of transactions (message delivery attempts) involved in delivering the message. An MDA can consist of any of the following end-to-end transaction types; Application Originated to Application Terminated (AO-AT), Application Originated to Mobile Terminated (AO-MT), Mobile Originated to Application Terminated (MO-AT) or Mobile Originated to Mobile Terminated (MO-MT). MDA PER SECOND means number of Message Delivery Attempts (MDA) in one second.
New Version means a modified version of the Software, as a result of which its functionality is improved or expanded.
Party or Parties means T-Mobile USA, Mavenir or both, as applicable.
Patch / Improved version means any correction to the Software, which corrects or replaces an error in any Software or module thereof. A Patch shall contain the appropriate load life, implementation instructions and Documentation.
Problem means any underlying cause of one or more Incidents.
Remedy means the action(s) required to solve a problem by limiting its effects. The Remedy may cause restrictions in System performance or might, for example, be:
Selective disabling of functionality
Manual restart/reload
Temporary shut-down of System parts
Return to previous configuration
Remedy Time is the time between T-Mobile (or the Software/System) reporting the problem and the delivery of an acceptable or permanent solution for the problem. A permanent solution can be:
Patch for the System Element
Maintenance Release of the System Element
New Release
Response Time means the time within which Supplier will start carrying out the services set forth herein, calculated from the moment T-Mobile has reported an Incident or made a request for Service.
Restoration means, the action(s) required to prevent the reoccurrence of a problem and/or any underlying causes of a problem. When a Restoration is implemented, the System is restored to the state it was in before the problem occurred. A Restoration might, for example, be:
Correction of procedural error
Documentation update
Manual restart/reload
Service & Support Specification | Strictly Confidential Information | Page 4 of 20 |
Return to previous configuration
Introduction of available Software correction(s)
Introduction of new Software correction(s)
Service Information includes relevant information provided by T-Mobile at the time of the call to Supplier. The call shall include fundamental information as described below but not be limited to:
Name of the reporter/reporting department
Call back number telephone/fax/e-mail
System Element concerned
Project concerned
Identification of the System Element concerned, e.g. variant, version, Maintenance Release, build
Priority of the problem
Description of the problem, malfunction or suspected design defect
Any additional information related to the problem
Site means any actual location specified by T-Mobile where the System has been installed.
SPR means a Supplier internal Software / System problem report.
Software Maintenance means, corrections of the Software based on reports from Supplier or a third party vendor, T-Mobile, or other Network operators. Software maintenance shall contain the appropriate Software, implementation instructions and user Documentation.
Supplier means Mavenir, and legal successors in title to Mavenir and any permitted assignee of Mavenir.
Third Party Equipment, Third Party Products and Third Party Software means Equipment, Products or Software supplied or provided by Supplier, but which has been manufactured or developed by a Third Party.
Third Party or Third party Company means a supplier of Equipment, Products and / or Software other than Mavenir.
Workaround Time / Neutralization time means the time between T-Mobile (or the Software/System) reporting the problem and the required time to develop and deploy a mutually agreed upon temporary corrective action to restore the functionality or part of the functionality of the System.
Workdays mean calendar days, except weekends.
Service & Support Specification | Strictly Confidential Information | Page 5 of 20 |
3. Service Description
3.1. Place and Times of Support Services
3.1.1. | Support Service shall take place by means of on-site or remote support whenever necessary and at no expense to T-Mobile. |
3.1.2. | For the purpose of remote support, Supplier shall support the means of remote access as mutually agreed to between T-Mobile and Supplier. |
3.1.3. | When Support Services are required to be performed on T-Mobiles premises, T-Mobile will provide Suppliers personnel access to T-Mobiles premises. |
3.1.4. | All Primary Support Services (as such term is defined herein) shall be performed on Workdays. T-Mobile shall be entitled to request expansion to include other days when necessary as mutually agreed to between T-Mobile and Supplier at no expense to T-Mobile. |
3.1.5. | Emergency Services (as such term is defined herein) shall be performed seven (7) days a week, twenty four (24) hours a day. Three hundred sixty five (365) days a year. |
3.2. Service Components
3.2.1. | Support Services Program |
Supplier agrees to provide T-Mobile with Support Services to include but not be limited to the following:
(A) Support of the System and System Elements comprised of:
| Primary Services |
| Emergency Services |
| Planned On-Site Support |
| System Health Management |
| Single Point of Contact Services |
| Software Maintenance |
| System Upgrade |
| System Element (Product) Support (SPS) |
| Helpdesk 24/7/365 for Critical/Major Errors |
(B) Hardware Repair and Replacement Service:
All Support Services discussed in this Exhibit C are covered by the Annual Service and Support Agreement between T-Mobile and Supplier. [***].
3.2.2. | Primary Services |
The following services are Primary Services;
1) Maintenance Service
Maintenance Services means the detecting and remedying of Incidents and/or the provision of temporary solutions in the Software after T-Mobile, the Software, or System has reported an Incident (it being understood and agreed that in the event that Supplier provides a temporary solution, it shall continue to provide Maintenance Services until such time as a permanent solution has been implemented). Software Incidents on a System will be addresses per Incident category as described in Section 3.3, Incident Severity Classification (Severity Level E1 and E2 are not included in Maintenance Service). In the case of a Test System, Severity Level A is not applicable.
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Remote or on-site maintenance installations of corrections of Incidents are included in Maintenance Services. Requests for Maintenance Services can be made seven (7) days a week, twenty four (24) hours a day, three hundred sixty five (365) days a year.
Planned Maintenance Service activities such as installations of corrections may be performed by Supplier at times outside of Office Hours.
2) New Release and Software Maintenance Services
New Releases and Software Maintenance Services means that Supplier will periodically provide T-Mobile with new Software versions, which may include improvements and new functionality. Documentation and new releases notes including delta from previous release, shall be provided in conjunction with the New Releases. Supplier will also provide T-Mobile with various Software updates, patches, corrections approved by the design within Supplier to ensure contracted service availability, product performance and meet up-to-date T-Mobile security and operation standards.
New releases and Software updates are provided under the same Software license terms and conditions that shall be stated in the Contract. New releases and Software updates delivered may also contain other Software programs (i.e. new functionality/ features), which shall be available to T-Mobile whenever possible on the same Software license terms and conditions that shall be stated in the Contract. No additional license fees shall be applicable.
Supplier will support up to N-2 release of the Software, where N being the current release of the Software available. Supplier shall ensure that any Maintenance Releases (defined as a Software release intended to fix an error discovered through Fault Correction) are designed in such a way that they can be incorporated into T-Mobile Network with no or minimum disruption of System operation. Supplier will provide Methods of Procedures (MOP). In addition, each Maintenance Release will be accompanied by Release Documentation listing errors corrected, enhancements, new / changed functionality and any delta from previous release or version.
Supplier may also provide T-Mobile with patches (Incl. all necessary documentation) to meet time commitments for new or additional features, critical or major design issues, rather than providing Maintenance Releases. Supplier will provide documents with release notes and delta from previous release. All patch releases will be automatically rolled into next new release.
Supplier may need to perform services on T-Mobiles premises. For such instance, T-Mobile will not be charged for the on-site Support Service.
3) Support Services
Support Services means the provision of assistance by telephone and/or remote access and/or on-site assistance in the event Incidents occur, as well as consultation by telephone on the use and functionality of the Software and System. Support Services also included the provision to T-Mobile of access to Web Services.
Web Services means the provision of online access to, among other things, System Documentation, release notes and tracking and tracing, and which access provides T-Mobile with information relating to each of its Incidents and Suppliers progress towards correcting such Incidents.
T-Mobile will work with Supplier to connect its Network to Suppliers secured access server. There are several options for this connection and several security levels are available. Supplier will provide necessary assist to T-Mobile for the successful establishment of operational Network connections.
Service & Support Specification | Strictly Confidential Information | Page 7 of 20 |
Supplier shall perform all Support Services on the latest, second, and third latest version of the Software released. Versions which are more than two (2) releases old shall not be supported.
With respect to Maintenance Services, Supportive Services and Emergency Services, Supplier shall perform within the response times, work around times and Final Solution times referred to in Section 3.4, Incident Handling, that lead to correction of the Incident within the shortest term possible. If the Incident does not result in complete or correction partial malfunctioning of the Software, it shall be remedied by providing an improved version in a timely manner agreed by T-Mobile.
It is the intent of the Parties that any problem, defect or failure in the System or Products shall be corrected promptly regardless of fault, and in this regard Supplier agrees that it shall determine the cause of any problem, defect or failure and provide and perform problem mitigation.
If Supplier demonstrates that an Incident cannot be remedied otherwise, it shall be entitled to incorporate temporary, problem-avoiding restrictions in the Software, Third Party software or provide temporary solutions (Work around) to Incidents in the form of a program bypass in order to circumvent the incident in question. These restrictions or program bypasses shall affect the functions of the Software, Third Party software as little as possible. After a temporary solution has been implemented, Supplier shall continue to work on the Incident until such time as a Final Solution has been implemented.
As part of Support Services for Acceptance Test(s), Supplier will provide all necessary resources, Software scripts/ tools and Documentation, to be used in the Acceptance Test(s), to assist T-Mobile to perform Acceptance Test(s).
Supplier will develop and provide additional tools and/or Software including scripts when requested by T-Mobile for third party testing equipment to be used in the Acceptance Test(s). This support should be at no additional expense to T-Mobile. If customer wishes to own the third party testing equipment, it is the responsibility of T-Mobile to acquire the equipment from third party vendor.
4) System Upgrade Support
System upgrade support includes SW release upgrade and/or System capacity upgrade requiring HW. Supplier shall ensure that all new SW versions (which mean major Software release with substantial new features) are compatible with deployed contractual product up to N-2 release of SW.
Supplier shall provide a System Upgrade Plan incorporating all necessary information to perform the upgrade and shall incorporate fallback procedures, where fallback means the restoration of the System configuration to its original configuration prior the installation of the new SW or HW release.
Supplier will provide Documents with release notes and delta documents from the previous release. Depending on individual upgrade involved, Supplier will work with T-Mobile to define a clear and workable migration plan.
Supplier may need to perform support including Software installation, configuration and etc. on T-Mobiles premises. For such instance, T-Mobile will not be charged for the on-site Support Services.
5) Helpdesk 24 x 7 Support:
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This option shall be available twenty four (24) hours a day, three hundred sixty five (365) days per year. T-Mobile can call the assigned Supplier Local Support office for a quick consultation or direct communication in any step of the problem handling process. This option gives personal assistance to T-Mobile for errors that have a Critical or Major Error level. The telephone number for reaching 24x7 supports is: +1 469-916-4393
6) Value Added Services
Supplier shall provide T-Mobile with following Valued Added Services:
| Preventive Maintenance as defined below; |
| T-Mobile Support representative as defined in Section 3.6; |
| Service Management as defined in Section 3.7; |
Preventive Maintenance means the maintenance of the Software for the duration of the Agreement through the provision of improved versions of the Software in which Incidents have been remedied and/or to which technical improvements have been made.
3.2.3. | Emergency Services |
Emergency Services consist of detecting and remedying Emergency Incidents and/or providing temporary solutions in the Software or Hardware after T-Mobile has reported an Incident (it being understood and agreed that in the event that Supplier provides a temporary solution, it shall continue to provide Maintenance Services until such time as a permanent solution has been implemented).
Emergency Support shall be provided 7 days a week, 24 hours a day three hundred sixty five (365) days a year. Emergency Incidents will be addressed per Emergency Incident category as described in Section 3.3, Incident Severity Classification (Severity Level E1 and E2).
The Emergency Services shall be activated by establishing contact with Supplier. Emergency requests shall always be reported via telephone.
Supplier shall provide to T-Mobile personnel a unique reference number for the emergency case which shall be used for further reference during processing or escalation.
Once the emergency is received Suppliers response shall be immediate. Supplier shall start to analyze the situation and produce an answer, including a Remedy and/or a Restoration (see section 2), within the contracted time. The answer shall describe what actions required either by Supplier or by T-Mobile.
If the Emergency Incident is neutralized with a temporary solution (Workaround) or Final Solution, the Emergency Incident will be closed.
The Emergency Handling shall be considered completed if;
| the answer, Workaround, Remedy and/or Restoration, has been agreed between T-Mobile and Supplier |
| the emergency situation no longer exists |
Supplier shall provide expert personnel support on-site if the situation requires this.
Once the emergency has been solved, the incident shall be reclassified into a severity level per SPS and resolution of the problem shall be followed up until it is corrected per severity level.
In case of a temporary solution, a Severity Level A Incident will be opened at the same time the Emergency Incident is closed and the Final Solution will be provided within the Final Solution time as described in Section 3.4, Incident Handling.
Supplier shall provide T-Mobile with a written report on the Emergency Handling Service supplied including a root cause analysis for the emergency.
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3.2.4. | Planned On-Site Support |
Supplier will provide on-site technical support for upcoming activities of T-Mobile which require on-site assistance due to T-Mobile activities not directly related to Supplier product, such as T-Mobile Network upgrade. Planned On-Site Support must be scheduled with at least five (5) business days notice. Planned On-Site Support will consist of Supplier engineer assigned to T-Mobile for each of Planned On-Site Support and who will be subject matter experts for the area needing support. This Support Program will include a Planned On-Site Support for a period not exceeding ten (10) business days. Onsite support activities beyond ten (10) days will be evaluated on a case by case basis. No expense of such support shall be applicable to T-Mobile.
3.2.5. | System Health Management |
System Health Management provides the following Support Services,
| Regular reports; Supplier will provide T-Mobile with reports. The periodicity and topics covered are jointly agreed upon between T-Mobile and Supplier. Examples of topics covered are, performance measurements and improvements; list of issues, etc. |
| Operational review; joint meetings between T-Mobile and Supplier are held on a regular basis to go through the status and performance of the service. |
| Supplier will provide Health Checks, based on agreed schedules, on each location where the System is deployed to provide T-Mobile with evaluations and recommendations. The goal for this check will be to increase System efficiency, identify System integrity faults, stale routing, and traffic bottlenecks. The Health Check will include a report outlining the findings, and recommendations. |
As part of the System Health Management, Supplier will provide T-Mobile with the following set scheduled Health Checks:
1) | Supplier will conduct a Health check one (1) month after operational deployment of the System to provide Health baseline; |
2) | Supplier will conduct a Health check after six (6) months of System deployment; |
3) | Supplier will conduct a Health check after twelve (12) months of System deployment; |
4) | Supplier will conduct a yearly Health check there after as part of the extended Support Services; |
5) | Major Software release or System update resets the Health check schedules to start from 1) again. |
3.2.6. | Single Point of Contact Services |
Single Point of Contact Services means the detection and remedying of Incidents and/or the provision of temporary solutions in the Third Party software and equipment, after T-Mobile has reported an Incident. Single Point of Contact Services means also providing assistance in the event Incidents occur, as well as consultation on the use and functioning of Third Party software and equipment. As the Single Point of Contact, Supplier will transfer these incidents to appropriate Third Party supplier and will assist and monitor the Incident until the Incident is resolved.
Supplier will provide and maintain a local technical presence in the Seattle area for all products purchased and kept under a service agreement by T-Mobile.
Supplier will support and maintain all third party hardware and software acquired by T-Mobile as part of the Agreement.
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3.2.7. | Standard System Element (or Product) Support (SPS): |
The SPS handling process gives T-Mobile a single interface for all operation and maintenance requests, technical requests etc. All requests in the SPS handling shall be submitted by T-Mobile via telephone, email or a web based interface.
All requests from T-Mobile shall include support information outlined in Section 2. The telephone number for reaching SPS is: +1 469-916-4393. On Call Support shall be available during business days from 8:00 a.m. CST to 5:00 p.m. CST. During these time periods competent Suppliers personnel shall be available to respond to all T-Mobile queries.
All support requests shall be assigned a Severity Level, Emergency, Critical, Major, Minor or Warning. T-Mobile shall be responsible for classifying and assigning the applicable Severity Level to a particular request as defined in the table below. If T-Mobile has not prioritized the request, Supplier shall assign the severity level and notify of the classification.
Upon receiving Trouble/Problem Report (via standard SPS, or via the 7 x 24 Telephone Support),
| Supplier shall revert to T-Mobile within the applicable First response Time by phone or web depending of type of request. (See chapter 2 Definitions), |
| Supplier shall then analyze the problem, identifying corrections and generating provisional and final solutions to problems arising from T-Mobile for the contractual System element. |
| Supplier shall then produce an answer, including a workaround, Remedy and/or a Restoration (see chapter 2 Definitions) within the contracted time. The answer shall describe what actions have to be taken, either by Supplier or by T-Mobile for the solution of the problem. |
| The answer shall be sent back to T-Mobile, via telephone, email or web. T-Mobile can follow the status of the problem, via the web, and see when its status is changed. |
The SPS request shall be considered completed/ closed if:
| T-Mobile accepts the SPS answer |
| T-Mobile rejects the SPS answer; Supplier shall make further analysis and deliver a new SPS answer. The SPS is closed regardless if the new SPS answer is accepted or rejected by T-Mobile. A rejection of the new SPS answer is handled outside the normal SPS process and a follow-up is made in the Support Service review meetings |
| SPS answer is not accepted or rejected by T-Mobile within seven (7) days and agreed by T-Mobile |
3.2.8. | Special Services |
Special Services are available as options, and are not included in this Agreement. These options may be purchased separately.
3.2.9. | HW Services |
HW Support Services include HW Maintenance and Support Server, HW Repair and Replacement Service.
3.2.9.1. HW Maintenance and Support Service
Supplier will provide HW Maintenance and Support Service 24 x 7 x 365. Response time from Suppliers notification shall be four (4) hours or fewer.
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3.2.9.2. HW Repair and Replacement Service
Repair and Replacement Service means the repair or exchange of defective Hardware.
Repair and Replacement Procedure
In the event of HW defect or failure incident reported by T-Mobile, Supplier shall determine and file HW trouble report and the RMA number, which shall be included with the defective unit. T-Mobile shall forward defective units together with a HW trouble report to Supplier determined location unless otherwise agreed. The HW Trouble Report shall state the units involved, unit identification number, request number and description of failure.
In the event of a Hardware failure, Supplier will ship an advance replacement of the same or higher functionality Hardware overnight from receipt of the defective Hardware incident report and RMA. When the replacement Hardware arrives at T-Mobiles premise, Supplier will perform the necessary work to replace the Hardware and bring the component or System back to its normal operating condition.
T-Mobile shall send the defective Hardware to Supplier within fourteen (14) days. In the event of a third party equipment part, Supplier will fulfil these replacement parts orders as soon as possible form its suppliers, not exceeding twenty-four (24) hours.
Supplier shall have the option to either repair or replace the defective unit at their expense. In special cases (project specific, due to customs regulations) Supplier will only repair and return the identical part which may require additional turn-around time. Under this circumstance Supplier shall notify T-Mobile the result of analysis, course of problem resolution and estimated time for repair on a per case basis.
The HW replacement Service shall maintain following performance,
NFF (No fault found) <5%
DOA (Dead on arrival) <1%
3.3. | Incident Severity Classification |
To allow proper action based on the severity of Incidents which might occur, each Incident will be categorized by T-Mobile and reported to Supplier.
Supplier supports the following six (6) severity categories:
Severity Level E1 |
: Emergency Incident (Critical Service affecting) | |
Severity Level E2 | : Emergency Incident (Series Service affecting) | |
Severity Level A | : High priority Incident (Series service affecting) | |
Severity Level B | : Medium priority Incident (Medium service affecting) | |
Severity Level C | : Low priority Incident (Minor service affecting) | |
Severity Level Q | : Support questions (Non service affecting) |
The following table illustrate mapping between six (6) severity levels and severity definition from ITU standard, as described in ITU-T Recommendation X.733.
ITU Classification |
Supplier Supported Six Incident Levels |
Definition | ||
Critical | Severity Level E1 | Critical service affecting Incidents cause severe System |
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ITU |
Supplier Supported |
Definition | ||
outage or blocking important functions of the System. These Incidents (i) directly affecting services provided to the Network, or Network Elements or (ii) materially affect the service to its Subscribers. A Severity Level E1 Incident will be responded to 24 hours a day, 7 days a week. | ||||
Severity Level E2 | Serious service affecting Incidents which cause serious impact on System functions, features of the Network or Network Elements. Serious service affecting Incidents also include Incidents which affect T-Mobiles Subscribers or restricts T-Mobiles ability to operate the Network. A Severity Level E2 Incident will be responded to 24 hours a day, 7 days a week. | |||
Major | Severity Level A | A Severity Level A Incident is a Severity Level E1 and E2 Incident for which a satisfactory Patch, work around or other solution has been implemented, but for which additional work needs to be performed in order to implement a Final Solution. A Severity Level A Incident can also be an incident that causes major impact on System, T-Mobile and/or T-Mobiles Subscribers. Work will be performed at a mutually agreed to time by both T-Mobile and Supplier. | ||
Severity Level B | Medium service affecting Incidents (i) having medium impact on System functions or features of the Network or Network Elements; (ii) which cause additional work to operate and to maintain the Network or Network Elements; (iii) which cause service to a number of T-Mobiles Subscribers to be affected in general. A Severity Level B Incident will be responded to during Office Hours. | |||
Minor | Severity Level C | Minor non-service affecting Incidents having a minor affect on System functions and features of the Network and/or Network Elements. A Severity C Incident will be responded to during Office Hours. | ||
Warning | Severity Level Q | The Warning severity level indicates the detection of a potential or impending service affecting fault, before any significant effects have been felt. Action should be taken to further diagnose (if necessary) and correct the problem in order to prevent it from becoming a more serious service affecting fault.
Support questions is an on-line questions service via the world-wide web through which T-Mobile may receive answers to technical questions with respect to the existing functionality of T-Mobiles Software. Support questions that take more than six (6) hours to answer will be promoted to a Severity Level C Incident. A Severity Q will be responded to during Office Hours. |
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3.4. Incident Handling
Severity Level E1: Emergency Incident (Critical service affecting)
Response time from Suppliers notification shall be (15) minutes or fewer. A Final Solution or Work Around (neutralization) will be available within four (2) hours of Suppliers notification in 90% of all cases and within six (6) hours in 100% of all cases. If no Final Solution is possible but a Work Around is created, the Emergency Incident will be closed and a Severity Level A Incident will be opened. The objective shall be to neutralize the Incident as soon as possible.
Severity Level E2: Emergency Incident (Serious service affecting)
Response time from Suppliers notification shall be 30 minutes or fewer. A Final Solution or Work Round (neutralization) will be available within four (4) hours of Suppliers notification in 90% of all cases and within eight (8) hours in 100% of all cases. If no Final Solution is possible but a Work Around is created, the Emergency Incident will be closed and a Severity Level A Incident will be opened. The objective shall be to neutralize the Incident as soon as possible.
Severity Level A: High priority Incident (Serious service affecting)
A response time of one (1) office hour is applicable. A Final Solution or Work around (neutralization) will be available within eight (8) office hours in 90% of all cases and twelve (12) office hours in 100% of all cases. If no Final Solution is possible but a Work around is created, the Final Solution will be available within two (2) weeks in 100% of all cases. The objective shall be to neutralize the Incident and implement a Final Solution as soon as possible.
Severity Level B: Medium priority Incident (Medium service affecting)
Response time from Suppliers notification shall be eight (8) Office Hours or fewer. A Final Solution or Work around (neutralization) will be available within three (3) Working days of Suppliers notification in 90% of all cases and within six (6) Working days in 100% of all cases. If no Final Solution is possible but a Work around is created, the Final Solution will be available within Three (3) weeks in 100% of all cases. The objective shall be to neutralize the Incident and implement a Final Solution as soon as possible.
Severity Level C: Low priority Incident (Minor service affecting)
Response time from Suppliers notification shall be eight (8) Office Hours or fewer. A Final Solution or Work around (neutralization time) will be available within One (1) week of Suppliers notification in 90% of all cases and within two (2) weeks in 100% of all cases. If no Final Solution is possible but a Work around is created, the Final Solution will be available within four (4) weeks in 100% of all cases. The objective shall be to neutralize the Incident and implement a Final Solution as soon as possible.
Severity Level Q: Support questions, Warning Incidents (Non service affecting)
A response will normally be given by returning e-mail within eight (8) Office Hours.
3.5. Alteration and Extra Work
3.5.1. | If Supplier, at T-Mobiles request, approval thereof and prior mutual consent, performs any work or produced any functionality that is beyond the substance or scope of the agreed Support Service, such functionality shall be paid for in accordance with the rates mutually agreed upon prior to such work being performed (less appropriate discounts). |
3.5.2. | T-Mobile accepts that the agreed or expected time of completion of the Support Service and the reciprocal responsibilities of T-Mobile and Supplier may be affected by the work and results as referred to in this Section 3.6. |
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3.6. T-Mobile Support Representative Activities
3.6.1. | T-Mobile Support Representative is a part of Value Added Services. He/She is the technical contact person for T-Mobile and works in close conjunction with Suppliers Operational Service Manager. The main objective of the T-Mobile Support Representative is to provide T-Mobile with proactive service for a specific System. Therefore, he/she shall have thorough knowledge of T-Mobiles System configuration, the implemented add-on Products and T-Mobiles Network. In order to have a good overview, T-Mobile Support Representative will: |
| Monitor T-Mobiles Incidents and keep track of progress of Incident handling; |
| Be involved in T-Mobiles planned System changes; |
| Attend the operational review meetings whenever necessary; |
| Monitor T-Mobiles traffic profile and System operational reports on a regular basis. |
3.7. Operational Service Management
3.7.1. | Service Management is a part of Value Added Services. Suppliers Operational Service Management shall be responsible for the quality, performance and escalation process related to System Support Services provided to T-Mobile hereunder. In order to measure the Support Service quality and performance, the Operational Service Manager will monitor incidents when necessary, provide T-Mobile with performance statistics and will arrange review meetings on a regular basis. |
Performance Statistics
In order to monitor the specified Response Times, Work around Times and Final Solution Times, the Operational Service Manager shall provide T-Mobile with performance statistics on a monthly basis. Upon a request by T-Mobile, the Operational Service Manager will provide information on a specific Incident within two (2) days.
Operational Review meetings
The objective of the operational review meetings shall be to inform T-Mobile concerning Suppliers Support Services organization; the progress of open Incidents and/or to discuss any other items in order to increase Suppliers Support Service quality. The Operational Service Manager and T-Mobile will together coordinate a weekly conference call between these two Parties. Operational review meetings can be held separately for each Supplier supported Product. Both Parties shall have the right to include items on the agenda for a specific meeting, but in general the following topics will be discussed:
| Organization processes and organization changes (both Parties); |
| Progress of open Incidents and ETA; |
| T-Mobiles Top ten Incidents; |
| T-Mobiles planned (evening) maintenance/configuration activities. |
Escalation
In the event that T-Mobile requires escalation of an Incident T-Mobile can contact the Operational Service Manager. The Operational service Manager will supervise the escalation and have access to all necessary management levels and experts to carry out the escalation as quickly as possible.
During Office Hours the Operational Service Manager will supervise T-Mobiles escalation process. Outside of Office Hours, the Operational Service Manager on duty will supervise T-Mobiles escalation.
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3.8. Documentation
3.8.1. | Supplier shall completely or partially adapt, revise or replace the Documentation periodically or provide T-Mobile with interim release notes if such should be reasonably necessitated by the provision of new or improved versions or corrections of the Software. Documentation or release notes shall be provided electronically and as a hard copy. |
3.9. Service Uptime or Availability
3.9.1. | The service uptime or availability will be measured as from a Geo-redundant and distributed System by the availability of the Services provided to all Subscribers of T-Mobile, based on following: |
a. | During any period in which one System component, whether it is a single node or a blade component, is unavailable but the other System component(s) is or are working properly and there is no negative impact to overall System operation and Service, the availability of the Services provided to T-Mobiles Subscribers shall be considered to be 100% (hundred percent). |
b. | During any period in which a System, or a System site, is unavailable but T-Mobile is able to re-route the affected traffic to another System or another Geo-diverse System site without causing any negative impact to the overall System operation, Service and or business, the availability of the Services provided to T-Mobiles Subscribers shall be considered to be 100% (hundred percent). If T-Mobile is unable to re-route such traffic or there is negative impact to overall System operation, Service and or business, then the availability shall be considered to be 0% (zero percent) during such period. |
c. | Planned service outage approved by T-Mobile will not be included in calculating System unavailability. |
3.9.2. | The unavailability time is the time from when T-Mobile notifies Supplier of an Incident until the time Supplier has successfully implemented a Work around or Solution |
3.9.3. | DowntimeAs to any calendar month, Downtime is defined as the total amount of Unscheduled Downtime less Scheduled Downtime for Service due to negative impact by the System during a calendar month. Downtime is expressed in minutes. Excluded from Downtime is any downtime caused by T-Mobile, Supplier, third parties, acts of force majeure, Network outages, or caused by any circumstances beyond the reasonable control of T-Mobile. |
3.9.4. | Scheduled DowntimeAs to any calendar month, the amount of time scheduled by T-Mobile for planned maintenance of the System. Scheduled Downtime is expressed in minutes. |
3.9.5. | T-Mobile Unscheduled DowntimeAs to any calendar month, any total or partial disruption or impairment in the Service due to negative impact by the System which results in a Severity Level E1 or Severity Level E2 outage of the Service, not the result of Scheduled Downtime, expressed in minutes. |
3.9.6. | Total Time AvailableAs to any calendar month, the product of one thousand four hundred and forty (1,440) and the total number of days in such month, less Scheduled Downtime. Total Time Available is expressed in minutes. |
3.9.7. | Service Uptime or AvailabilityAs to any calendar month, the number one (1), minus the accumulated Unscheduled Downtime for such month divided by the Total Time Available for such calendar month. Service Uptime or Availability is expressed as a percentage. |
3.9.8. | Supplier will guarantee T-Mobile that Service Uptime or System Availability shall be 99.999%. |
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3.9.9. | If the Service uptime or availability is below the 99.999% in a calendar month, calculated using above method, this will result in a decrease of the quality of T-Mobile service. In this case, T-Mobile shall be entitled to charge a penalty of 30% of the prorated monthly Support Services fee for that relevant year on a per Incident basis. |
3.10. Performance Penalties
3.10.1. | If the Workaround as described in section 3.4, Incident Handling, is prolonged to an unacceptable extent by Supplier, this will result in a decrease of the quality of T-Mobile service. No Workaround or non-neutralization is defined as having no Final solution and/or Workaround. In this case, T-Mobile shall have the right to receive liquidated damages from Supplier in accordance with the following chart on a per Incident basis: |
Incident Classification |
Incident Handling Condition |
Penalties | ||
Severity Level E1 Incident | Non-neutralization, over and above 6 hours | [***]% of the monthly Support Services Fees | ||
Non-neutralization, over and above 10 hours | [***]% of the monthly Support Services Fees | |||
Severity Level E2 Incident | Non-neutralization, over and above 8 hours | [***]% of the monthly Support Services Fees | ||
Non-neutralization, over and above 12 hours | [***]% of the monthly Support Services Fees | |||
Severity Level A Incident | Non-neutralization, over and above 12 office hours | [***]% of the monthly Support Services Fees | ||
Non-neutralization, over and above 16 office hours | [***]% of the monthly Support Services Fees | |||
Severity Level B Incident | Non-neutralization, over and above 6 working days | [***]% of the monthly Support Services Fees | ||
Non-neutralization, over and above 2 weeks | [***]% of the monthly Support Services Fees |
The above mentioned percentages cannot be charged cumulatively with respect to the same Incident.
Supplier shall meet the response times herein for all conditions [***] of the time. Should Supplier not meet such SLAs, T-Mobile shall request from Supplier a written review and process analysis of why Supplier is not capable of meeting the targets. Supplier shall have thirty (30) days to respond to T-Mobiles request. If after thirty (30) days of receipt of the report Suppliers average is still below the target the following shall be implemented:
Supplier shall pay to T-Mobile liquid damages in the amount of [***] for every month Supplier is below the response targets set above for the Term.
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*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
4. Service Guidelines
4.1. Quick overview of this Service agreement
Service Components |
Applicable | |
Primary Services | Yes | |
Maintenance Service |
||
New Release and Software Maintenance Services |
||
Support Services |
||
System Upgrade Support |
||
Helpdesk 24 x 7 Support |
||
Value Added Services |
||
HW Services |
||
Emergency Services |
Yes | |
Planned On-Site Support |
Yes | |
System Health Management |
Yes | |
Single Point of Contact Services |
Yes | |
System Element (Product) Support (SPS) |
Yes | |
Special Services |
N/A |
4.2. Service Handling Chart
Severity Levels |
Applicable | |||||
Severity Level E1 | Response time: Work around time Final solution time |
: 15 minutes : 2 hours (90%), 6 hours (100%) : N/A |
Yes | |||
Severity Level E2 | Response time: Work around time Final solution time |
: 30 minutes : 4 hours (90%), 8 hours (100%) : N/A |
Yes | |||
Severity Level A | Response time: Work around time
Final solution time |
: 1 office hour : 8 office hours (90%), 12 office hours (100%) : 2 weeks (100%) |
Yes | |||
Severity Level B | Response time: Work around time |
: 8 office hours : 3 working days (90%), |
Yes |
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Severity Levels |
Applicable | |||||
Final solution time | 6 working days (100%) : 3 weeks (100%) |
|||||
Severity Level C | Response time: | : 8 office hours | Yes | |||
Work around time | : 1 week (90%), 2 weeks (100%) | |||||
Final solution time | : 4 weeks (100%) | |||||
Severity Level Q | Response time: | : Response within 8 office hours | N/A | |||
Work around time | : N/A | |||||
Final solution time | : 3 months (100%) |
4.3. T-Mobile shipping address
Supplier must make all overnight shipping to one of the following T-Mobile datacenter address. The specific datacenter shall be notified by T-Mobile during the shipping request is made. This includes all HW, replacement parts, components, Documents etc, eligible for overnight shipping. If the item to be shipped at a different location other than following address, T-Mobile must notify Supplier in writing about new address before the shipping is made.
ATLANTA Datacenter
POC: | Arturo Cooper | |
Address: | 4 Concourse Parkway Suite 300 Atlanta GA. 30328 | |
Telephone: | 678-338-4119 |
SNOQUALMIE Datacenter
POC: |
Ryan Dardis | |
Address: |
34931 SE DOUGLAS ST, SNOQUALMIE, WA 98065 | |
Telephone: |
425-396-4166 |
5. Service not covered under support program
The Support Services provided under this Support Services Program will not include:
| Support or replacement of Product or Product Components that is destroyed or damaged due to improper storage, Installation, use, maintenance or repair by T-Mobile or due to accident, fire, etc. unless the responsibility of Supplier. |
| Any Hardware upgrade required to run new or updated Software, unless the Hardware is required as a result of a Supplier Software Release. |
| Services on any Software or Hardware not purchased from Supplier unless they are explicitly stated in this agreement and mutually agreed upon by both Parties. |
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Appendix D
ESCROW AGREEMENT
[TO BE ADDED WITHIN 30 DAYS AFTER THE EFFECTIVE DATE OF THE AGREEMENT]
Confidential and Proprietary |
Page 43 |
Iron Mountain offers records management for both physical and digital media, disaster recovery support, consulting services, and is the leader in intellectual property protection, specializing in technology escrow and domain name records management. Comac, a subsidiary of Iron Mountain, provides marketing collateral fulfillment services. Iron Mountain is committed to delivering responsive and reliable service to meet our customers needs. Our proven systems and processes ensure that we provide quality and consistent service to our customers. Be sure to visit our website, www.ironmountain.com for more information.
© 2005 Iron Mountain Incorporated. All rights reserved. Iron Mountain and the design of the mountain are registered trademarks and Iron Mountain Connect is a trademark of Iron Mountain Incorporated. All other trademarks and registered trademarks are the property of their respective owners.
EFFECTIVE DATE: April 20, 2010
PRIMARY DEPOSIT ACCOUNT NUMBER: 37613
AUXILIARY DEPOSIT ACCOUNT NUMBER
CUSTOM THREE-PARTY ESCROW SERVICE AGREEMENT
1. | Introduction. |
This Three Party Escrow Service Agreement (the Agreement) is entered into by and between Mavenir Systems, Inc. (the Depositor), and by Starent Networks, Corp. (the Beneficiary) and by Iron Mountain Intellectual Property Management, Inc. (Iron Mountain). Depositor, Beneficiary, and Iron Mountain may be referred to individually as a Party or collectively as the Parties throughout this Agreement. The Parties intend for this Agreement to govern two deposit escrow accounts consisting of: (1) a Primary escrow account (Deposit Account 1), and (2) an Auxiliary escrow account (Deposit Account 2), each a Deposit Account.
(a) The use of the term services in this Agreement shall refer to Iron Mountain services that facilitate the creation, management, and enforcement of software or other technology escrow accounts as described in Exhibit A attached hereto (Services). A Party shall request Services under this Agreement by submitting a work request for certain Iron Mountain Services (Work Request) via written instruction or the online portal maintained at the website located at www.ironmountainconnect.com, or other websites owned or controlled by Iron Mountain that are linked to that website (collectively the Iron Mountain Website).
(b) The Beneficiary and Depositor have, or will have, entered into a license agreement or other agreement conveying intellectual property rights to the Beneficiary, and the Parties intend this Agreement to be considered as supplementary to such agreement, pursuant to Title 11 United States [Bankruptcy] Code, Section 365(n).
2. | Depositor Responsibilities and Representations. |
(a) | Depositor shall make an initial deposit that is complete and functional of all proprietary technology and other materials covered under this Agreement (Deposit Material) to Iron Mountain within thirty (30) days of the Effective Date. Depositor may also update Deposit Material from time to time during the Term of this Agreement provided a minimum of one (1) complete and functional copy of Deposit Material is deposited with Iron Mountain at all times. At the time of each deposit or update, Depositor will provide an accurate and complete description of all Deposit Material sent to Iron Mountain using the form attached hereto as Exhibit B. |
(b) | Depositor represents that it lawfully possesses all Deposit Material provided to iron Mountain under this Agreement free of any liens or encumbrances as of the date of their deposit. Any Deposit Material liens or encumbrances made after their deposit will not prohibit, limit, or alter the rights and obligations of Iron Mountain under this Agreement. Depositor warrants that with respect to the Deposit Material, Iron Mountains proper administration of this Agreement will not violate the rights of any third parties. |
(c) | Depositor represents that all Deposit Material is readable and useable in its then current form; if any portion of such Deposit Material is encrypted, the necessary decryption tools and keys to read such material are deposited contemporaneously. |
(d) | Depositor agrees, upon request by Iron Mountain, in support of Beneficiarys request for verification Services, to promptly complete and return the Escrow Deposit Questionnaire attached hereto as Exhibit Q. Depositor consents to Iron Mountains performance of any level(s) of verification Services described in Exhibit A attached hereto and Depositor further consents to Iron Mountains use of a subcontractor to perform verification Services. Any such subcontractor shall be bound by the same confidentiality obligations as Iron Mountain and shall not be a direct competitor to either Depositor or Beneficiary. Iron Mountain shall be responsible for the delivery of Services of any such subcontractor as if Iron Mountain had performed the Services. Depositor represents that all Deposit Material is provided with all rights necessary for Iron Mountain to verify such proprietary technology and materials upon receipt of a Work Request for such Services or agrees to use commercially reasonable efforts to provide Iron Mountain with any necessary use rights or permissions to use materials necessary to perform verification of the Deposit Material. Depositor agrees to reasonably cooperate with Iron Mountain by providing reasonable access to its technical personnel for verification Services whenever reasonably necessary. |
3. | Beneficiary Responsibilities and Representations. |
(a) | Beneficiary acknowledges that, as between Iron Mountain and Beneficiary. Beneficiary assumes all responsibility for the completeness and functionality of all Deposit Material. |
(b) | Beneficiary may submit a verification Work Request to Iron Mountain for one or more of the Services defined in Exhibit A attached hereto and further consents to Iron Mountains use of a subcontractor if needed to provide such Services. Beneficiary warrants that Iron Mountains use of any materials supplied by Beneficiary to perform the verification Services described in Exhibit A is lawful and does not violate the rights of any third parties. |
4. | Iron Mountain Responsibilities and Representations. |
(a) | Iron Mountain agrees to use commercially reasonable efforts to provide the Services requested by Authorized Person(s) (as identified in the Authorized Person(s)/Notices Table below) representing the Depositor or Beneficiary in a Work Request. Iron Mountain may reject a Work Request (in whole or in part) that does not contain all required information at any time upon notification to the Party originating the Work Request. |
(b) | Iron Mountain will conduct a visual inspection upon receipt of any Deposit Material and associated Exhibit 8. if Iron Mountain determines that the Deposit Material does not match the description provided by Depositor represented in Exhibit B attached hereto, Iron Mountain will notify Depositor of such discrepancies and notate such discrepancy on the Exhibit B. |
(c) | Iron Mountain will provide notice to the Beneficiary of all Deposit Material that is accepted and deposited into the escrow account under this Agreement. |
(d) | Iron Mountain will work with a Party who submits any verification Work Request for Deposit Material covered under this Agreement to either fulfill any standard verification Services Work Request or develop a custom Statement of Work (SOW). Iron Mountain and the requesting Party will mutually agree in writing to an SOW on the following terms and conditions that include but are not limited to: description of Deposit Material to be tested; description of Verification testing; requesting Party responsibilities; Iron Mountain responsibilities; Service Fees; invoice payment instructions; designation of the paying Party; designation of authorized SOW representatives for both the requesting Party and Iron Mountain with name and contact information; and description of any final deliverables prior to the start of any fulfillment activity. After the start of fulfillment activity, each SOW may only be amended or modified in writing with the mutual agreement of both Parties, in accordance with the change control procedures set forth therein. |
(e) | Iron Mountain will hold and protect Deposit Material in physical or electronic vaults that are either owned or under the control of Iron Mountain, unless otherwise agreed to by the Parties. |
(f) | Upon receipt of written instructions by both Depositor and Beneficiary, Iron Mountain will permit the replacement or removal of previously submitted Deposit Material. The Party making such request shall be responsible for getting the other Party to approve the joint instructions. |
(g) | Should transport of Deposit Material be necessary in order for Iron Mountain to perform Services requested by Depositor or Beneficiary under this Agreement, Iron Mountain will use a commercially recognized overnight carrier such as Federal Express or United Parcel Service. Iron Mountain will not be responsible for any toss or destruction of, or damage to, such Deposit Material while in the custody of the common carrier. |
5. | Payment. |
The Depositor and Beneficiary shall each be responsible for paying to Iron Mountain one half (1/2) of all payments, designated in Exhibit A and all fees as set forth in the Work Request (Service Fees). Together, the Depositor and Beneficiary are referred to as the Paying Party. Except as set forth below, all Service Fees are due within thirty (30) calendar days from the date of invoice in U.S. currency and are non-refundable. Iron Mountain may update Service Fees with a ninety (90) calendar day written notice to the Paying Party during the term of this Agreement. The Paying Party is liable for any taxes related specifically to Services purchased under this Agreement or shall present to Iron Mountain an exemption certificate acceptable to the taxing authorities. Applicable taxes shall be billed as a separate item on the invoice. Depositor and Beneficiary agree that if this Agreement terminates during the term for any reason, other than for the fault of Iron Mountain, all prepaid fees shall be non-refundable. Any Service Fees not collected by Iron Mountain when due shall bear interest until paid at a rate of one percent (1%) per month (12% per annum) or the maximum rate permitted by law whichever is less. Notwithstanding, the non-performance of any obligations of Depositor to deliver Deposit Material under the License Agreement or this Agreement, Iron Mountain is entitled to be paid all Service Fees that accrue during the Term of this Agreement.
6. | Term and Termination. |
(a) | The Term of this Agreement is for a period of one (1) year from the Effective Date (Initial Term) and will automatically renew for additional one (1) year terms (Renewal Term) and continue in full force and effect until one of the following events occur: (i) Depositor and Beneficiary provide Iron Mountain with sixty (60) days prior written joint notice of their intent to terminate this Agreement; (ii) Beneficiary provides Iron Mountain and Depositor with sixty (60) days prior written notice of their intent to terminate this Agreement; (iii) the Agreement terminates under another provision of this Agreement; or (iv) any time-after the Initial Term. Iron Mountain provides a sixty (60) days prior written notice to the Depositor and Beneficiary of Iron Mountains intent to terminate this Agreement. If the Effective Date is not specified above, then the last date noted on the signature blocks of this Agreement shall be the Effective Date. |
(b) | Unless the express terms of this Agreement provide otherwise, upon termination of this Agreement, Iron Mountain shall return the Deposit Material to the Depositor. If reasonable attempts to return the Deposit Material to Depositor are unsuccessful, Iron Mountain shall destroy the Deposit Material. |
(c) | In the event of the nonpayment of undisputed Service Fees owed to Iron Mountain. Iron Mountain shall provide all Parties to this Agreement with written notice of Iron Mountains intent to terminate this Agreement. Any Party to this Agreement shall have the right to make the payment to Iron Mountain to cure the default. If the past due payment is not received in full by Iron Mountain within thirty (30) calendar days of the date of such written notice, then Iron Mountain shall have the right to terminate this Agreement at any time thereafter by sending written notice to all Parties. Iron Mountain shall have no obligation to perform the Services under this Agreement (except those obligations that survive termination of this Agreement) so long as any undisputed Service Fees due Iron Mountain under this Agreement remain unpaid. |
7. | General Indemnity and Infringement Indemnification. |
(a) Subject to Section 11 and 12, each Parry shall defend, indemnify and hold harmless the others, their corporate affiliates and their respective officers, directors, employees, and agents and their respective successors and assigns from and against any and all claims, losses, liabilities, damages, and expenses (including, without limitation, reasonable attorneys fees), arising under this Agreement from the negligent or intentional acts or omissions of the indemnifying Party or its subcontractors, or the officers, directors, employees, agents, successors and assigns of any of them.
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(b) Anything in this Agreement to the contrary notwithstanding, Depositor at its own expense shall defend and hold Iron Mountain fully harmless against any claim or action asserted against Iron Mountain (specifically including costs and reasonable attorneys fees associated with any such claim or action) to the extent such claim or action is based on an assertion that Iron Mountains proper administration of this Agreement infringes any patent, copyright, license or other proprietary right of any third party. When Iron Mountain has notice of a claim or action, it shall promptly notify Depositor in writing. At its option, Depositor may elect to control defense of such claim or action and may elect to enter into a settlement agreement, provided that no such settlement or defense shall include any admission or implication of wrongdoing on the part of Iron Mountain without Iron Mountains prior written consent, which consent shall not be unreasonably delayed or withheld. Iron Mountain shall have the right to employ separate counsel and participate in the defense of any claim at its own expense.
8. | Warranties. |
(a) | IRON MOUNTAIN WARRANTS ANY AND ALL SERVICES PROVIDED HEREUNDER SHALL BE PERFORMED IN A WORKMANLIKE MANNER EXCEPT AS SPECIFIED IN THIS SECTION, ALL EXPRESS OR IMPLIED CONDITIONS, REPRESENTATIONS, AND WARRANTIES INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, SATISFACTORY QUALITY, AGAINST INFRINGEMENT OR ARISING FROM A COURSE OF DEALING, USAGE, OR TRADE PRACTICE, ARE HEREBY EXCLUDED TO THE EXTENT ALLOWED BY APPLICABLE LAW. AN AGGRIEVED PARTY MUST NOTIFY IRON MOUNTAIN PROMPTLY OF ANY CLAIMED BREACH OF ANY WARRANTIES. THE WARRANTY PROVIDED IS SUBJECT TO THE LIMITATION OF LIABILITY SET FORTH IN THIS AGREEMENT. |
(b) | Depositor warrants that all Depositor information provided hereunder is accurate and reliable and undertakes to promptly correct and update such Depositor information during the Term of this Agreement. |
(c) | Beneficiary warrants that all Beneficiary information provided hereunder is accurate and reliable and undertakes to promptly correct and update such Beneficiary information during the Term of this Agreement. |
(d) | Ownership Warranty Depositor warrants that it is the owner or legal custodian of the Deposit Material and has full authority to store the Deposit Material and direct their disposition in accordance with the terms of this Agreement. Depositor shall reimburse Iron Mountain for any expenses reasonably incurred by Iron Mountain (including reasonable legal fees) by reason of Iron Mountains compliance with the instructions of Depositor in the event of a dispute concerning the ownership, custody or disposition of Deposit Material stored by Depositor with Iron Mountain. |
9. | Insurance. |
Iron Mountain shall, at its sole cost and expense, throughout the term of this Agreement, procure and maintain in full force and effect, the following insurance coverage, with an insurance carrier that is rated B+ or better by A.M. Best.
TYPE OF INSURANCE |
COVERAGE AMOUNT | TYPE OF INSURANCE | COVERAGE AMOUNT | |||
General Liability |
$2,000,000 General Aggregate | Crime insurance | $2,000,000 Each Occurrence | |||
General Liability |
$1,000,000 Each Occurrence | Umbrella Coverage | $5,000,000 General Aggregate | |||
Professional Liability |
$1,000,000 Each Occurrence |
All certificates of insurance shall name the Parties as additional beneficiaries with respect to General Liability coverage. All certificates of insurance shall require that the Parties be provided with advance written notice of cancellation of the stated coverage, and Iron Mountain shall request that its insurer use its best efforts to provide at least thirty (30) days advance written notification of such cancellation.
10. | Confidential Information. |
Iron Mountain shall have the obligation to reasonably protect the confidentiality of the Deposit Material. Except as provided in this Agreement Iron Mountain shall not use or disclose the Deposit Material. Iron Mountain shall not disclose the terms of this Agreement to any third Party. If Iron Mountain receives a subpoena or any other order from a court or other judicial tribunal pertaining to the disclosure or release of the Deposit Material, Iron Mountain will promptly notify the Parties to this Agreement unless prohibited by law. After notifying the Parties, Iron Mountain may comply in good faith with such order after providing the Depositor or Beneficiary a reasonable opportunity to challenge such order. It shall be the responsibility of Depositor or Beneficiary to challenge any such order, provided, however, that Iron Mountain does not waive its rights to present its position with respect to any such order. Iron Mountain will cooperate with the Depositor or Beneficiary, as applicable, to support efforts to quash or limit any subpoena, at such partys expense. Any party requesting additional assistance shall pay Iron Mountains standard charges or as quoted upon submission of a detailed request.
11. | Limitation of Liability. |
NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT, ALL LIABILITY, IF ANY, WHETHER ARISING IN CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, OF ANY PARTY TO THIS AGREEMENT SHALL BE LIMITED TO THE AMOUNT EQUAL TO ONE YEAR OF FEES PAID OR OWED TO IRON MOUNTAIN UNDER THIS AGREEMENT. IF CLAIM OR LOSS IS MADE IN RELATION TO A SPECIFIC DEPOSIT OR DEPOSITS, SUCH LIABILITY SHALL BE LIMITED TO THE FEES RELATED SPECIFICALLY TO SUCH DEPOSITS. THIS LIMIT SHALL NOT APPLY TO ANY PARTY FOR; (I) ANY CLAIMS OF INFRINGEMENT OF ANY PATENT, COPYRIGHT, OR TRADEMARK; (II) LIABILITY FOR DEATH OR BODILY INJURY; OR (III) PROVEN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
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12. | Consequential Damages Waiver. |
IN NO EVENT SHALL ANY PARTY TO THIS AGREEMENT BE LIABLE TO ANOTHER PARTY FOR ANY INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, LOST PROFITS, ANY COSTS OR EXPENSES FOR THE PROCUREMENT OF SUBSTITUTE SERVICES, OR ANY OTHER INDIRECT DAMAGES, WHETHER ARISING IN CONTRACT. TORT (INCLUDING NEGLIGENCE) OR OTHERWISE EVEN IF THE POSSIBILITY THEREOF MAY BE KNOWN IN ADVANCE TO ONE OR MORE PARTIES.
13. | General. |
(a) | Incorporation of Work Requests. All valid Depositor and Beneficiary Work Requests are incorporated into this Agreement. |
(b) | Purchase Orders. In the event that the Paying Party issues a purchase order or other instrument used to pay Service Fees to Iron Mountain, any terms and conditions set forth in the purchase order which constitute terms and conditions which are in addition to those set forth in this Agreement or which establish conflicting terms and conditions to those set forth in this Agreement are expressly rejected by Iron Mountain. |
(c) | Right to Make Copies. Iron Mountain shall have the right to make copies of all Deposit Material as reasonably necessary to perform the Services. Iron Mountain shall copy all copyright, nondisclosure, and other proprietary notices and titles contained on Deposit Material onto any copies made by Iron Mountain. Any copying expenses incurred by Iron Mountain as a result of a Work Request to copy will be borne by the Party requesting the copies. Iron Mountain may request Depositors reasonable cooperation in promptly copying Deposit Material in order for Iron Mountain to perform this Agreement. |
(d) | Choice of Law. The validity, interpretation, and performance of this Agreement shall be controlled by and construed under the laws of the State of New York, USA, as if performed wholly within the state and without giving effect to the principles of conflicts of laws. |
(e) | Authorized Person(s). Depositor and Beneficiary must each authorize and designate one person whose actions will legally bind such party (Authorized Person who shall be identified in the Authorized Persons (s) Notices Table of this Agreement) and who may manage the Iron Mountain escrow account through the Iron Mountain website or written instruction. The Authorized Person for each the Depositor and Beneficiary will maintain the accuracy of their name and contact information provided to Iron Mountain during the term of this Agreement. |
(f) | Right to Rely on Instructions. Iron Mountain may act in reliance upon any instruction, instrument, or signature, reasonably believed by Iron Mountain to be genuine and from an Authorized Person(s), officer, or other employee of a Party. Iron Mountain may assume that such representative of a Party to this Agreement who gives any written notice, request, or instruction has the authority to do so. Iron Mountain will not be required to inquire into the truth or evaluate the merit of any statement or representation contained in any notice or document reasonably believed to be from such representative. With respect to Release and Destruction of Deposit Materials, Iron Mountain shall rely on an Authorized Person(s). |
(g) | Force Majeure. No Party shall be liable for any delay or failure in performance due to events outside the defaulting Partys reasonable control, including without limitation acts of God, earthquake, labor disputes, shortages of supplies, riots, war, acts of terrorism, fire, epidemics, or delays of common carriers or other circumstances beyond its reasonable control. The obligations and rights of the excused Party shall be extended on a day-to-day basis for the time period equal to the period of the excusable delay. |
(h) | Notices. All notices regarding Exhibit C (release) shall be sent by commercial express mail or other commercially appropriate means that provide prompt delivery and require proof of delivery. All other correspondence, including invoices, payments, and other documents and communications, may be sent electronically or via regular mail. The Parties shall have the right to rely on the last known address of the other Parties. Any correctly addressed notice to last known address of the other Parties that is relied on herein and that is refused, unclaimed, or undeliverable because of an act or omission of the Party to be notified as provided herein shall be deemed effective as of the first date that said notice was refused, unclaimed, or deemed undeliverable by electronic mail, the postal authorities by mail, through messenger or commercial express delivery services. |
(i) | No Waiver. No waiver of rights under this Agreement by any Party shall constitute a Subsequent waiver of this or any other right under this Agreement. |
(j) | Assignment. No assignment of this Agreement by Depositor or Beneficiary or any rights or obligations of Depositor or Beneficiary under this Agreement is permitted without the written consent of Iron Mountain, which shall not be unreasonably withheld or delayed. Iron Mountain shall have no obligation in performing this Agreement to recognize any successor or assign of Depositor or Beneficiary unless Iron Mountain receives clear, authoritative and conclusive written evidence of the change of parties. |
(k) | Severability. In the event any of the terms of this Agreement become or are declared to be illegal or otherwise unenforceable by any court of competent jurisdiction, such term(s) shall be null and void and shall be deemed deleted from this Agreement. All remaining terms of this Agreement shall remain in full force and effect. If this paragraph becomes applicable and as a result, the value of this Agreement is materially impaired for any Party, as determined by such Party in its sole discretion, then the affected Party may terminate this Agreement by written notice to the others. |
(l) | Independent Contractor Relationship. Depositor and Beneficiary understand, acknowledge, and agree that Iron Mountains relationship with Depositor and Beneficiary will be mat of an independent contractor and that nothing in this Agreement is intended to or should be construed to create a partnership, joint venture, or employment relationship. |
(m) | Attorneys Fees. In any suit or proceeding between the Parties relating to this Agreement, the prevailing Party will have the right to recover from the other(s) its costs and reasonable fees and expenses of attorneys, accountants, and other professionals incurred in connection with the suit or proceeding, including costs, fees and expenses upon appeal, separately from and in addition to any other amount included in such judgment. This provision is intended to be severable from the other provisions of this Agreement, and shall survive and not be merged into any such judgment. |
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(n) | No Agency. No Party has the right or authority to and shall not, assume or create any obligation of any nature whatsoever on behalf of the other Parties or bind the other Parties in any respect whatsoever. |
(o) | Disputes. Any dispute, difference or question relating to or arising among any of the Parties concerning the construction, meaning, effect or implementation of this Agreement or the rights or obligations of any Party hereof will be submitted to, and settled by arbitration by a single arbitrator chosen by the corresponding Regional Office of the American Arbitration Association in accordance with the Commercial Rules of the American Arbitration Association. The arbitration hearing shall be limited to two (2) days maximum. The arbitrator shall apply New York law. Unless otherwise agreed by the Parties, arbitration will take place in New York. New York, U.S.A. Any court having jurisdiction over the matter may enter judgment on the award of the arbitrator. Service of a petition to confirm the arbitration award may be made by regular mail or by commercial express mail, to the attorney for the Party or, if unrepresented, to the Party at the last known business address. If however, Depositor or Beneficiary refuse to submit to arbitration, the matter shall not be submitted to arbitration and Iron Mountain may submit the matter to any court of competent jurisdiction for an interpleader or similar action. Unless adjudged otherwise, any costs of arbitration incurred by Iron Mountain, including reasonable attorneys fees and costs, shall be divided equally and paid by Depositor and Beneficiary. |
(p) | Regulations. All Parties are responsible for and warrant, to the extent of their individual actions or omissions, compliance with all applicable laws, rules and regulations, including but not limited to: customs laws; import; export and re-export laws; and government regulations of any country from or to which the Deposit Material may be delivered in accordance with the provisions of this Agreement. |
(q) | No Third Party Rights. This Agreement is made solely for the benefit of the Parties to this Agreement and their respective permitted successors and assigns, and no other person or entity shall have or acquire any right by virtue of this Agreement unless otherwise agreed to by all the parties hereto. |
(r) | Entire Agreement. The Parties agree that this Agreement, which includes all the Exhibits attached hereto and all valid Work Requests submitted by the Parties, is the complete agreement between the Parties hereto concerning the subject matter of this Agreement and replaces any prior or contemporaneous oral or written communications between the Parties. There are no conditions, understandings, agreements, representations, or warranties, expressed or implied, which are not specified herein. Each of the Parties herein represents and warrants that the execution, delivery, and performance of this Agreement has been duly authorized and signed by a person who meets statutory or other binding approval to sign on behalf of its business organization as named in this Agreement. This Agreement may only be modified by mutual written agreement of the Parties. |
(s) | Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. |
(t) | Survival. Sections 6 (Term and Termination), 7 (General Indemnity), 8 (Warranties), 10 (Confidential Information), 11 (Limitation of Liability) 12 (Consequential Damages Waiver), and 13 (General) of this Agreement shall survive termination of this Agreement or any Exhibit attached hereto. |
DEPOSITOR | BENEFICIARY | |||||
COMPANY NAME: | Mavenir Systems, Inc. | COMPANY NAME: Starent Networks, Corp. | ||||
SIGNATURE: |
/s/ Terry Hungle | SIGNATURE: |
/s/ Steven Boyce | |||
PRINT NAME: |
Terry Hungle | PRINT NAME: |
Steven Boyce | |||
TITLE: |
Chief Financial Officer | TITLE: |
Sr. Corporate Counsel | |||
DATE: |
03.31.2010 | Date: | 04.13.2010 | |||
EMAIL ADDRESS |
terry@mavenir.com | EMAIL ADDRESS: |
S T Boyce@cioco.com |
IRON MOUNTAIN INTELLECTUAL, PROPERTY MANAGEMENT, INC.
SIGNATURE: |
/s/ Mary K. English | |
PRINT NAME: |
Mary K. English | |
TITLE: |
Director of Operations | |
DATE: |
4/20/10 | |
EMAIL ADDRESS: |
ipmclientservices@ironmountain.com |
NOTE: AUTHORIZED PERSON(S)/NOTICES TABLE, BILLING CONTACT INFORMATION TABLE AND EXHIBITS FOLLOW
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DEPOSITOR AUTHORIZED PERSON(S)/NOTICES TABLE
Provide the name(s) and contact information of the Authorized Person(s) under this Agreement. All notices will be sent to the person(s) at the address(es) set forth below. This is required information.
COMPANY: | Mavenir Systems, Inc. | |
ADMINISTRATIVE CONTACT |
||
PRINT NAME: |
Terry Hungle | |
TITLE: |
Chief Financial Officer | |
EMAIL ADDRESS |
terry@mavenir.com | |
ADDRESS 1 |
1651 N Glenville | |
ADDRESS 2 |
Suite 216 | |
City/State/Province |
Richardson, TX | |
POSTAL/ZIP CODE |
75081 | |
PHONE NUMBER |
469-916-4393 x 5010 | |
FAX NUMBER |
469-916-4397 |
BENEFICIARY AUTHORIZED PERSON(S)/NOTICES TABLE
Provide the name(s) and contact information of the Authorized Person(s) under this Agreement. All notices will be
sent to the
person(s) at the address(es) set forth below. This is required information.
COMPANY: |
Starent Networks, Inc. | |
ADMINISTRATIVE CONTACT |
||
PRINT NAME: |
Steven Boyce | |
TITLE: |
Sr. Corporate Counsel | |
EMAIL ADDRESS |
St boyce@cioco.com | |
ADDRESS 1 |
30 International Place | |
ADDRESS 2 |
||
CITY/STATE/PROVINCE |
Tewksbury, Massachusetts | |
POSTAL/ZIP CODE |
01876 | |
PHONE NUMBER |
(978) 863-2358 | |
FAX NUMBER |
(978) 863-3907 |
IRON MOUNTAIN INTELLECTUAL PROPERTY MANAGEMENT. INC.
All notices should be sent to ipmclientservices@ironmountain.com OR
Iron Mountain Intellectual Property Management, Inc. Attn: Client Services
2100 Norcross Parkway, Suite 150
Norcross, Georgia, 30071, USA.
Telephone: 800-875-5669
Facsimile: 770-239-9201
Approved as to Operational Content: Iron Mountain IPM Service Delivery
|
Approved as to Form and Legal Content: Iron Mountain Legal Department
| |
Name: Stephanie DuBose Date: March 8, 2010 |
Barbara ONeal Smith Senior Contracts Specialist Date: March 3, 2010 |
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BILLING CONTACT INFORMATION TABLE
Please provide the name and contact information of the Billing Contact under this Agreement. All Invoices will be sent to this individual at the address set forth below.
DEPOSITOR | BENEFICIARY | |||||||
PRINT NAME: |
Yasmin Limbada | PRINT NAME: |
Patricia Gomez | |||||
TITLE: |
Office Manager | TITLE: |
Manager Accounts Payable | |||||
EMAIL ADDRESS |
Yasmin@mavenir.com | EMAIL ADDRESS |
pgomez@starentnetworks.com | |||||
STREET ADDRESS |
1651 N Glenville, Suite 216 | STREET ADDRESS |
30 International Place | |||||
PROVINCE/CITY/STATE |
Richardson, TX | PROVINCE/CITY/STATE |
Tewksbury, Massachusetts | |||||
POSTAL/ZIP CODE |
75081 | POSTAL/ZIP CODE |
01876 | |||||
PHONE NUMBER |
469-916-4393 EXT 5007 | PHONE NUMBER |
978 863 3623 | |||||
FAX NUMBER |
469-916-4397 | FAX NUMBER |
978 863 3904 | |||||
PURCHASE ORDER # |
PURCHASE ORDER # |
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MUST BE COMPLETED EXHIBIT AEscrow Service Work RequestDeposit Account Numbers: 37613
SERVICE Check |
SERVICE
DESCRIPTIONTHREE PARTY ESCROW AGREEMENT All services are listed |
ONE- |
ANNUAL |
PAYING PARTY Check | ||||
x Setup Fee | Iron Mountain will setup a new escrow deposit account using a standard escrow agreement. Custom contracts are subject to the Custom Contract Fee noted below. | $1500 |
¨ Depositor - OR - ¨ Beneficiary | |||||
x Deposit Account Fee-including Escrow Management Center Access | Iron Mountain will set up one deposit account to manage and administrate access to Deposit Material that will be securely stored in controlled media vaults, Furthermore, Iron Mountain will provide account services that include unlimited deposits, electronic vaulting access to Iron Mountain Connect Escrow Management Center for secure online account management, submission of electronic Work Requests; and communication of status. A Client Manager will be assigned to each deposit account and provide training upon request to facilitate secure Internet access to the account and ensure fulfillment of Work Requests. An oversize fee may apply. | $1,000 | ¨ Depositor - OR - ¨ Beneficiary | |||||
x Beneficiary Fee Including Escrow Management Center Access | Iron Mountain will fulfill a Work Request to add a Beneficiary to an escrow deposit account and manage access rights associated with the account. Beneficiary will have access to Iron Mountain Connect Escrow Management Center for secure online account management, submission of electronic Work Requests and communication of status. A Client Manager will be assigned to each deposit account and provide training upon request to facilitate secure Internet access to the account and ensure fulfillment of Work Requests. | $700 | ¨ Depositor - OR - ¨ Beneficiary | |||||
x Add Additional Deposit Account | Iron Mountain will set up one additional deposit account to manage and administrate access to new Deposit Material that will be securely stored in controlled media vaults in accordance with the service description above and the Agreement that governs the Initial Deposit Account. | $1,000 | ¨ Depositor - OR - ¨ Beneficiary | |||||
¨ Add Deposit Tracking Notification | At least semi-annually, Iron Mountain will send an update reminder to Depositor. Thereafter, Beneficiary will be notified of last deposit. | N/A | $375 | ¨ Depositor - OR - ¨ Beneficiary | ||||
¨ Add File List Test | Iron Mountain will fulfill a Work Request to perform a File List Test, which includes analyzing deposit media readability, file listing creation of file classification table, virus scan, and assurance of completed deposit questionnaire. A final report will be sent to the Paying Party regarding the Deposit Material to ensure consistency between Depositors representations (i.e., Exhibit B and Supplementary Questionnaire) and stored Deposit Material. Deposit must be provided on CD, DVD-R, or deposited FTP. | $2,500 | N/A | ¨ Depositor - OR - ¨ Beneficiary | ||||
¨ Add Level 1 - Inventory and Analysis Test | Iron Mountain will perform an Inventory Test on the initial deposit, which includes Analyzing deposit media readability, virus scanning, developing file classification tables, identifying the presence absence of build instructions, and identifying materials required to recreate the Depositors software development environment. Output includes a report which will include build instructions, file classification tables and listings. In addition, the report will list required software development materials, including without limitation, required source code languages and compilers, third-party software, libraries, operating systems and hardware, as well as Iron Mountains analysis of the deposit. | $5,000 or based on SOW if custom work required | N/A | ¨ Depositor - OR - ¨ Beneficiary | ||||
¨ Add Level 2 - Compile Test | Iron Mountain will fulfill a Work Request to perform a Deposit Compile Test, which includes the Inventory Test as described above plus recreating the Depositors software development environment, compiling source files and modules, linking libraries and recreating executable code, pass/fail determination creation of comprehensive build instructions with a final report sent to the Paying Party regarding the Deposit Material. The Paying Party and Iron Mountain will agree on a custom Statement of Work (SOW) prior to the start of fulfillment. | Based on SOW | N/A | ¨ Depositor - OR - ¨ Beneficiary | ||||
¨ Add Level 3 - Binary Comparison | Iron Mountain will fulfill a Work Request to perform one Deposit Compile Test Binary Comparison which includes a comparison of the files built from the Deposit Compile Test to the actual licensed technology on the Beneficiarys site to ensure a full match in file size, with a final report sent to the Requesting Party regarding the Deposit Material. The Paying Party and Iron Mountain will agree on a custom Statement of Work (SOW) prior to the start of fulfillment. | Based no SOW | N/A | ¨ Depositor - OR - ¨ Beneficiary | ||||
¨ Add Level 4 - Fall Usability | Iron Mountain will fulfill a Work Request to perform one Deposit Compile Test Full Usability which includes a confirmation that the built applications work properly when installed. A final report will be sent to the Paying Party regarding the Deposit Material. The Paying Party and Iron Mountain Will agree on a custom Statement of Work (SOW) prior to the start of fulfillment. | Based on SOW | N/A | ¨ Depositor - OR - ¨ Beneficiary |
Page 8 of 13
¨ Add Dual/Remote Vaulting | Iron Mountain will fulfill a Work Request to store deposit materials in one additional location as defined within the Service Agreement. Duplicate storage request may be in the form of either physical media or electronic storage. | N/A | $500 |
¨ Depositor - OR - ¨ Beneficiary | ||||
¨ Release Deposit Material | Iron Mountain will process a Work Request to release Deposit Material by following the specific procedures defined in Exhibit C Release of Deposit Materials the Escrow Service Agreement. | $500 | N/A |
¨ Depositor - OR - ¨ Beneficiary | ||||
¨ Add Custom Services | Iron Mountain will provide its Escrow Expert consulting based on a custom SOW mutually agreed to by all Parties. | $175/hour | N/A | ¨ Depositor - OR - ¨ Beneficiary | ||||
¨ Custom Contract Fee | Custom contracts are subject to the Custom Contract Fee, which covers the review and processing of custom or modified contract. | $750 | N/A | ¨ Depositor - OR - ¨ Beneficiary |
Note: Parties may submit Work Requests via written instruction or electronically through the online portal.
Page 9 of 13
EXHIBIT B
DEPOSIT MATERIAL DESCRIPTION
COMPANY NAME: ACCOUNT NUMBER: 37613
DEPOSIT NAME: Mavenir Systems AND DEPOSIT VERSION
(Deposit Name will appear in account history reports)
DEPOSIT MEDIA (PLEASE LABEL ALL MEDIA WITH THE. DEPOSIT NAME PROVIDED ABOVE)
MEDIA TYPE |
QUANTITY |
MEDIA TYPE | QUANTITY | |||
x CD-ROM / DVD |
2 | ¨ 3.5 Floppy Disk | ||||
¨ DLT Tape |
¨ Documentation | |||||
¨ DAT Tape |
¨ Hart Drive / CPU | |||||
¨ Circuit Board |
TOTAL SIZE OF TRANSMISSION |
# OF FILES |
# OF FOLDERS | ||||
¨ Internet File Transfer |
||||||
¨ Other (please describe below): |
DEPOSIT ENCRYPTION (Please check either Yes or No below and complete as appropriate)
Is the media or are any of the files encrypted? ¨ Yes or x No
If yes, please include any passwords and decryption tools description below. Please also deposit all necessary encryption software with this deposit.
Encryption tool name |
|
Version |
|
Hardware required |
|
Software required |
|
Other required information |
|
DEPOSIT CERTIFICATION (Please check the box below to Certify and Provide your Contact Information)
x I certify for Depositor that above described Deposit Material has been transmitted electronically or sent via commercial express mail carrier to from Mountain at the address below. | ¨ Iron Mountain has inspected and accepted the above described Deposit Material either electronically or physically. Iron Mountain will notify Depositor of any discrepancies. | |
NAME: BG Kumar |
NAME: | |
PRINT NAME: BG Kumar |
PRINT NAME: | |
DATE: 03.31.2010 |
DATE: | |
EMAIL ADDRESS: bgkumar@mavenir.com |
||
TELEPHONE NUMBER: 972-998-4190 |
||
FAX NUMBER: |
Note: If Depositor is physically sending Deposit Material to Iron Mountain, please label all media and mail all Deposit Material with the appropriate Exhibit B via commercial express carrier to the following address:
Iron Mountain Intellectual Property Management, Inc. Attn: Vault Administration 2100 Norcross Parkway, Suite 150 Norcross GA 30071 |
Telephone: 800-875-5669 Facsimile: 770-239-9201 |
FOR IRON MOUNTAIN USE ONLY: (NOTED DISCREPANCIES ON VISUAL INSPECTION)
Page 10 of 13
EXHIBIT C
RELEASE OF DEPOSIT MATERIALS
Deposit Account Number: 37613
Iron Mountain will use the following procedures to process any Beneficiary Work Request to release Deposit Material. All notices under this Exhibit C shall be sent pursuant to the terms of Section 13(h) Notices.
1. | Release Conditions. The Depositor and Beneficiary agree that a Work Request for the release of the Deposit Material shall be based solely on one or more of the following conditions (defined as Release Conditions) established by Section 12.5 of that certain, Reseller OEM Agreement (the License Agreement), effective October 28, 2008, by and between Depositor (Mavenir Systems, Inc.) and Beneficiary (Starent Networks, Corp.): |
1. | With respect to the Deposit Material deposited into the Primary Deposit Account, Number 37613, the following Release Conditions shall apply: |
12.5(a) | Depositor is determined to be insolvent by a court of competent jurisdiction, a court of competent jurisdiction enters on order or decree under Title 11, U.S. Code, or any similar Federal, foreign or state law for the relief of debtors (collectively, Bankruptcy Law) that is for relief with respect to Depositor, Depositor makes a general assignment for the benefit of its creditors, or Depositor commences a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any Bankruptcy Law (if such insolvency or related event is not lifted within 30 days); |
12.5(b) | Depositor ceases to do business as a going concern for more than 30 days (other than the acquisition of Depositor, whether by merger, consolidation, reorganization, stock purchase or otherwise, or by the acquisition of all or substantially all of its assets); |
12.5(c) | a receiver or custodian is appointed for the business of Depositor and such receiver or custodian is not dismissed within 30 days; |
12.5(d) | Depositor is dissolved or liquidated pursuant to any law in force for the winding up or liquidation of corporations or other entities; and |
12.5(f) | any material and repeated failure by any successor to Depositor, whether by merger, sale of assets or otherwise, to perform Depositors obligations under the License Agreement, including, without limitation, Depositors maintenance and support and development obligations set forth in Appendix C to the License Agreement. |
II. With respect to the Deposit Material deposited into the Auxiliary Deposit Account, Number , the following Release Condition shall apply:
12.5(e) | Beneficiary terminates the License Agreement pursuant to Section 14.1 thereof for Depositors material breach or material failure of performance of its obligations under the License Agreement, following Depositors failure to cure such material breach or material failure prior to the end of the cure period set forth in Section 14.1 thereof. |
2. | Release Work Request. A Beneficiary may submit a Work Request to Iron Mountain (with copy to Depositor) to release the Deposit Material covered under this Agreement. Iron Mountain will send a written notice of this Beneficiary Work Request within five (5) business days to the Depositors Authorized Person(s). |
3. | Contrary Instructions. From the date Iron Mountain mails written notice of the Beneficiary Work Request to release Deposit Material covered under this Agreement, Depositor authorized representative(s) shall have thirty (30) days to deliver to Iron Mountain contrary instructions. Contrary instructions shall mean the written representation by Depositor that a Release Condition has not occurred or has been cured (Contrary Instructions). Contrary Instructions shall be on company letterhead and signed by an authorized Depositor representative. Upon receipt of Contrary Instructions, Iron Mountain shall promptly send a copy to Beneficiarys Authorized Person(s). Additionally, Iron Mountain shall notify both Depositor and Beneficiary Authorized Person(s) that there is a dispute to be resolved pursuant to the Disputes provisions of this Agreement. Iron Mountain will continue to store Deposit Material without release pending (i) joint instructions from Depositor and Beneficiary with instructions to release the Deposit Material; or (ii) dispute resolution pursuant to the Disputes provisions of this Agreement; or (iii) receipt of an order from a court of competent jurisdiction. |
4. | Release of Deposit Material. If Iron Mountain does not receive Contrary Instructions from an authorized Depositor representative, Iron Mountain is authorized to release Deposit Material to the Beneficiary or, if more than one Beneficiary is registered to the deposit, to release a copy of Deposit Material to the Beneficiary. Iron Mountain is entitled to receive any undisputed, unpaid Service Fees due Iron Mountain from the Parties before fulfilling the Work Request to release Deposit Material covered under this Agreement. Any Party may cure a default of payment of Service Fees. |
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5. | Termination of Agreement Upon Release. This Agreement will terminate upon the release of Deposit Material held by Iron Mountain. |
6. | Right to Use Following Release. Beneficiary has the right under this Agreement to use the Deposit Material for the sole purpose of continuing the benefits afforded to Beneficiary by the License Agreement. Notwithstanding, the Beneficiary shall not have access to the Deposit Material unless there is a release of the Deposit Material in accordance with this Agreement, Beneficiary shall be obligated to maintain the confidentiality of the released Deposit Material. Depositor and Beneficiary agree that release of the Deposit Materials to the Beneficiary does not constituted a grant of any intellectual property rights of any kind in the Deposit Materials to the Beneficiary other than as provided in the License Agreement. In no event shall the Beneficiary have the right to use the Deposit Materials for any purpose not specifically set forth in the License Agreement. |
Page 12 of 13
EXHIBIT Q
ESCROW DEPOSIT QUESTIONNAIRE
Introduction
From time to time, technology escrow beneficiaries may exercise their right to perform verification services. This is a service that Iron Mountain provides for the purpose of validating relevance, completeness, currency, accuracy and functionality of deposit materials.
Purpose of Questionnaire
In order for Iron Mountain to determine the deposit material requirements and to quote fees associated with verification services, a completed deposit questionnaire is requested. It is the responsibility of the escrow depositor to complete the questionnaire.
Instructions
Please complete the questionnaire in its entirety by answering every question with accurate data. Upon completion, please return the completed questionnaire to the beneficiary asking for its completion or e-mail it to Iron Mountain to the attention of verification@ironmountain.com
Escrow Deposit Questionnaire
General Description
1. | What is the general function of the software to be placed into escrow? |
2. | On what media will the source code be delivered? |
3. | What is the size of the deposit in megabytes? |
Requirements for the Execution of the Software Protected by the Deposit
1. | What are the system hardware requirements to successfully execute the software? (memory, disk space, etc.) |
2. | How many machines are required to completely set up the software? |
3. | What are the software and system software requirements, to execute the software and verify correct operation? |
Requirements for the Assembly of the Deposit
1. | Describe the nature of the source code in the deposit. (Does the deposit include interpreted code, compiled source, or a mixture? How do the different parts of the deposit relate to each other?) |
2. | How many build processes are there? |
3. | How many unique build environments are required to assemble the material in the escrow deposit into the deliverables? |
4. | What hardware is required for each build environment to compile the software? (including memory, disk space, etc.) |
5. | What operating systems (including versions) are used during compilation? Is the software executed on any other operating systems/version? |
6. | How many separate deliverable components (executables, share libraries, etc.) are built? |
7. | What compilers/linkers/other tools (brand and version) are necessary to build the application? |
8. | What, if any, third-party libraries are used to build the software? |
9. | How long does a complete build of the software take? How much of that time requires some form of human interaction and how much is automated? |
10. | Do you have a formal build document describing the necessary steps for system configuration and compilation? |
11. | Do you have an internal QA process? If so, please give a brief description of the testing process. |
12. | Please list the appropriate technical person(s) Iron Mountain may contact regarding this set of escrow deposit materials. |
Please provide your technical verification contact information below :
COMPANY : | Mavenir Systems, Inc. | |
SIGNATURE: | /s/ BG Kumar | |
PRINT NAME: | BG Kumar | |
ADDRESS 1: | 1651 N Glenville | |
ADDRESS 2 : | Suite 216 | |
CITY, STATE, ZIP | Richardson, TX 75081 | |
TELEPHONE : | 972-998-4190 | |
EMAIL ADDRESS: | BGKumar@mavenir.com |
For additional information about Iron Mountain Technical Verification Services, please contact Manager of Verification Services at 978-667-3601 ext. 100 or by e-mail at mailto: verification@ironmountain.com
Page 13 of 13
Appendix E
List of Starent House Account Customers
| North America |
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
Confidential and Proprietary |
Page 44 |
*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
| Caribbean / Latin America |
[***]
[***]
[***]
[***]
[***]
[***]
[***]
| Asia Pacific |
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
| EMEA |
[***]
[***]
[***]
[***]
[***]
Confidential and Proprietary |
Page 45 |
*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
Appendix F
Form of Warrant
Confidential and Proprietary |
Page 46 |
Issue Date: October , 2008
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES OF THIS INSTRUMENT.
MAVENIR SYSTEMS, INC.
STOCK PURCHASE WARRANT
THIS CERTIFIES that Starent Networks, Corp. (the Holder) is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe for and purchase, from Mavenir Systems, Inc., a Delaware corporation (the Company), up to 6,287,989 Shares (as defined below), at an exercise price of $0.9542 per share (the Exercise Price). The Exercise Price and the Shares purchasable hereunder are subject to adjustment as set forth in Section 9. This Warrant may be exercised for Vested Shares at any time on or prior to the close of business on October , 2015 (the Expiration Date).
1. Definitions.
(a) Bookings shall mean purchase orders accepted by the Company in accordance with its published policy for acceptable order support and documentation, consistently applied, that results from the sale of Mavenir Products by the Holder directly to Tier One Accounts, which Mavenir Products were acquired from the Company pursuant to the OEM Agreement.
(b) Change of Control shall mean (x) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any merger, consolidation or other form of reorganization in which outstanding shares of the Company are exchanged for securities or other consideration issued, or caused to be issued, by the acquiring entity or its subsidiary, but excluding any transaction effected primarily for the purpose of changing the Companys jurisdiction of incorporation) that results in the transfer or acquisition of at least a majority of the Companys voting power to such entity or (y) a sale of all or substantially all of the assets of the Company or the exclusive license of all or substantially all of the Companys intellectual property by means of any transaction or series of related transactions.
(c) Common Stock shall mean the Companys common stock, $0.001 par value per share.
(d) Effective Date shall mean October 29, 2008.
(e) IPO shall mean the Companys first firm commitment underwritten public offering of its Common Stock or other securities pursuant to an effective registration statement under the Securities Act.
(f) Mavenir Products shall have the meaning given such term in the OEM Agreement.
(g) OEM Agreement shall mean that certain Reseller OEM Agreement dated as of October 29, 2008 between the Company and the Holder, as amended from time to time.
(h) Preferred Stock shall mean the Series C Convertible Preferred Stock, par value $0.001 per share, of the Company and any other stock into or for which the Series C Convertible Preferred Stock may be converted or exchanged, and upon and after the occurrence of an event which results in the automatic or voluntary conversion, redemption or retirement of all (but not less than all) of the outstanding shares of such Preferred Stock, including without limitation, the consummation of an IPO in which such conversion occurs, then from and after the date upon which such outstanding shares are so converted, redeemed or retired, Preferred Stock shall mean such Common Stock.
(i) Securities shall mean this Warrant and the Shares issuable upon exercise of this Warrant.
(j) Securities Act shall mean the Securities Act of 1933, as amended.
(k) Shares shall mean shares of Preferred Stock.
(l) Tier One Accounts shall mean NTT DOCOMO, INC., Vodafone Group Plc, France Telecom, Bouygues Telecom, Telefonica S.A., Hutchison Telephone Company, Softbank Mobile Corp., AT&T Inc., Deutsche Telekom ADR, SK Telecom Co., Ltd., KT Freetel Co., Ltd., BT Group, plc, Verizon, Verizon Business, Verizon Wireless, Reliance Communications Limited, KDDI Corporation, Tata Teleservices Limited, Vivo, Alltel Communications, LLC, Telecomunicaciones Movilnet C.A., America Moviles, Bell Canada, Bell Mobility, China Unicom Ltd., China Telecom, China Mobile, Cox Wireless LLC (Cox/TMI Wireless), United States Cellular Corporation, Sprint Nextel Corporation, Clearwire / XHOM / Sprint Wireless Broadband Company LLC, Telus Communications Company, Mobilkom Austria Group, Joint Stock Financial Corporation Sistema, Willcom, Inc., Emobile Ltd., or any subsidiaries or affiliates of the foregoing.
(m) Vested Shares shall mean the number of Shares that have vested pursuant to Section 2(a) hereof.
(n) Warrant Period shall mean the period of time commencing on the Effective Date and expiring on the third anniversary of the Effective Date.
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2. Exercise of Warrant.
(a) The right to subscribe for and purchase the Shares shall vest according to the amount of Bookings during the Warrant Period in accordance with the milestones (the Milestones) set forth in the table below:
Milestones |
Incremental Number of Vested Shares |
Aggregate Number of Vested Shares |
||||||
$1 million in Bookings during the Warrant Period |
314,399 | 314,399 | ||||||
$2 million in Bookings during the Warrant Period |
314,400 | 628,799 | ||||||
$3 million in Bookings during the Warrant Period |
314,399 | 943,198 | ||||||
$4 million in Bookings during the Warrant Period |
314,400 | 1,257,598 | ||||||
$5 million in Bookings during the Warrant Period |
314,399 | 1,571,997 | ||||||
$6 million in Bookings during the Warrant Period |
314,400 | 1,886,397 | ||||||
$7 million in Bookings during the Warrant Period |
314,399 | 2,200,796 | ||||||
$8 million in Bookings during the Warrant Period |
314,400 | 2,515,196 | ||||||
$9 million in Bookings during the Warrant Period |
314,399 | 2,829,595 | ||||||
$10 million in Bookings during the Warrant Period |
314,400 | 3,143,995 | ||||||
$11 million in Bookings during the Warrant Period |
314,399 | 3,458,394 | ||||||
$12 million in Bookings during the Warrant Period |
314,400 | 3,772,794 |
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$13 million in Bookings during the Warrant Period |
314,399 | 4,087,193 | ||||||
$14 million in Bookings during the Warrant Period |
314,400 | 4,401,593 | ||||||
$15 million in Bookings during the Warrant Period |
314,399 | 4,715,992 | ||||||
$16 million in Bookings during the Warrant Period |
314,400 | 5,030,392 | ||||||
$17 million in Bookings during the Warrant Period |
314,399 | 5,344,791 | ||||||
$18 million in Bookings during the Warrant Period |
314,400 | 5,659,191 | ||||||
$19 million in Bookings during the Warrant Period |
314,399 | 5,973,590 | ||||||
$20 million in Bookings during the Warrant Period |
314,399 | 6,287,989 |
For the avoidance of doubt, (i) no additional Shares shall vest after the Warrant Period irrespective of the amount of Bookings generated thereafter, and (ii) there shall be no pro rata vesting between Milestones and the amount of Bookings must equal or exceed the specified Milestone in order for the Holder to be vested in the aggregate number of Shares corresponding to such Milestone.
(b) The purchase rights represented by this Warrant are exercisable by the Holder, in whole or in part, by the surrender of this Warrant and the Notice of Exercise annexed hereto duly executed at the principal executive office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company), and upon payment of the Exercise Price of the Shares thereby purchased (by cash or by check or bank draft payable to the order of the Company); whereupon the Holder shall be entitled to receive a certificate for the number of Shares so purchased. The Company agrees that if at the time of the surrender of this Warrant and purchase of the Shares, the Holder shall be entitled to exercise this Warrant, the Shares so purchased shall be and be deemed to be issued to the Holder as the record owner of such Shares as of the close of business on the date on which this Warrant shall have been exercised as aforesaid.
- 4 -
(c) In lieu of exercising this Warrant by payment of cash or check pursuant to subsection (b) above, the Holder may elect to receive Vested Shares equal to the value of the Warrant (based upon the value of the Vested Shares or the portion thereof being exercised), at any time after the date hereof and before the close of business on the Expiration Date, by surrender of this Warrant at the principal executive office of the Company, together with the Notice of Conversion annexed hereto, in which event the Company will issue to the Holder Vested Shares in accordance with the following formula:
X = | Y(A-B) A |
Where, | X = | the number of Vested Shares to be issued to the Holder; | ||
Y = | the number of Vested Shares for which the Warrant is being exercised; | |||
A = |
the fair market value of one Share; and | |||
B = | the Exercise Price. |
For purposes of this subsection the fair market value of a Share is defined as follows:
(1) if the exercise is in connection with an IPO, and if the Companys registration statement relating to such IPO has been declared effective by the Securities and Exchange Commission, then the fair market value shall be the initial Price to Public specified in the final prospectus with respect to the offering;
(2) if the exercise is in connection with a Change of Control, then the fair market value shall be the value received in such Change of Control by the holders of the securities as to which purchase rights under this Warrant exist;
(3) if the exercise occurs after, and not in connection with an IPO, and:
a) if traded on a securities exchange or the Nasdaq Stock Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange or market over the thirty (30) day period ending three (3) days prior to the date of the Notice of Conversion; or
b) if actively traded over-the-counter, the value shall be deemed to be the average of the closing bid prices over the thirty (30) day period ending three (3) days prior to the date of the Notice of Conversion;
(4) if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Companys Board of Directors.
3. Nonassessable. The Company covenants that all Shares which may be issued upon the exercise of rights represented by this Warrant will, upon exercise of the rights represented by this Warrant, be validly issued, fully paid and nonassessable and free from all taxes, liens and charges in
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respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). Certificates for Shares purchased hereunder shall be delivered to the Holder within a reasonable time after the date on which this Warrant shall have been exercised as aforesaid.
4. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon the exercise of this Warrant, an amount equal to such fraction multiplied by the then current price at which each Share may be purchased hereunder shall be paid in cash to the Holder.
5. Charges, Taxes and Expenses. Issuance of certificates for Shares upon the exercise of this Warrant shall be made without charge to the Holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder.
6. No Rights as Stockholder. This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Company prior to the exercise hereof.
7. Loss, Theft, Destruction or Mutilation of Warrant. On receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount.
8. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, a Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.
9. Adjustments. The Exercise Price and the number of Shares purchasable hereunder are subject to adjustment from time to time as set forth in this Section 9.
(a) Reclassification, etc. If the Company, at any time while this Warrant, or any portion hereof, remains outstanding and unexpired by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities or any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under this Warrant immediately prior to such reclassification or other change and the Exercise Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section 9.
(b) Subdivision or Combination of Shares. In the event that the Company shall at any time subdivide the outstanding securities as to which purchase rights under this Warrant exist, or shall issue a stock dividend on the securities as to which purchase rights under this Warrant exist, the number of securities as to which purchase rights under this Warrant exist immediately prior to such subdivision or to the issuance of such stock dividend shall be proportionately increased, and the
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Exercise Price shall be proportionately decreased, and in the event that the Company shall at any time combine the outstanding securities as to which purchase rights under this Warrant exist, the number of securities as to which purchase rights under this Warrant exist immediately prior to such combination shall be proportionately decreased, and the Exercise Price shall be proportionately increased, effective at the close of business on the date of such subdivision, stock dividend or combination, as the case may be.
(c) Cash Distributions. No adjustment on account of cash dividends or interest on the securities as to which purchase rights under this Warrant exist will be made to the Exercise Price under this Warrant.
(d) Antidilution Rights. Antidilution rights applicable to the Preferred Stock issuable upon the exercise of this Warrant are set forth in the Companys Amended and Restated Certificate of Incorporation (as it may be further amended or restated from time to time, the Charter), and shall be applicable with respect to the Preferred Stock issuable upon exercise of this Warrant. The Company shall promptly provide the Holder with any restatement, amendment, modification or waiver of the Charter. For avoidance of any doubt, there shall be no duplicate antidilution adjustment pursuant to this Section 9(d) and the Charter.
(e) Notice of Adjustments. If: (i) the Company shall declare any dividend or distribution upon its stock, whether in stock, cash, property or other securities; (ii) the Company shall offer for subscription prorata to the holders of any class of its Preferred Stock any additional shares of stock of any class or other rights; (iii) there shall be any Change of Control; (iv) there shall be an IPO; (v) the Company shall sell, lease, license or otherwise transfer all or substantially all of its assets; or (vi) there shall be voluntary dissolution, liquidation or winding up of the Company; then, in connection with each such event, the Company shall send to the Holder: (A) at least fifteen (15) days 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, subscription rights (specifying the date on which the holders of the Preferred Stock shall be entitled thereto) or for determining rights to vote in respect of such Change of Control, dissolution, liquidation or winding up; (B) in the case of any such Change of Control, sale, lease, license or other transfer of all or substantially all of the Companys assts, dissolution, liquidation or winding up, at least fifteen (15) days prior written notice of the date when the same shall take place (and specifying the approximate date on which the holders of Preferred Stock shall be entitled to exchange their Preferred Stock for securities of or other property deliverable upon such Change of Control, dissolution, liquidation or winding up); and (C) in the case of an IPO, the Company shall give the Holder at least fifteen (15) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the event requiring the notice, and (ii) if any adjustment is required to be made, (A) the amount of such adjustment, (B) the method by which such adjustment was calculated, (C) the adjusted Exercise Price (if the Exercise Price has been adjusted), and (D) the number of shares subject to purchase hereunder after giving effect to such adjustment, and shall be given in the manner set forth in Section 15(e).
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(f) Timely Notice. Failure to timely provide such notice required by Section 9(e) above shall entitle Holder to retain the benefit of the applicable notice period notwithstanding anything to the contrary contained in any insufficient notice received by Holder.
10. Restrictions on Transferability of Securities.
(a) Restrictions on Transferability. The Securities shall not be sold, assigned, transferred or pledged except upon the conditions specified in this Section 10.
(b) Restrictive Legend. Each certificate representing the Securities and any other securities issued in respect of the Securities upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall (unless otherwise permitted by the provisions of Section 10(c)) be stamped or otherwise imprinted with a legend in the following form (in addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AS SET FORTH IN THAT CERTAIN STOCK PURCHASE WARRANT BETWEEN THE CORPORATION AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH MAY BE OBTAINED AT THE CORPORATIONS PRINCIPAL OFFICE. SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES OF THESE SECURITIES.
Each holder of Securities and each subsequent transferee consents to the Company making a notation on its records and giving instructions to any transfer agent of the Securities in order to implement the restrictions on transfer established in this Section 10.
(c) Notice of Proposed Transfers. Each holder of a warrant or stock certificate, as the case may be, representing the Securities, by acceptance thereof, agrees to comply in all respects with the provisions of this Section 10(c). Such holder agrees not to make any disposition of all or any portion of the Securities unless and until there is then in effect a registration statement under the
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Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement or such holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Company, such holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company that such disposition will not require registration of such shares under the Securities Act.
11. Investment Representations of the Holder. With respect to the acquisition of any of the Securities, the Holder hereby represents and warrants to the Company as follows:
(a) Purchase Entirely for Own Account. This Warrant is made with the Holder in reliance upon the Holders representation to the Company, which by the Holders execution of this Warrant the Holder hereby confirms, that the Securities will be acquired for investment for the Holders own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Holder has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Warrant, the Holder further represents that the Holder does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person with respect to any of the Securities.
(b) Reliance upon Holders Representations. The Holder understands that the Securities have not been, and will not be, registered under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act, and that the Companys reliance on such exemption is predicated on the Holders representations set forth herein.
(c) Investment Experience; Economic Risk. The Holder understands that the Company has a limited financial and operating history and that an investment in the Company involves substantial risks. The Holder has made such inquiry concerning the Company and its business and personnel as it has deemed appropriate. The Holder has such knowledge and experience in financial and business matters that the Holder is capable of evaluating the merits and risks of the investment in the Securities. The Holder can bear the economic risk of the Holders investment and is able, without impairing the Holders financial condition, to hold the Securities for an indefinite period of time and to suffer a complete loss of the Holders investment.
(d) Accredited Investor Status. The Holder is an accredited investor within the meaning of Regulation D, Rule 501(a), promulgated under the Securities Act. The Holder also represents that it has not been organized for the purpose of acquiring the Securities.
(e) Restricted Securities. The Holder understands that the Securities are characterized as restricted securities under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such federal securities laws and applicable regulations such Securities may be resold without registration under the Securities Act only in certain limited circumstances. In this connection, Holder represents that it is aware of the provisions of Rule 144 promulgated under the Securities Act which permit limited resale of securities purchased in a private placement subject to the satisfaction of certain conditions, including, among other things, the existence of a public market for the securities and the availability of certain current public information about the Company.
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12. Market Standoff. The Holder hereby agrees that, if requested by the managing underwriter, it will not, without the prior written consent of the Company, during the period commencing on the date of the final prospectus relating to the Companys IPO or any secondary public offering, as applicable, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) calendar days in the case of an initial public offering and ninety (90) calendar days in the case of any secondary public offering (or such other period as may be requested by the Company or managing underwriter to accommodate regulatory restrictions on (a) the publication or other distribution of research reports and (b) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto)) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired), whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of securities, in cash or otherwise. The foregoing covenants shall not apply to the sale of any shares by the Holder to an underwriter pursuant to an underwriting agreement and shall only be applicable to the Holder if all the Companys executive officers, directors and greater than one percent (1%) stockholders enter into similar agreements. The Holder agrees to execute an agreement(s) reflecting (i) and (ii) above as may be requested by the managing underwriters at the time of the IPO or any secondary public offering, and further agrees that the Company may impose stop transfer instructions with its transfer agent in order to enforce the covenants in (i) and (ii) above. The restrictions in this Section 12 shall not apply to transfers to affiliates of the Holder or purchases made in the open market following the completion of any offering covered by this Section 12 or to any resale public offerings in which the Holder is not selling shares of Common Stock for its own account.
13. Change of Control. If at any time there shall be Change of Control, then, as a part of such Change of Control, lawful provision shall be made so that the Holder shall thereafter be entitled to receive, upon exercise of this Warrant, the kind and amount of shares of preferred stock or other securities or property of the successor, surviving or purchasing corporation resulting from or participating in such Change of Control that would have been issuable if Holder had exercised this Warrant immediately prior to the Change of Control. In any such case, appropriate adjustment (as determined in good faith by the Companys Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the Change of Control to the end that the provisions of this Warrant (including adjustments of the Exercise Price and number of shares of Preferred Stock purchasable upon exercise) shall be applicable in their entirety, and to the greatest extent possible. Without limiting the foregoing, in connection with any Change of Control, upon the closing thereof, the successor or surviving entity shall assume the
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obligations of this Warrant. In connection with a Change of Control and upon Holders written election to the Company, the Company shall cause this Warrant to be exchanged for the consideration that Holder would have received if Holder chose to exercise its right to have shares issued pursuant to Section 2(c) of this Warrant without actually exercising such right, acquiring such shares and exchanging such shares for such consideration.
14. Reservation of Stock. The Company will at all times reserve and keep available, solely for issuance and delivery upon the exercise of this Warrant, such number of Shares and other securities, cash and/or property, as from time to time shall be issuable upon the exercise of this Warrant.
15. Miscellaneous.
(a) Governing Law. THIS WARRANT WILL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE (WITHOUT REFERENCE TO THE CONFLICTS OF LAW PROVISIONS THEREOF).
(b) Restrictions. By acceptance hereof, the Holder acknowledges that the Shares acquired upon the exercise of this Warrant may have restrictions upon its resale imposed by state and federal securities laws.
(c) Waivers and Amendments. This Warrant and any provisions 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.
(d) Assignment. This Warrant may be assigned or transferred by the Holder only with the prior written approval of the Company. This Warrant shall be binding upon any successors or assigns of the Company.
(e) Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be delivered personally by hand or by courier, mailed by United States first-class mail, postage prepaid, sent by facsimile or sent by electronic mail directed to the party to be notified at the address, facsimile number or electronic mail address indicated for such person on the signature page hereof, or at such other address, facsimile number or electronic mail address as such party may designate by ten (10) days advance written notice to the other parties hereto. All such notices and other communications shall be deemed given upon personal delivery, on the date of mailing, upon confirmation of facsimile transfer or when directed to the electronic mail address set forth on signature page hereof. With respect to any notice given by the Company under any provision of the Delaware General Corporation Law or the Companys charter or bylaws, the Holder agrees that such notice may given by facsimile or by electronic mail.
(f) Counterparts. This Warrant may be executed in any number of counterparts, each of which shall be enforceable, and all of which together shall constitute one instrument.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.
MAVENIR SYSTEMS, INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
Address: | ||||
1651 North Glenville Drive, Suite 201 | ||||
Richardson, Texas 75081 | ||||
Attn: Chief Executive Officer | ||||
Attn: Chief Financial Officer | ||||
Facsimile: (972) 437-6232 |
AGREED AND ACKNOWLEDGED:
STARENT NETWORKS, CORP. |
||||
By: | ||||
Name: | ||||
Title: | ||||
Address*: | ||||
Facsimile #: |
* | Please indicate address for notice purposes. |
MAVENIR SYSTEMS, INC.
SIGNATURE PAGE TO WARRANT
NOTICE OF EXERCISE
TO: | Mavenir Systems, Inc. 1651 North Glenville Drive, Suite 201 Richardson, Texas 75081 ATTN: Chief Financial Officer |
1. The undersigned hereby elects to purchase shares of the Stock (the Shares) of Mavenir Systems, Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full.
2. Please issue a certificate or certificates representing the Shares in the name of the undersigned or in such other name as is specified below:
(Print Name) | ||||||
Address: | ||||||
3. The undersigned confirms that the Shares are being acquired for the account of the undersigned for investment only and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or selling the Shares.
(Date) | (Signature) | |||
(Print Name) |
Appendix G
Statement of Work
Confidential and Proprietary |
Page 47 |
Starent Networks Corporation
Overview
MavenirStatement of Work
Revision 2.4
October 17, 2008
Starent Networks Corporation
30 International Place
Tewksbury, MA 01876
978-851-1100
http://www.starentnetworks.com
The information in this document is the proprietary and confidential property of Starent Networks Corporation. No part of this document may be disclosed, reproduced or distributed without the express written permission of Starent Networks Corporation. Starent Networks Corporation reserves the rights to alter the design and specifications at any time without notice, as part of its continuing program of product development.
Overview Mavenir Statement of Work | Starent Networks Corporation |
Change History
Revision |
Date | Author(s) | Description of change | |||
1.0 | 07/08/2008 | D. Fiore / J. Towey | Created and Reviewed for External Release | |||
1.1 | 07/14/08 | J. Towey | Edited with agreed dates from Mavenir | |||
2.0 | 10/9/2008 | Payam Maveddat | Mavenir Systems Response | |||
2.1 | 10/14/08 | Starent | Modified to incorporate updated understanding of market acceptance of the Tunneled IOS model, and broaden vision toward VoIP in general | |||
2.2 | 10/16/08 | Starent | Incorporation of internal comments and milestone date clarifications | |||
2.3 | 10/16/2008 | Payam Maveddat | ||||
2.4 | 10/17/2008 | Starent | Final Edits per internal review. |
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Table of Contents
1 INTRODUCTION |
4 | |||
2 OVERVIEW |
4 | |||
2.1 WORK ITEM OVERVIEW |
4 | |||
3 CDMA FEMTO SOLUTION SIP / IMS MODEL |
7 | |||
3.1 ARCHITECTURE / SYSTEM VIEW |
7 | |||
3.2 ISC/SCC AS |
7 | |||
3.3 ICS MSC |
8 | |||
3.4 IM TAS FEATURES |
8 | |||
3.4.1 MSC as TAS |
9 | |||
3.4.2 IM TAS |
9 | |||
3.5 SMS GATEWAY |
9 | |||
3.6 NETWORK MANAGEMENT |
9 | |||
3.7 REDUNDANCY |
10 | |||
3.8 PERFORMANCE |
10 | |||
4 CDMA FEMTO SOLUTIONTUNNELED IOS ARCHITECTURE |
11 | |||
4.1 ARCHITECTURE/ SYSTEM VIEW |
11 | |||
4.2 SYSTEM LEVEL INTEROPERATION TESTING |
11 | |||
4.3 NETWORK MANAGEMENT |
12 | |||
4.4 REDUNDANCY |
12 | |||
4.5 PERFORMANCE |
12 | |||
5 VOIP / IMS SOLUTION |
13 | |||
5.1 ARCHITECTURE / SYSTEM VIEW |
13 | |||
6 PROGRAM / PROJECT MANAGEMENT |
13 |
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Overview Mavenir Statement of Work | Starent Networks Corporation |
1 Introduction
This document provides an overview for the Statement of Work requested from Mavenir Systems in order to jointly develop and deploy additional convergence server capabilities on the Mavenir Platform to support CDMA Femtocell, mobile VoIP to GSM Core (or otherwise defined as MSC as TAS) and generic VoIP solutions.
2 Overview
There are a variety of CDMA Femtocell architectures being positioned in the marketplace. Two approaches have risen to the forefront of Starent discussions with the CDMA customer base; the Tunneled IOS Approach, and the IMS/SIP Approach.
Starent Networks view that these two solution types are needed for CDMA. The Tunneled IOS approach will opportunistically be used as near term customer demand warrants. Strategically, Starent Networks is committed to a standards-based IMS/SIP based approach for the CDMA Femtocell marketplace. These new features and functions can also be used to address more generic VoIP solutions, including but not limited to IMS based Femto, VoIP to GSM MSC (MSC as TAS), and Greenfield VoIP.
This document identifies the high level work items requested for Mavenir Systems to include in its development and product roadmaps. It is important to note, that continued discussion and architectural refinement is required to meet future standards and deliver a competitive and differentiated solution.
Definitions:
MSC as TAS is defined as SIP end points connected through a broadband access through a Session Boarder Controller (SBC) to a 2G GSM MSC.
SCC is defined for legacy user equipment (in this case CDMA 1xRTT) as a function providing terminating access domain selection function (T-ADS) as defined in 3GPP Release 8.
2.1 Work Item Overview
Shown in Table 2.1 are the high level work items with program dates for the Mavenir deliverables. Shown in Table 2.2 are the Solutions and Milestones as referenced in the Reseller OEM Agreement between Mavenir Systems and Starent Networks. Sections 3, 4 and 5 provide more explanation on the specific work items.
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Overview Mavenir Statement of Work | Starent Networks Corporation |
Work |
Description |
Deliverable |
Original Time Frame |
Mavenir Agreed Dates | ||||||
1 | CDMA Femto Solution-SIP/IMS Model | |||||||||
1.1 | Architecture/System Specifications | Agreed to System Specifications Reviewed and accepted | ||||||||
a | System Interface Definition and Specification | 15-Jul-08 | July 18, 08 | |||||||
b | ICS Definition and Specification (includes both ICS MSC and SCC AS) | 15-Aug-08 | Nov 15, 08 | |||||||
c | MSC as TAS Definition and Specification | 15-Jul-08 | Nov 30, 08 | |||||||
d | IM TAS Definition and Specification | 30-Sep-08 | Nov 16, 08 | |||||||
1.2 | Proto Type Development | Working Lab System to begin Starent / Mavenir Integration Testing | ||||||||
a | ICS MSC Model Development | 30-Oct-08 | Mar 29, 09 | |||||||
b | SCC AS Model Development | 30-Aug-08 | Mar 29, 09 | |||||||
c | MSC as TAS Interfaces | 30-Aug-08 | Apr 15, 09 | |||||||
d | IM TAS Phase 1 Development | 15-Mar-09 | May 15, 09 | |||||||
e | IM TAS Phase 2 Development | 15-Jun-09 | Aug 15, 09 | |||||||
1.3 | Product Development | QAd and Field Ready Component | ||||||||
a | ICS MSC | 15-Dec-08 | Jun 28, 09 | |||||||
b | SCC AS | 30-Oct-08 | Jun 28, 09 | |||||||
c | IM TAS Phase 1 | 15-Jun-09 | Jun 28, 09 | |||||||
d | IM TAS Phase 2 | 15-Oct-09 | Oct 15, 09 | |||||||
e | MSC as TAS | July 15, 09 | ||||||||
2 | CDMA Femto SolutionBSC Model | |||||||||
2.1 | System Integrated and Working Solution for TBD MSC | QAd and Field Ready Component | 30-Oct-08 | Mar. 29, 09 | ||||||
3 | VoIP / IMS Solution | |||||||||
3.1 | Integrate IM TAS into Greenfield VoIP Offering | QAd and Field Ready Component | 15-Oct-09 | Jun 15, 09 | ||||||
3.2 | Legacy Interworking via SS7 Map-E, D, C Interfaces | QAd and Field Ready Component | 15-Oct-09 | Oct 15, 09 |
Table 2.1Overview of Work Items
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Overview Mavenir Statement of Work | Starent Networks Corporation |
Mavenir Product/Solution |
Milestone 1 |
Milestone 2 |
Milestone 3 | |||
Tunneled IOS with AirWalk IP RAN |
29-Mar-2009 | |||||
ICS MSC with AirWalk IP RAN |
28-Jun-2009 | |||||
SCC AS |
28-Jun-2009 | |||||
IM TASPhase 1 with AirWalk SIP Femto |
28-Jun-2009 | |||||
IM TASPhase 2 with AirWalk SIP Femto and Generic VoIP Clients |
15-Oct-2009 | |||||
MSC as TAS |
15-Oct-2009 |
Table 2.2Solutions and Milestones
For each of the Solutions identified in Table 2.2, the following deliverables (but not an exclusive list) are to be part of the milestone delivery:
1. | Enhancements to Mavenir EMS to include provisioning of various mOne subsystems or modules for each solution. |
2. | Comprehensive Acceptance Test Plan which has been reviewed and approved by the appropriate Starent Program Manager. |
3. | Acceptance Test Report with results reviewed and accepted by the appropriate Starent Program Manager. |
4. | Full product documentation, including release notes, known issues and work arounds, configuration and administration guides, System engineering, and capacity planning guidelines. |
5. | Training Documentation and Material. |
6. | Manufacturing Documentation as identified by Starent Program Management. |
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3 CDMA Femto Solution SIP / IMS Model
3.1 Architecture / System View
This section provides an overview of the proposed CDMA Femto Solution. Mavenir components and required interfaces are shown in the shaded boxes below.
[***]
Figure 3.1 SOWSignaling Plane Reference Architecture
3.2 ISC/SCC AS
Starent Networks is committed to the pre-standard work currently under development with key customers and look to have alignment and joint standards contributions with Mavenir in 3GPP, 3GPP2 and Femto Forum. In the absence of a ratified standards, Mavenir will develop a specification for the relevant SIP Interfaces identified above.
The ISC/SCC AS shall be developed according to the emerging standard specifications TS 23.292, TS 23.237, TR 23.892, and TR 23.893. This development shall include all the interfaces shown in the grey box below and in Figure 3.1. These interfaces include the appropriate IS-41/MAP functionality as specified in X.S0004-000-E_v7.0; including MAP-E, MAP-D, and MAP-C.
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[***]
3.3 ICS MSC
This functional block is still pre-standard. Mavenir/Starent need to come to a common ground of understanding for this element. Conceptually, SIP should originate from the FAP, terminate directly into the IMS Core, and anchored in the SCC AS. This block only comes into play for legacy/non SIP based FAPs and is the mobility handoff point between CS and IMS service networks.
This block is also envisioned to capture the function for inter-MSC handoffs when acting as part of a MSC Softswitch environment. These interfaces include the appropriate MAP functionality as specified in X.S0004-000-E_v7.0; including MAP-E, MAP-D, and MAP-C.
This element also requires that Mavenir test and interoperates with various CS-MGWs (media gateways) and Media Servers (MS) to be jointly defined based upon market need.
3.4 IM TAS Features
A multi-phased solution is understood to be delivered by Mavenir; full 3GPP2 Compliant IM TAS offering.
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3.4.1 MSC as TAS
This solution allows the existing MSCs within a carriers network to be used as Telephony Application Servers for generic IMS VoIP Solutions in a UMTS or GSM context.
MSC as TAS is defined as Connecting VoIP End Points via mOne to 2G GSM MSCs via a broadband access.
Mavenir is responsible for all interface development, interoperability, and certification to deliver the features listed in Appendix A.
The target MSCs should be jointly created between Mavenir and Starent during the System Definition and Specification work item.
3.4.2 IM TAS
This solution enables an IMS based delivery of features and functions to the consumer base. This TAS should work with both generic SIP-based VoIP Endpoints, and with defined Femto Base Stations.
Mavenir is responsible for all functional development, interface development, interoperability, and certification to roll out the features listed in Appendix A.
A phased feature set is acceptable and is outlined in Appendix A. The list should be finalized during the System Definition and Specification work item (3.1).
3.5 SMS Gateway
The solution shall seamlessly support SMS GW as currently being developed by Mavenir Systems. This capability provides an interworking function between legacy SMS and SIP-based messaging towards the IMS network.
3.6 Network Management
All the above elements shall be seamless integrated into Mavenirs Element Management System with full EMS functionality as part of the joint solution.
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3.7 Redundancy
All the above elements shall be developed in a manner which supports Mavenirs redundancy architecture. In all cases, carrier grade software and hardware concepts shall be utilized in the development and testing of the product elements.
In no case, shall the system fail in an unrecoverable state. Ideally, sessions shall be maintained with no user level interruption of service. In all situations, logs and debug level functionality shall allow for remote diagnose and fault identification/containment/correction.
The system shall allow for software upgrades/downgrades in a seamless and none service affecting manner.
3.8 Performance
The above functions shall be designed, tested, and verified to meet the system level performance levels previously discussed.
Estimated capacity per CE application card:
***
***
***
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4 CDMA Femto SolutionTunneled IOS Architecture
4.1 Architecture/ System View
[***]
Figure 4.1 Tunneled IOS Model
The Mavenir Convergence Server shall interwork between a IOS based Femto Access Point provided by AirWalk Communications and CDMA MSCs supporting IOS 5.0 as per 3GPP2 standards. A 3rd party media gateway is required that supports EVRC codec adaptation to PCM.
The target CDMA MSCs current include:
| Nortel |
| Huawei |
| ZTE |
| Motorola |
4.2 System Level Interoperation Testing
This approach is largely a system interoperation and test activity leveraging previously developed Mavenir functionality. To the extent new interfaces are needed, or subsequent modifications to functionality are required based on IOT testing, Mavenir will appropriately incorporate into its plans as dictated by Starent Customer demand.
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4.3 Network Management
All the above elements shall be seamless integrated into Mavenirs Element Management System with full EMS functionality as part of the joint solution.
4.4 Redundancy
All the above elements shall be developed in a manner which supports Mavenirs redundancy architecture. In all cases, carrier grade software and hardware concepts shall be utilized in the development and testing of the product elements.
In no case, shall the system fail in an unrecoverable state. Ideally, sessions shall be maintained with no user level interruption of service. In all situations, logs and debug level functionality shall allow for remote diagnose and fault identification/containment/correction.
The system shall allow for software upgrades/downgrades in a seamless and none service affecting manner.
4.5 Performance
The above functions shall be designed, tested, and verified to meet the system level performance levels previously discussed.
Estimated capacity per CE application card:
[***]
[***]
[***]
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5 VoIP / IMS Solution
5.1 Architecture / System View
This work item is a system integration effort of elements previous specified. Elements of specific interest are the IM TAS and Legacy SS7 signaling interworking
6 Program / Project Management
Mavenir shall to identify a Program Manager and commit to weekly / biweekly conference calls. Starent recommends using the existing Mavenirs project management and dashboard process to effectively communicate status, risks, and progress and minimizing Mavenir overhead.
Starent Networks requires participation in System Architecture and Detailed design reviews throughout the development process. Mavenir Systems shall provide unit/feature test plans and QA test summaries on a periodic basis (monthly). Starent requires review and approval rights of the acceptance test plans being created by Mavenir for each milestone listed in Table 2.1 and 2.2.
Revision 2.4 |
Proprietary and Confidential Information | Page 13 of 15 |
Overview Mavenir Statement of Work | Starent Networks Corporation |
Appendix A : Required 3GPP/2 TAS Functions
(Note that some of the services and features require joint development and coupling with Starents products that must be jointly defined between the two companies.)
Phase 1: | ||
Other Wireless Services |
||
SMS Delivery |
||
Voice Mail Waiting Indication |
||
Ring-Back Tones |
||
Supplementary/subscriber services |
||
Call Delivery (CD) |
S.R0006-501 A June 2007 | |
Call ForwardingBusy (CFB) |
S.R0006-502 A June 2007 | |
Call ForwardingDefault (CFD) |
S.R0006-503 A June 2007 | |
Call ForwardingNo Answer (CFNA) |
S.R0006-504 A June 2007 | |
Call ForwardingUnconditional (CFU |
S.R0006-505 A June 2007 | |
Call Transfer (CT) |
S.R0006-506 A June 2007 | |
Call Waiting (CW) |
S.R0006-507 A June 2007 | |
Calling Number Id Presentation (CNIP) |
S.R0006-508 A June 2007 | |
Calling Number Id Restriction (CNIR) |
S.R0006-509 A June 2007 | |
Conference Calling (CC) |
S.R0006-510 A June 2007 | |
Do Not Disturb (DND) |
S.R0006-511 A June 2007 | |
Flexible Alerting (FA) |
S.R0006-512 A June 2007 | |
Message Waiting Notification (MWN) |
S.R0006-513 A June 2007 | |
Mobile Access Hunting (MAH) |
S.R0006-514 A June 2007 | |
Remote Feature Control (RFC) |
S.R0006-518 A June 2007 | |
Selective Call Acceptance (SCA) |
S.R0006-519 A June 2007 | |
Subscriber PIN Access (SPINA) |
S.R0006-520 A June 2007 | |
Subscriber PIN Intercept (SPINI) |
S.R0006-521 A June 2007 | |
Three-Way Calling (3WC) |
S.R0006-522 A June 2007 | |
Voice Message Retrieval (VMR) |
S.R0006-523 A June 2007 | |
Calling Name Presentation (CNAP) |
S.R0006-526 A June 2007 | |
Calling Name Restriction (CNAR) |
S.R0006-527 A June 2007 | |
Over-the-Air Service Provisioning (OTASP) |
S.R0006-533 A June 2007 | |
User Group (UG) |
S.R0006-535 A June 2007 | |
Short Message Delivery |
S.R0006-601 A June 2007 | |
User selective call forwarding |
||
Advice of Charge |
Phase 2:
| Regulatory |
| E911 Phase 2emergency services support |
| WLNP Phase 2wireless local number portability/number pooling |
| CALEA Punch listlawful intercept of wireless communications |
| TTY/TDDwireless support for the hearing impaired |
Revision 2.4 |
Proprietary and Confidential Information | Page 14 of 15 |
Overview Mavenir Statement of Work | Starent Networks Corporation |
| WPS Wireless Priority Service (future) |
| WIN Phase 2 based services |
| Wireless Number Portability (WNP) |
| Pre-paid wireless service |
| Obtain the location and status of a mobile station |
| Premium Rate Charging (PRC) |
| Freephone (FPH) |
| Advice Of Charging (AOC) are charging related services that provide a set of advanced wireless charging capabilities. |
| Enhanced Preferred Language (EPL) uses |
| Wireless Intelligent Network (WIN) capabilities to provide announcements to the subscriber in the subscribers preferred language. |
| Rejection of Undesired Annoying Calls (RUAC) is a screening service that blocks undesired annoying calls to the subscriber |
Supplementary/subscriber services |
||
Password Call Acceptance (PCA) |
S.R0006-515 A June 2007 | |
Preferred Language (PL) |
S.R0006-516 A June 2007 | |
Priority Access and Channel Assmt (PACA) |
S.R0006-517 A June 2007 | |
Voice Privacy (VP |
S.R0006-524 A June 2007 | |
Asynchronous Data Service (ADS) |
S.R0006-525 A June 2007 | |
Data Privacy (DP) |
S.R0006-528 A June 2007 | |
Emergency Services (9-1-1) |
S.R0006-529 A June 2007 | |
Group 3 Facsimile Service (G3 Fax) |
S.R0006-530 A June 2007 | |
Network Directed System Selection (NDSS) |
S.R0006-531 A June 2007 | |
Non-Public Service Mode (NP) |
S.R0006-532 A June 2007 | |
Service Negotiation (SN |
S.R0006-534 A June 2007 | |
Group 3 Analog Facsimile Service (G3 AFax) |
S.R0006-536 A June 2007 | |
WIN Feature Descriptions |
S.R0006-537 A June 2007 | |
Wireless Messaging Teleservice |
S.R0006-602 A June 2007 | |
Wireless Paging Teleservice |
S.R0006-603 A June 2007 | |
Mobile Station Functionality |
S.R0006-701 A June 2007 | |
System Functionality |
S.R0006-801 A June 2007 | |
Subscriber Confidentiality |
S.R0006-802 A June 2007 | |
Network Services |
S.R0006-803 A June 2007 | |
Enhanced Security |
S.R0006-804 A June 2007 | |
User selective call forwarding |
||
Answer hold |
||
Anonymous call rejection |
||
Automatic code gapping |
Revision 2.4 |
Proprietary and Confidential Information | Page 15 of 15 |
Appendix H
Mavenir EULA
Confidential and Proprietary |
Page 48 |
Mavenir, Inc.
End-User License Agreement
This End User License Agreement (Agreement), effective this day of , (Effective Date), is by and between Mavenir, Inc., a Delaware corporation having offices at 1651 N Glenville, Suite 201, Richardson, TX 75081 (Mavenir) and , a located at (Licensee). The parties hereby agree as follows:
Page 1 of 5 |
Page 2 of 5 |
Page 3 of 5 |
Page 4 of 5 |
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date first written above.
LICENSEE | MAVENIR, INC. | |||
By: | By: | |||
Printed Name: | Printed Name: | |||
Title: | Title: |
Page 5 of 5 |
EXECUTION COPY
AMENDMENT NO. 1
AMENDMENT NO. 1 (Amendment), dated as of February 10, 2009, between Starent Networks, Corp. (Starent) and Mavenir Systems, Inc. (Mavenir), to the Reseller OEM Agreement, dated October 28, 2008 (the Agreement), and the Statement of Work, dated October 17, 2008 (the SOW), between the parties.
As Starent and Mavenir wish to revise the Agreement and the SOW to remove a delivery milestone required by Mavenir, the parties agree as follows:
1. SOW, Table 2.2.
The parties agree to remove Milestone 1 (Tunneled IOS with AirWalk IP RAN) from Table 2.2 of the SOW.
2. Agreement
(a) Section 6.7.
The parties agree that the Section 6.7 of the Agreement will be amended as follows:
(i) The third sentence is hereby amended and restated as follows:
As a result, the Parties have agreed to establish a total of two milestones in connection with the development of the Solutions (which shall herein be referred to as Milestones 2 and 3), as more fully set forth in the SOW (each, a Milestone and collectively, the Milestones).
(ii) The sixth sentence is hereby amended and restated as follows:
To assure prompt performance of the Milestones, the Parties have agreed that Mavenir shall be subject to liquidated damages in the aggregate amount of up to [***] (the Liquidated Damages), which amount shall be divided evenly among Milestones 2 and 3 as set forth in the SOW.
(iii) The ninth sentence is hereby amended and restated as follows:
The Milestone Cure Period shall commence upon Mavenirs receipt of written notice from Starent of any alleged missed milestone, and, with respect to Milestones 2 and 3, shall be for a period of thirty (30) days.
(b) Section 12.5(e).
The parties agree that Mavenir will no longer be obligated to perform Milestone 1 as originally provided in the Agreement and SOW and accordingly, Mavenirs failure to fulfill Milestone 1 will not result in the release of the Deposit Materials under Section 12.5(e).
*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
3. General.
Capitalized terms used in this Amendment but not defined herein will have the respective meanings ascribed to such terms in the Agreement and the SOW. In the event of any conflict between the terms of this Amendment and the terms of the Agreement and/or the SOW, this Amendment will control. Except as modified by this Amendment, the Agreement and the SOW will remain in full force and effect.
STARENT NETWORKS, CORP. | MAVENIR SYSTEMS, INC. | |||||||
By: | /s/ Steven Boyce | By: | /s/ Terry Hungle | |||||
Name: | Steven Boyce | Name: | Terry Hungle | |||||
Title: | Associate General Counsel | Title: | Chief Financial Officer | |||||
Date: | 2/10/2009 | Date: | 02.10.2009 |
ADDENDUM NO. 1
This Addendum No. 1 (this Addendum), effective as of December 28, 2009 (the Effective Date), is made by and between Cisco Systems, Inc. (Cisco) (as successor-in-interest to Starent Networks, Corp., a Delaware corporation (Starent)), having its primary office at 175 West Tasman Drive, San Jose, California 95134 and Mavenir Systems, Inc., a Delaware corporation, with offices at 1700 International Place, Suite 200, Richardson, TX 75081 (Mavenir), in connection with that certain OEM Agreement between Starent and Mavenir dated October 28, 2008 (the OEM Agreement), and amends and restates in its entirety, as of the date signed by the last party, that original Addendum No. 1 executed by and between the parties hereto to be effective as of the Effective Date. Starent and Mavenir shall each be referred to herein individually as a Party or collectively as the Parties.
WHEREAS, Mavenir has agreed to provide, deploy and support certain social networking technologies to T-Mobile USA, Inc. (TMO) to be integrated into TMOs network, as more fully set forth in that certain Second Amendment to Master Agreement Between T-Mobile USA, Inc. and Starent Networks, Corp., dated as of December 23, 2009, which was previously delivered by Starent to Mavenir on or about the Effective Date (the Solution); and
WHEREAS, the Solution consists of Mavenir products and services and does not include Starent products or services; and
WHEREAS, the Parties wish to establish the terms and conditions regarding, among other things, the provision of the Solution to TMO.
NOW, THEREFORE, in consideration of the premises set forth above, the Parties agree as follows:
1. | Mavenir shall be fully and solely liable for supplying all products and services in connection with, and for the full and complete performance of, the Solution. Mavenir shall be liable for the full amount of any and all liability, penalties, liquidated damages, costs, fees and the like (collectively, Claims) arising in connection with the Solution whether asserted against Starent or Mavenir. Mavenir shall hold Starent harmless, and fully indemnify Starent, with respect to any Claims asserted by TMO or any third party arising in connection with the Solution in accordance with the OEM Agreement. |
2. | Within thirty (30) days of receipt of any payment made by TMO to Starent in connection with the Solution, Starent shall pay to Mavenir [***] of all amounts actually received by Starent. |
3. | This Addendum is subject to the OEM Agreement. In the event any discrepancy exists between the OEM Agreement and this Addendum, the terms of this Addendum shall prevail. |
4. | This Addendum and the OEM Agreement (a) are complete, (b) constitute the entire understanding between the parties with respect to the subject matter hereof, and (c) supersede all prior agreements, whether oral or written. No waiver, modification, or addition to this Addendum or the OEM Agreement shall be valid unless in writing and signed by the parties hereto. Except as expressly provided herein, the terms of the OEM Agreement are hereby ratified and confirmed and remain in full force and effect. |
5. | This Addendum shall be effective as of the Effective Date and amends and restates in its entirety that Addendum No. 1 executed by and between Mavenir and Starent on or about the Effective Date. |
IN WITNESS WHEREOF, as of the Effective Date, the Parties have caused this Addendum to be executed by their duly authorized representatives.
CISCO SYSTEMS, INC. | MAVENIR SYSTEMS, INC. | |||||||
By: | /s/ Kulvinder Ahuja | By: | /s/ Terry Hungle | |||||
Name: | Kulvinder (Kelly) Ahuja | Name: | Terry Hungle | |||||
Title: | SVP/GM SP Mobility Group | Title: | Chief Financial Officer | |||||
Date: | February 7, 2013 | Date: | February 4, 2013 |
STARENT CONFIDENTIAL AND PROPRIETARY
*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
Cisco Systems, Inc. | ||||
170 West Tasman Drive | ||||
San Jose, CA 95134-1706 | ||||
Direct: 978.863.3748 | ||||
FAX: 978.863.3977 www.cisco.com |
1 September 2010
Mr. Terry Hungle
Chief Financial Officer
Mavenir Systems, Inc.
1651 N GIenvale, Suite 201
Richardson, TX 75081
Company Address
Company Address>
Re: | Introducing Cisco Systems, Inc. |
Dear | Sir or Madam: |
Starent Networks LLC, formerly known as Starent Networks, Corp. (Starent) was acquired by Cisco Systems, Inc. on December 18, 2009. Pursuant to such acquisition, Starent will assign the following agreements entered into between Starent and your company, including all relevant amendments, schedules and addenda to Cisco Systems, Inc., as of September 3, 2010:
(1) | Reseller OEM Agreement dated 28 October 2008 |
(2) | TMO IMS Agreement dated 29 December 2008 |
The attached Notice of Assignment shall serve as notice pursuant to those agreements.
If you should have any questions or concerns regarding this Notice, please contact Greg Sweenie by email at gsweenie@cisco.com or by phone at +1.978.863.3748.
Thank you for your understanding and cooperation.
Yours sincerely,
Mark Donohue
Director, Operations
Mobile Internet Technology Group
cc: | General Counsel (same address) |
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1 September 2010
NOTICE OF ASSIGNMENT
Contracts with Starent Networks LLC, formerly known as Starent Networks, Corp
Assigned to Cisco Systems, Inc.
This is to inform you that effective September 3, 2010 (the Assignment Date), Starent Networks LLC, formerly known as Starent Networks, Corp (Starent), shall assign, novate, and transfer to Cisco Systems, Inc. (Cisco), all rights and obligations of Starent under the following agreements, including all relevant amendments, schedules and addenda (the Assigned Contracts):
(1) | Reseller OEM Agreement dated 28 October 2008 |
(2) | TMO IMS Agreement dated 29 December 2008 |
Starent is a wholly owned affiliate of Cisco.
As of the Assignment Date, Cisco will assume all rights and obligations of Starent under the Assigned Contracts.
As part of the acquisition transition process, Cisco will be moving Starent products to the Cisco brand name. To that end, Cisco will be providing new names and model numbers (Name) to Starent products, and Cisco and Starent may market, sell and distribute the Starent products under the Starent Name or under both Starent and Cisco Names after the Assignment Date during the transition period before the final transition to the use of only the Cisco Name.
Starting on September 3, 2010: Notices by your company to Cisco should be sent to 170 West Tasman Drive, San Jose, CA 95134, Attn: SVP, Legal Services and General Counsel.
Mark Donohue
Director, Operations
Mobile Internet Technology Group
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AMENDMENT NO. 2
TO THE
RESELLER OEM AGREEMENT
Amendment No. 2, dated as of March 23, 2011 (the Effective Date), between Mavenir Systems, Inc. (Mavenir) and Cisco Systems, Inc. (Cisco) (which assigned the Agreement (as defined below) on September 3, 2010 by Starent Networks LLC (f/k/a/ Starent Networks, Corp.)) (Starent), to the Reseller OEM Agreement, dated as of October 28, 2008 as amended (the Agreement).
The parties agree to modify the Agreement as follows:
1. | Definitions |
Insert the following new Definitions:
Cisco means Cisco Systems, Inc. and its Affiliates.
CM shall mean a Cisco authorized contract manufacturer.
Open Source License means a software license under which source code is made available under terms that allow any licensee to copy, create derivative works and distribute the software without any fee or cost.
Open Source Technology means any technology provided by Mavenir that is or becomes subject to the terms of an Open Source License.
2. | License and Restrictions. |
At the beginning of 3rd sentence of Section 2.1(b), insert the following: Except as set forth in Section 2.6 below,...
3. | Mavenir Trademark and Copyright License. |
Section 2.6 is deleted in its entirety and replaced with the following: Starent may re-brand any Mavenir Product (including but not limited to: the Mavenir Product, Mavenir Software graphical user interface and Mavenir Documentation) provided by Mavenir under this Agreement as a Starent brand or a Cisco brand. In addition Cisco may, with Mavenirs prior written consent (which consent shall not be unreasonably withheld or delayed), re-brand the Mavenir Product with a Starent and/or Cisco brand and any third party brand or with a third party brand. In the event that Starent or Cisco rebrands any Mavenir Product pursuant to this Section 2.6, Cisco shall be pay to Mavenir all fees, costs and expenses, if any, mutually agreed upon by Mavenir and Cisco in writing and in accordance with the payment terms of Section 5 of the Agreement.
4. | Fees, Payments and Payment Terms. |
In Section 5, titled Fees, Payments and Payment Terms. Section 5.3 titled Support Fees is deleted in its entirety and replaced with the following: Cisco shall pay the Maintenance and Support fees set forth in Appendix B-1 within sixty (60) days following the end of each of Ciscos fiscal quarters (October 31, January 31, April 30, July 31).
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Section 5.4, titled Payment Terms is amended and restated as follows:
5.4 Payment Terms. Mavenir shall invoice all fees and amounts due under any order upon shipment. Payment of such invoices shall be due net sixty (60) days from Ciscos receipt of invoice. Payment of an invoice without asserting a dispute is not a waiver of any claim or right. Payment shall not constitute Ciscos Acceptance (as defined below) of the Deliverables. Where Cisco or any Authorized Purchaser disputes a portion of an invoice, neither Cisco nor any Authorized Purchaser will withhold payment of undisputed amounts. All payments hereunder shall be made by wire transfer to such bank and account as Mavenir may from time to time designate in writing. All payments shall be made in U.S. Dollars. Whenever any payment hereunder shall be stated to be due on a day which is not a day that banks are open for business in Boston, Massachusetts (a Business Day), such payment shall be made on the immediately succeeding Business Day. Payments hereunder shall be considered to be made as of the day on which they are received at Mavenirs designated bank. Any amounts payable by Cisco or any Authorized Purchaser hereunder which remain unpaid after the due date may be subject to a late charge equal to the lesser of 1.25% per month or the maximum rate allowed by law.
Section 5.8, titled Delivery is amended and restated as follows:
5.8 Forecast and Delivery.
Forecast. During the term of this Agreement, Cisco shall provide Mavenir on a monthly basis a twelve (12) month non-binding rolling projection of orders by Cisco of the Mavenir Products, including quantities and Mavenir part numbers (Forecast). Notwithstanding any other provision contained herein, the parties acknowledge and agree that the Forecast can in no way be construed as a commitment on Ciscos part to purchase any Mavenir Products, unless specifically designated by Cisco as committed orders on such Forecast (the Committed Orders). If Cisco designates a Committed Order in its Forecast, then such Committed Order shall be subject to the terms and conditions of this Agreement (including but not limited to: payment, cancellation and rescheduling sections). Cisco agrees to issue Mavenir a purchase order(s) for the Committed Orders no later than four (4) weeks prior to the requested delivery date.
Delivery. Cisco shall from time to time place written purchase orders for Mavenir Products under this Agreement. Orders shall specify the quantity of Mavenir Products to be delivered, delivery destination, and a requested shipment date.
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Mavenir shall ship all Mavenir Products in accordance with the lead-time or delivery date that is set forth on a purchase order and accepted by Mavenir. The maximum lead time for Mavenir Products shall be four (4) weeks for Committed Orders and ten (10) weeks for up to fifty percent (50%) of non-committed Forecast orders and twelve (12) weeks for orders in excess of fifty percent (50%) of the non-committed Forecast. If Mavenir is unable to ship the Mavenir Products by the agreed upon shipment date, Mavenir shall notify Cisco in writing and if such delay results in Cisco paying damages to an End User or Distributor, then Mavenir shall reimburse Cisco for such damages to the extent specifically caused by Mavenirs delay, such damages not to exceed the delay damages set forth in Ciscos agreement with its End User or Distributor. At Ciscos option, such credit shall be paid in cash or applied against future purchases and reflected in future invoices. Mavenir shall accept or reject each purchase order submitted by Cisco within five (5) business days of Mavenirs receipt of such purchase order. If Mavenir does not reject an order within five (5) business days of receipt, the order will be deemed accepted. If Mavenir is more than 30 days late in shipping any Deliverables specified in the applicable purchase order. Cisco may, without liability, terminate any undelivered portion of the purchase order and any other undelivered purchase orders for the same or substantially similar Deliverables. Ciscos acceptance of all or any part of the Deliverables does not waive any claim that Cisco may have for delay damages under this Section.
Insert the following new Section 5.12. titled Authorized Purchasers:
5.12. Upon the Effective Date, Mavenir agrees to allow Cisco non-Affiliated CMs and Cisco Affiliates acting in the capacity of CMs (the Authorized Purchasers) to order Mavenir Products on behalf of Cisco, which Mavenir Products will be incorporated into, bundled with, sold in conjunction with Cisco products or on a standalone basis. The following Sections of this Agreement shall apply to any such purchases by Authorized Purchasers of Mavenir Products for inclusion in or with Cisco products (collectively the Authorized Purchaser Required Sections): Sections 2, 3.1, 4.1, 5.1, 6.1 through 6.6, 10 and 16. Mavenir will manage the applicable aspects of delivery and fulfillment of Mavenir Products directly to Authorized Purchasers. Notwithstanding anything to the contrary in this Agreement or any non-disclosure agreement executed by Mavenir and Cisco, Cisco may disclose the terms of this Agreement to its Authorized Purchasers without Mavenirs consent solely for the Authorized Purchasers use in purchasing Mavenir Products for Cisco, provided such Authorized Purchasers agree to comply with the terms of Section 9 hereof. With respect to Mavenir Products ordered by Authorized Purchasers, Mavenir shall invoice such Authorized Purchaser directly and Cisco shall have no liability for any such Order. The parties agree that the Authorized Purchasers shall not be third party beneficiaries of this Agreement, and further that Cisco has the right to enforce terms under this Agreement directly, notwithstanding the fact that Orders for the Mavenir Products may be issued by the Authorized Purchasers for Cisco. In no event shall Ciscos or CMs payment of any invoice constitute Ciscos acceptance of any Deliverables.
3
Insert the following new Section 5.13. titled Cancellation/Rescheduling of Orders and Committed Forecast
Cisco may cancel, at no charge to Cisco, any Committed Order(s) in the Forecast or any purchase order placed by Cisco up to six (6) weeks prior to the scheduled delivery date.
Cisco may reschedule, at no charge to Cisco, any Committed Order(s) in the Forecast or any purchase order placed by Cisco up to two (2) weeks prior to the scheduled delivery date, provided that such rescheduling is within three (3) months from the original scheduled delivery date.
5. | Acceptance. |
Section 6.1 is delete in its entirety and insert the following: Unless otherwise agreed, acceptance of the initial shipment of each Mavenir Product type (Acceptance) to an End User shall occur upon the earlier of (a) formal acceptance of the Mavenir Products by the End User or (b) one hundred twenty (120) days following delivery of the Mavenir Products to Cisco (unless rejected in writing by Cisco within such period). For subsequent shipments of previously Accepted Mavenir Products by an End User, Acceptance shall occur upon the earlier of (a) formal acceptance of the Mavenir Products by the End User or (b) sixty (60) days following delivery of the Mavenir Products to Cisco (unless rejected in writing by Cisco within such period).
In the event the End User rejects the Mavenir Products, and Cisco is required by the End User to refund any amounts paid by the End User for the Mavenir Products, Mavenir will refund any amounts paid by Cisco for such Mavenir Products.
6. | Warranties. |
Section 10.2 (e), Following the end of the sentence, insert: In addition, Mavenir warrants to Cisco as of the Effective Date that the Mavenir Products do not contain any Open Source Technology other than as set forth on Appendix I, and to the extent that Mavenir desires to include any additional Open Source Technology after the Effective Date, then Mavenir will comply with Ciscos Open Source Guidelines attached hereto and incorporated herein as Appendix J.
7. | Open Source. |
Insert a new Section 17 as follows and renumber the existing Section 17 to Section 18:
Section 17 Open Source Technology
4
17.1 Open Source Licenses. Each party will comply with the terms of all Open Source Licenses governing the Software.
17.2 Guidelines. Mavenir will comply with Ciscos Open Source Guidelines for Suppliers, attached as Appendix J (the Guidelines). Mavenir will cooperate with Cisco to help it understand all information provided under the Guidelines and ensure that it is in the correct format.
17.3 Updates. Mavenir will update all information and technology provided under Section 17.2. Updated information and technology will be provided to Cisco promptly, but in no event later than thirty (30) days after the event that necessitated the update.
17.4 Request for Source Code. If, as a result of an alleged obligation under an Open Source License. Cisco receives a request from a third party to provide Open Source Code for all or a portion of the Open Source Technology (the Request), and the Open Source Code requested has not already been provided by Mavenir to Cisco under Section 17.2, then Cisco shall notify Mavenir and refer the requestor to Mavenir.
17.4.1 If Mavenir is obligated to provide all or part of the requested Source Code to Cisco under Section 17.2 or any other provision of this Agreement, and has failed to do so, Mavenir shall provide such code within five (5) business days of notification.
17.4.2 If the requested Open Source Code is not subject to release under Section 17.4.1 and the Request is not resolved within five (5) business days of notification, Mavenir shall meet with Cisco to discuss how it plans to respond to the Request. If the Request is not resolved within thirty (30) days of notification or as otherwise agreed by the parties, then Cisco may disclose any information provided by Mavenir under Section 17.2 in accordance with any applicable license terms as reasonably necessary to respond to the Request and to any related public allegations regarding Ciscos open source compliance.
17.4.3 If the license under which the Request is made provides for suspension or termination of license rights within a specified time period following notification of breach, then, unless otherwise agreed by Cisco, the 30-day period referred to in Section 17.4.2 above shall be shortened to five (5) Business Days prior to such suspension or termination. 17.5 Reimbursement for Non-compliance. If Mavenir (i) fails to comply with any of its obligations under Sections 17.2 (Guidelines) or 17.3 (Updates) and (ii) has not cured such non-compliance or commenced a compliance plan acceptable to Cisco within ten (10) days of written notice of such non-compliance from Cisco, and (iii) such failure results in costs reasonably incurred by Cisco (Costs), then upon receipt of a notice of non-compliance and a statement of Costs from Cisco. Mavenir shall promptly reimburse Cisco for the Costs identified in the statement. All Costs under this Section 17.5 shall be treated as direct damages and shall not be subject to the waivers and limitations of Section 13.
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8. | Indemnification. |
Section 11.1(a) titled Mavenir Indemnity, at the end of the first sentence after trade secrets of a third party, insert or any alleged breach of a license governing Open Source Technology resulting from the Open Source Technology, as distributed in accordance with the licenses provided in Section 2.1 due to Mavenirs failure to comply with such license.
Section 11.3 titled Exclusions, at the end of clause (iii) insert: . or any alleged breach of a license governing Open Source Technology resulting from the Open Source Technology, as distributed in accordance with the licenses provided in Section 2.1 due solely to Ciscos failure to comply with such license provided that such exclusion will only apply provided the Open Source License for the Open Source Software at issue was correctly identified by Mavenir to Cisco and in compliance with the Guidelines.
9. | Entire Agreement. |
In the newly numbered Section 18.1 (Entire Agreement) add the following sentence: Additional terms contained in purchase orders, purchase order acknowledgements or other form documents exchanged by the parties shall not modify the terms of this Agreement and shall have no force or effect.
10. | Fees. |
Appendix B, titled Fees is deleted in its entirety and replaced with Appendix B-1 attached hereto and incorporated herein.
11. | Security Vulnerability. |
The following terms shall be added as a new Section 4 to Appendix C, Mavenir Maintenance and Support Services:
Security Vulnerability: Mavenir will diligently address any security vulnerabilities in the Mavenir Software and in addition, Mavenir will promptly bring to Ciscos attention any such security vulnerability. In the event that Cisco brings to Mavenirs attention any software security vulnerability or Mavenir brings to Ciscos attention any software security vulnerability, Mavenir will: (i) respond to any Cisco communication(s) within forty-eight (48) hours or less; (ii) provide all information, cooperation and assistance to Cisco and/or its Product Security Response Incident Response Team (PSIRT) regarding any such security vulnerability: and (iii) address such security vulnerability per the severity rating that Cisco assigns to it, including preparing and making available to Cisco for public distribution any patches, fixes or workarounds that would mitigate against such vulnerabilities. Mavenirs efforts under this section will be at Mavenirs sole expense. In the event that a third party coordination center (such as CERT/CC or NISCC) is coordinating the response and disclosure for multiple vendors of a security
6
vulnerability that impacts the software, each party agrees to cooperate and work in good faith with such third party coordination center. Mavenir shall also keep Cisco informed of any security vulnerability disclosure dates for Mavenir Software that may impact any Cisco products.
Notwithstanding anything herein to the contrary, Cisco retains the right in its discretion to disclose any security vulnerability in the software in accordance with Ciscos PSIRT reporting process (located at http://www.cisco.com/en/US/products/products_security_advisories_listing.html), to the extent such vulnerability impacts any Cisco products.
12. Miscellaneous. Capitalized terms used in this Amendment but not defined herein will have the respective meanings ascribed to such terms in the Agreement. In the event of any conflict between the terms of this Amendment and the terms of the Agreement (or any previous amendments), this Amendment shall control. Except as modified by this Amendment, the Agreement shall remain in full force and effect.
MAVENIR SYSTEMS, INC. | CISCO SYSTEMS, INC. | |||||||
By: | /s/ Terry Hungle | By: | /s/ Mark J. Donohue | |||||
Name: | Terry Hungle | Name: | Mark J. Donohue | |||||
Title: | Chief Financial Officer | Title: | Director, Operations | |||||
Date: | 03.23.2011 | Date: | 31 March 2011 |
7
APPENDIX B-1
Products and Prices
The Products and Prices listed below are as of the Effective Date of this Amendment. The Products and Prices may change from time to time during the term of the Agreement upon the mutual written agreement of the parties.
CISCO HW PID |
Mavenir P/N | Product Description (60 Character Max; First Letter Capitalized) |
Xfer Price | |||||
MlXS-00-CS1HRSF = |
100 100 100 | Standard Server Frame | $ | [***] | ||||
MIXS-00-CS1HR42UK= |
100 100 150 | Standard ATCA Frame | $ | [***] | ||||
MIXS-00-CS1HR42DK= |
100 100 200 | Deep ATCA Frame | $ | [***] | ||||
MIXS-00-CS1PDUDC= |
100 102 100 | DC PDU Unipower | $ | [***] | ||||
MIXS-00-CS1HRSFAC= |
100 110 100 | Standard Server Frame Assembly | $ | [***] | ||||
MIXS-00-CS1HR42UA= |
100 150 100 | Standard ATCA Frame Assembly | $ | [***] | ||||
MIXS-00-CS1HR42DA= |
100 150 200 | Deep ATCA Frame Assembly | $ | [***] | ||||
MIXS-00-CS1PD21X4= |
100 200 100 | DC PDU NEI | $ | [***] | ||||
MIXS-00-CS1FA13= |
200 103 150 | ATCA Chassis Fan Tray Module | $ | [***] | ||||
MIXS-00-CS1PA13DC= |
200 104 150 | ATCA Chassis DC Power Entry Module | $ | [***] | ||||
MIXS-00-CS1XA13= |
200 150 200 | ATCA Chassis | $ | [***] | ||||
MIXS-00-CS1HSA13= |
200 200 100 | ATCA Shell Manager | $ | [***] | ||||
MIXS-00-CS1CRM= |
300 300 200 | Resource Manager Card | $ | [***] | ||||
MIXS-00-CS1CSE= |
300 350 100 | Switch Engine (SE) | $ | [***] | ||||
MIXS-00-CS1CSER= |
300 355 100 | Switch Engine (SE) RTM | $ | [***] | ||||
MIXS-00-CS1CSI= |
300 400 100 | Signaling Interface Card | $ | [***] | ||||
MIXS-00-CS1CN32AM= |
300 600 100 | Nehalem 32G DIMM 32G Flash | $ | [***] | ||||
MIXS-00-CS1MNRTD= |
300 650 100 | Application Card RTM (w/ HD) | $ | [***] | ||||
MIXS-00-CS1MNRT= |
300 655 100 | Application Card RTM (no HD) | $ | [***] | ||||
MIXS-00-CS1CN8AM= |
300 700 100 | Nehalem 8G DIMM 32G Flash | $ | [***] | ||||
MIXS-00-CS1XN8= |
300 800 100 | Westmere 8G DIMM 60W | $ | [***] | ||||
MIXS-00-CS1XN32= |
300 810 100 | Westmere 32G DIMM 60W | $ | [***] | ||||
MIXS-00-CS1MTS48= |
500 100 200 | Terminal Server | $ | [***] | ||||
MIXS-00-CS1DS325= |
500 103 101 | SAS ITB Hitachi HD SN 2500 | $ | [***] | ||||
MIXS-00-CS1PS325= |
500 103 102 | SAS DC Power Supply ST2500 | $ | [***] | ||||
MIXS-00-CS1CS325= |
500 103 103 | SAS Controller ST2500 | $ | [***] | ||||
MIXS-00-CS1RA325= |
500 103 200 | SAS Storage Array | $ | [***] | ||||
MIXS-00-CS1XHP37= |
500 104 200 | HP DL370 G6 14IB | $ | [***] | ||||
MIXS-00-CS1XSPS= |
500 105 200 | HP DL360 G6 | $ | [***] | ||||
MIXS-00-CS1DHP36= |
500 106 200 | HP DL360 G6 146G HD | $ | [***] | ||||
MIXS-00-CS1PHP36= |
500 107 200 | HP DL360 G6/G7 AC Power Supply 460 watts | $ | [***] | ||||
MIXS-00-CS1PHP37= |
500 114 200 | HP DL370 G6 AC Power Supply 750 watts | $ | [***] | ||||
MIXS-00-CS1FHP37= |
500 115 200 | HP DL370 G6 System Fan Kit | $ | [***] | ||||
MIXS-00-CS1DHP37= |
500 116 200 | HP DL370 G6 ITB Seagate HD | $ | [***] | ||||
MIXS-00-CS1XG72AC= |
500 200 100 | HP DL360 G7 192G RAM AC Power | $ | [***] | ||||
MIXS-00-CS1XG71AC= |
500 220 100 | HP DL360 G7 64G RAM AC Power | $ | [***] | ||||
MIXS-00-CS1XG72DC= |
500 250 100 | HP DL360 G7 192G RAM DC Power | $ | [***] | ||||
MIXS-00-CS1PHP367= |
500 255 100 | HP DL360 G7 DC Power Supply 1200 Watts | $ | [***] | ||||
MIXS-00-CS1CMPC4= |
700 160 100 | Radisys MPC IV card | $ | [***] | ||||
MIXS-00-CS1CMS9KK= |
700 200 100 | Radisys CMS 9000 Starter Kit (includes 400 G.711 RTU License) | $ | [***] | ||||
MIXS-00-CS1CSCC3= |
700 250 100 | Radisys SCC III Card | $ | [***] | ||||
MIXS-00-CS1XSAN38= |
700 390 100 | Acme Net Net 3820 Lab System (Up to 250 Licenses) | $ | [***] | ||||
MIXS-00-CS1PAN38= |
700 395 100 | Acme Net Net 3820 Power Supply | $ | [***] | ||||
MIXS-00-CS1CAC416= |
700 400 100 | Acme Net Net 4500 SBC with 16K Session Module | $ | [***] | ||||
MIXS-00-CS1CAC34= |
700 450 100 | Acme Net Net 4500 SBC 4K Sessions Expansion Module | $ | [***] | ||||
MIXS-00-CS1XRS30= |
700 720 100 | Radisys CMS 3000 G.711/SIP Lab System | $ | [***] | ||||
MIXS-00-CS1FRAWB= |
900 100 100 | RAWB (Rear Air Management) | $ | [***] | ||||
MIXS-00-CS1FFAWB= |
900 101 100 | FAWB (Front Air Management) | $ | [***] | ||||
MIXS-00-CS1PDTAC= |
900 120 100 | AC PDU Tripp Lite | $ | [***] | ||||
TOTAL 49 HW parts |
*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
Maintenance Support Pricing.
The above listed transfer prices include the first year of annual maintenance support. For subsequent annual maintenance support renewals the annual rate shall be [***] of the hardware transfer price and [***] of the software transfer price.
*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
APPENDIX I
LIST OF OPEN SOURCE SOFTWARE
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*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
APPENDIX J
CISCO OPEN SOURCE GUIDELINES
Open Source Guidelines for Cisco Suppliers
Open Source Guidelines for Cisco Suppliers
1 | Introduction |
These Open Source Guidelines for Cisco Suppliers (Guidelines) specify what information must be provided, and what procedures must be followed, before a supplier provides materials to Cisco that include open source technology. For example, these Guidelines would apply to you in the following situations1:
| You are licensing proprietary technology to Cisco that includes open source components; |
| You are designing technology for Cisco that will include open source components; |
| You are selling to Cisco a hardware product that has open source technology (i) bundled with it; (ii) installed on it; (iii) incorporated into firmware as part of the product; or (iv) distributed separately, but intended to be used with the product. |
| You are providing Cisco with open source technology in conjunction with services for Cisco or its partners or customers; |
| Any other situation where you provide open source components to Cisco for eventual distribution to Cisco customers, partners or other vendors. |
By open source technology, we mean any technology that is subject to an open source license. These are generally licenses that make source code available for free modification and distribution. Examples of open source licenses include the Berkeley Software Distribution (BSD), the MIT license, the different versions of the Mozilla and Apache licenses, and all of the licenses sponsored by the Free Software Foundation, including the GNU General Public License (GPL) and the GNU Lesser General Public License (LGPL). A legal definition of open source technology is provided in your contract with Cisco.
Certain open source licenses apply their terms to modifications and additions that a licensee makes to the original code. In addition, certain licensessuch as the GPL and the LGPLapply their terms to code that links to, or interacts in certain ways with, the original code. For purposes of these Guidelines, all such code should be considered open source technology.
2 | Cisco, Open Source and You |
Cisco views the open source community as a valuable supply base whose works must be respected and used appropriately. While open source technology allows us to develop new products quickly and to leverage widely accepted platforms and standards, we recognize that open source technology also comes with risks and obligations.
1 These are intended as examples and not a comprehensive list.
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Open Source Guidelines for Cisco Suppliers
Cisco intends to comply with its open source license obligations, to manage risks in a sensible manner, and to be a positive contributor to the open source community. To this end, we have enacted policies and procedures that our engineers must follow when they build products or services containing open source technology. Our suppliers must comply as well, because when they provide us with deliverables containing open source technology, they are placing obligations and risks directly upon Cisco.
Cisco needs to understand and manage these risks and obligations before any deliverables are used in a Cisco product or service. These Guidelines are designed to ensure that we have the information needed to accomplish this.
Cisco will monitor each suppliers compliance with these Guidelines. Failure to comply may cause a supplier to be removed from Ciscos Approved Vendor List, and the supplier may not be considered for future business with Cisco.
3 | Open Source Requirements: |
All suppliers should provide the following to Cisco:
1. | Import Archive. The Import Archive helps Cisco to understand the open source technology in the deliverables and to prepare to meet the licensing obligations associated with that technology. The Import Archive consists of three elements: |
a. | A spreadsheet listing information about each open source component contained in the deliverables (e.g., name of component, version number, where obtained, licensing information, etc.). |
| In order to ensure that you have the most recent version of the spreadsheet, please obtain the current template from the Cisco person with whom you are working (your Cisco contact). |
| An Initial draft of the spreadsheet must be provided prior to contract signing. |
b. | Licensing text files for each of the components listed in the spreadsheet. |
| See the spreadsheet template for instructions on how to prepare the licensing text files. |
| Licensing files must accompany the Initial spreadsheet prior to contract signing. |
c. | The source code for each component listed in the spreadsheet. |
| The source code should be pristine source as it was acquired from the original provider, and should be the version of that component as utilized in the deliverables. |
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| The source code must be provided with the deliverables. |
2. | Publication Archive. The Publication Archive enables Cisco to meet its obligation to publish source code as required by certain open source licenses (such as the General Public License ver. 2, the Lesser General Public License, the Mozilla Public License, etc.) The Publication Archive must contain all code required for each open source component in the deliverables. This requirement is driven by the particular license governing each component. |
| It is your obligation to review each license and ensure that all required source code is provided to Cisco. |
| The Publication Archive must be delivered no later than the date specified in the contract. |
Top-level README file. Along with the Publication Archive, you must provide a file named README at the root of the Publication Archive which contains instructions (such as an ordered list of Unix shell commands) for building the source code into installable object code. This README file should also contain a table of requirements identifying the name, version number, and origin (such as a URL) for each software package required for compilation, installation, and execution of the code in the Publication Archive, if those packages are not themselves present in the Publication Archive. For example, a Publication Archive containing only a Hello, World! program source file (hello.c) and a simple Make file for generating an executable program, might provide a requirements table similar to the following:
Package Name |
Version |
Origin | ||
GNU Compiler Collection (gcc) | 4.4.1 | http://gcc.gnu.org/gcc-4.4/ | ||
GNU binutils | 2.19.1 | http://www.gnu.org/software/binutils/ | ||
GNU C Library | 2.10.1 | http://www.gnu.org/software/libc/ | ||
GNU Make | 3.81 | http://www.gnu.org/software/make/ |
If the software package required for development of the code in the Publication Archive originated from a distributor (such as Red Hat Enterprise Linux, Debian GNU/Linux, or Ubuntu), then it is acceptable to prepare the table using the output of the corresponding package management commands, such as rpm -qa for RPM-based systems or dpkg-l for DEB-based systems. Please prune such lists of all software packages that are not required.
If a required package is proprietary and available only on a commercial basis, then the name of the licensor or distributor, along with a URL, contact address (email or traditional, or both), and/or phone number.
NOTE: If you have modified any of the required technology such that the modifications are required to correctly compile, install, or execute any of the code in the Publication Archive, then (if you have a license to distribute the
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modified versions) you must provide the modified versions in the Publication Archive, in a subdirectory of the root called REQUIREMENTS, which should in turn contain one archive file or unpacked directory of modified source code for each modified requirement. If you do not have license to distribute the requirements in modified source form, then you should note their modified status by placing the word MODIFIED after the version number in the README file.
The README file should be in plain-text format.
3. | Build Log and Verification Archive: |
The Build Log and Verification Archive allows Cisco to verify that the Publication Archive (see above) provided is accurate and complete.
The Build Log and Verification Archive must be delivered no later than the date specified in the contract terms.
An acceptable Build Log and Verification Archive must satisfy the following list of requirements; we provide Unix shell commands as examples to guide you in developing your own procedures.
a. | In order to document the completeness of the Publication Archive, you must provide a Build Log for that code. This log should: |
i. | Demonstrate or provide as part of the log a standard, secure cryptographic hash of the archive: |
| md5sum myarchive.tar.gz |
| or shasum -a 256 myarchive.tar.gz |
ii. | Demonstrate the unpacking of the archive: |
| tar xzvf myarchive.tar.gz |
iii. | Demonstrate the build process: |
| cd myarchive |
| ./configure |
| make |
iv. | Demonstrate the installation of the archive results (not necessarily at device level, but at least at filesystem level): |
| make install |
v. | Demonstrate as part of the log the standard, secure cryptographic hash of the resultant artifact(s), as for example: |
| find $INSTALL_DlR -print | xargs md5sum |
| or find $INSTALL_DIR -print | xargs shasum -a 256 |
vi. | If you are providing Cisco with a product image, demonstrate building the product image with the results of the publication archive build. |
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vii. | If you are providing Cisco with a product image, demonstrate or provide as part of the log the standard, secure cryptographic hash of the resultant product image. |
viii. | Include the complete output of the above demonstrations. |
b. | In addition, to allow Cisco to verify the accuracy of the build log, you must do one of the following: |
i. | Provide a Verification Archive. The Verification Archive should contain sufficient additional materials to allow Cisco to build the resulting product image using the source code provided by the Publication Archive. The simplest and recommended way to achieve this is to provide a virtual machine, executable by VMWare Player and containing all necessary tools, the Publication Archive, binary objects for vendors proprietary technology, and instructions for a simple entry point to build the image from the publication archive sources and the provided binary objects. (For example, cd $START_DlR;make;make install). The instructions should be provided in a file named README at the root directory of the filesystem of the VM. |
or
ii. | If you do not wish to provide such a VM, you should provide all necessary tools, publication archive, binary objects, supporting libraries, instructions, and so forth such that Cisco can replicate the build of the product image using the Publication Archive source code. |
4 | Updates |
All information and source code and packed files provided to Cisco pursuant to these Guidelines must be updated at the time the deliverables are updated. In addition, you must notify Cisco promptly if you add additional open source technology to any deliverable. Prompt notification should be provided in accordance with the contract.
5 | Questions? |
Your Cisco contact is available to point you in the right direction. Please get in touch with him or her if you need further guidance.
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ADDENDUM TO RESELLER OEM AGREEMENT
Addendum No. 1, dated as of April 22, 2011 (the Effective Date), between Mavenir Systems, Inc. (Mavenir) and Cisco Systems, Inc. (formerly Starent Networks, Corp.) (Cisco), to the Reseller OEM Agreement between, Mavenir and Cisco, dated October 28, 2008, as amended (the Agreement) amends and restates in its entirety, as of the date signed by the last party, that original Addendum to Reseller Agreement executed by and between the parties hereto to be effective as of the Effective Date. Capitalized terms used in this Addendum but not defined herein will have the respective meanings ascribed to such terms in the Agreement.
Cisco wishes to purchase Products, Services and Software Maintenance Support from Mavenir, as more fully described in this Addendum, in support of its resale of the IP Messaging solution to AT&T (the IP Messaging Project). The parties agree that this Addendum shall apply only to purchases for the IP Messaging Project and that other purchases by Cisco shall be made under the terms of the Agreement.
The parties agree to supplement and modify the Agreement as follows:
1. Acceptance. The Mavenir Product Acceptance and Acceptance Test for the IP Messaging Project shall be as set forth in that certain document titled Acceptance which was previously delivered by Cisco to Mavenir on or about the Effective Date.
2. Definitions. In addition to the Definitions in the Agreement, additional Definitions for the IP Messaging Project are set forth in Attachment 1.
3. Products. Cisco may purchase the Mavenir Products listed on that certain document titled Products and Prices (the Product List) which was previously delivered by Cisco to Mavenir on or about the Effective Date, for the prices set forth in such document, subject to Cisco issuing Mavenir a purchase order(s) from time to time during the term of the IP Messaging Project.
4. Product Technical Specification. The Products ordered by Cisco under this Addendum will comply with the technical specifications and performance/capacity specifications set forth in that certain document titled Technical Specifications which was previously delivered by Cisco to Mavenir on or about the Effective Date. In the event the Mavenir Products fail to meet the technical specifications or performance/capacity metrics contained in such technical specifications, then Mavenir agrees to provide to Cisco, at no additional charge, any additional hardware or software to the Mavenir Products to be in compliance with such technical and performance/capacity specifications.
5. Maintenance. Cisco may purchase Software Maintenance Support for the IP Messaging Project as described in the Agreement and herein at the price set forth in the Product List. Additional terms relating to Mavenirs support obligations and service level agreements are contained in that certain document titled Additional Support Obligations which was previously delivered by Cisco to Mavenir on or about the Effective Date.
6. Professional Services. Mavenir shall deliver the Services described in that certain document titled Professional Services which was previously delivered by Cisco to Mavenir on or about the Effective Date. Such services are to be provided by Mavenir at no charge, unless otherwise expressly stated in a Partner Statement of Work (P-SOW) between Mavenir and Cisco.
7. Training. Mavenir shall develop and deliver the training and courseware development described in that certain document titled Training and Courseware Development which was previously delivered by Cisco to Mavenir on or about the Effective Date, at the prices set forth therein. Such training and courseware development will be provided by Mavenir, at no charge, unless otherwise expressly stated therein.
8. Duration of Addendum
This Addendum shall be effective as of the Effective Date and shall remain in effect for a term of five (5) years from the Effective Date (the Initial Term). After the Initial Term, the Addendum shall automatically renew for additional periods of twelve (12) months, unless Cisco provides Mavenir written notice at least sixty (60) days prior to the expiration of the Initial Term or any extended term. This Addendum shall survive any termination or expiration of the Agreement for the duration of the Project. Notwithstanding any expiration or termination of the Agreement, the Agreement shall be remain in full force and effect for this Project and for the duration of the Project.
[***]
[***]
10. Offshore Language
Mavenir shall not perform any Services under this Addendum, or allow such performance by any subcontractor, at a location outside the United States (Offshore Location) to deliver Services in the United States unless AT&T approves the work to be performed by Mavenir or a subcontractor at such Offshore Location. In the event of such approval, the physical location where the work is to be performed, the Services to be performed at such location, and, if applicable, the identity of any subcontractor performing such work shall be specifically set forth in Attachment 11. AT&Ts approval of the Offshore Locations identified in that certain document titled Offshore Locations previously delivered by Cisco to Mavenir on or about the Effective Date shall be valid until April 30. 2011. Thereafter, AT&Ts re-approval in writing, which shall not be unreasonably refused, shall be required for the continued use of such Offshore Locations to deliver Services in the United States.
11. AT&T Supplier Information Security Requirements (SISR) and Offshore Amendments
No later than April 27, 2011, the parties agree to negotiate and intend to execute an amendment to the Addendum containing mutually acceptable offshore Services terms. No later than May 27, 2011, the parties agree to negotiate and intend to execute an amendment to the Addendum containing mutually acceptable information security terms.
12. IP Messaging SPAM Filter
[***], Mavenir agrees to provide Cisco for AT&T a Diameter interface on the IP Messaging solution to communicate with AT&Ts SPAM filtering capabilities. The CPM Enabler supports Diameter Credit Control as a real-time authorization interface that can be used to interwork with 3rd party spam/virus filters, whereby the CPM Enabler is effectively a PEP (Policy Enforcement Point) and the 3rd party spam/virus filter is a PDP (Policy Decision Point). The DCC interface is invoked based on subscriber profile information and can be customized to pass various message related data, including the message body, envelope, etc.
13. Hardware Swap
Unless agreed upon in writing by and among Mavenir, Cisco and AT&T, Mavenir shall not require a Hardware Swap (as defined in Attachment 1) of the IP Messaging solution based on the requirements set forth in this Addendum. In the event of a Hardware Swap is agreed to by the parties, then such new hardware and any related services to swap the hardware shall be performed by Mavenir [***].
14. Legacy Support Cost Offset
To offset a realized cost increase for the legacy messaging Product maintenance fees for the current installed base, Mavenir will provide [***] to Cisco for AT&T an annual maximum [***] of CPM Product per year for each of the next five (5) years, provided that the annual maximum shall expire at the end of each year and shall not carry over to any subsequent year. Prior to Mavenir making such CPM Product available, Cisco must provide proper AT&T documentation that reflects the legacy maintenance cost increase. The cost relief is based upon the current installed base of legacy equipment as of November 8, 2010. Any equipment added in the future with the legacy vendor will not be applicable under this Addendum and cost relief will not be provided with respect to such equipment. Cisco shall provide Mavenir purchase orders to obtain CPM products under the Legacy Support Cost Offset.
15. IP Messaging Lab Equipment for AT&T
Mavenir agrees to provide Cisco for AT&T the lab equipment set forth in that certain document titled AT&T Lab Systems which was previously delivered by Cisco to Mavenir on or about the Effective Date per the pricing defined in the Product List.
16. IP Messaging Lab Equipment for Cisco
In order for Cisco to replicate AT&Ts production environment, Cisco will create an IP Messaging Lab to assist in the support of the IP Messaging Project. Mavenir agrees to provide Cisco for such lab the Mavenir Products set forth in that certain document titled Cisco IP Messaging Lab which was previously delivered by Cisco to Mavenir on or about the Effective Date, at the prices set forth therein.
17. AT&T Security Regulations/Work Policy
Mavenir agrees to comply with AT&Ts security regulations as set forth in that certain document titled AT&T Security Regulations/Work Policy which was previously delivered by Cisco to Mavenir on or about the Effective Date.
*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
18. Request for Proposal Response
Mavenirs response to the AT&T IP Messaging Project Request for Proposal is hereby incorporated herein by reference.
19. Miscellaneous.
In the event of any conflict between the terms of this Addendum and the terms of the Agreement, this Addendum shall control. Except as modified by this Addendum, the Agreement shall remain in full force and effect.
20. Amendment and Restatement.
Effective as of the date signed by the last party below, this Addendum amends and restates in its entirety that certain Addendum No. 1 executed on or about the Effective Date by and between the parties set forth below, the terms of which are superseded by the terms set forth herein.
MAVENIR SYSTEMS, INC. |
CISCO SYSTEMS, INC. | |||||||
By: | /s/ Terry Hungle | By: | /s/ Kulvinder Ahuja | |||||
Name: | Terry Hungle | Name: | Kulvinder (Kelly) Ahuja | |||||
Title: | Chief Financial Officer | Title: | SVP/GM SP Mobility Group | |||||
Date: | February 4, 2013 | Date: | February 7, 2013 |
ATTACHMENT 1
DEFINITIONS
| ACActive Charge |
| AOApplication Originated |
| ATApplication Terminated |
| API -Application Programming Interface |
| ATCAAdvanced Telecommunications Computing Architecture |
| CDRCall Detail Record |
| CMSCentralized Management Server |
| CPMConverged IP Messaging. Refers to the solution enabling CPM functionality in the network. |
| CPM-DEConverged IP MessagingDelivery Engine. Refers to the solution enabling CPM-DE functionality in the network. |
| ESMEExternal Short Messaging Entity |
| EOLEnd of Life |
| Hardware SwapRefers to the notion of a complete change in hardware required by the Supplier to continue like-for-like capabilities. Hardware swap specifically does not refer to the replacement of EOL hardware or other agreed to circumstances that would require a complete change in hardware. |
| FCAPSFault, Configuration, Accounting, Performance, and Security |
| FFAFirst Field Application |
| FSMForward Short Message |
| GUIGraphical User Interface |
| ICGWInter Carrier Gateway |
| IMPInstant Messaging and Presence |
| IMSIP Multimedia Subsystem |
| IP MessagingRefers to the overall solution set described within this Supplement. |
| IP-SM-GWIP Short Messaging Gateway |
| LDAPLightweight Directory Access Protocol |
| Lower SAGLower SMPP Aggregation Gateway. Refers to the solution enabling Lower SAG functionality in the network. |
| MINDMaster Integrated Network Directory |
| MMMultimedia Message |
| MMSMultimedia Messaging Service |
| MMSCMultimedia Messaging Service Center |
| MOMobile Originated |
| MreptMessaging Reporting Server |
| MTMobile Terminated |
| MWIMessage Waiting Indicator. Refers to the solution enabling MWI functionality in the network. |
| NDCNetwork Data Center |
| NPINumeric Plan Indicator |
| OAMOperation and Maintenance |
| OMAOpen Messaging Gateway |
| RMSRich Messaging Server |
| SAGSMPP Aggregation Gateway. Refers to the solution enabling SAG functionality in the network. |
| SANStorage Area Network |
| SIPSession Initiation Protocol |
| SISRSupplier Information Security Requirements |
| SMPPShort Message Peer-to-Peer Protocol |
| SMSShort Messaging Service |
| SMSCShort Messaging Service Center |
| SNMPSimple Network Management Protocol |
| SPAMRefers to unsolicited electronic communication. |
| TACTechnical Assistance Center |
| TSSTechnical Support Services |
| TONType of Number |
| UMRUniversal Messaging Router |
| Upper SAGUpper SMPP Aggregation Gateway. Refers to the solution enabling Upper SAG functionality in the network. |
AMENDMENT NO. 3
TO THE
RESELLER OEM AGREEMENT
Amendment No. 3, dated as of September 22, 2011 (the Effective Date), between Mavenir Systems, Inc. (Mavenir) and Cisco Systems, Inc. (Cisco) (successor to Starent Networks, Corp.) to the Reseller OEM Agreement, dated as of October 28, 2008 as amended (the Agreement).
The parties agree to modify the Agreement as follows:
1. Trademark License. Insert a new Section 2.9 as follows:
2.9 TRADEMARK LICENSE
a) | License Grant. Subject to the terms and conditions of this Agreement and during the term of this Agreement, Cisco grants to Mavenir a nonexclusive, nontransferable license, without the right to sublicense, to use the name, logo, trademarks, and other marks of Cisco (collectively the Marks) solely on its web site and other marketing programs that the Parties may from time to time mutually agree to in writing. |
b) | Ownership of the Cisco Marks. Mavenir acknowledges that Cisco owns the Cisco Marks, and that, except as set forth in Section a) above, Mavenir has no rights, title, or interest in or to the Cisco Marks and that all use of the Cisco Marks by Mavenir shall be for Ciscos benefit, Mavenir agrees it will not adopt, use, or attempt to register the Cisco Marks or any confusingly similar mark. |
c) | Form of Use. In addition to the terms in this Section 2.9, Mavenir also agrees to abide by Ciscos logo usage guidelines and trademark policies, currently found at |
http://www.cisco.com/en/US/about/ac50/ac47/about cisco brand center.html. The guidelines and policies above are incorporated herein by reference and are subject to change without notice. Cisco reserves the right to review Mavenirs use of the Cisco Marks at any time, and Mavenir agrees to make modifications to its use of the Cisco Marks, or to cease use of the Cisco Marks, at Ciscos request.
Cisco/Mavenir Confidential
d) | Obligation upon Termination or Expiration. Upon expiration or termination of this Agreement for any reason, Mavenir will immediately cease all use of Cisco Marks and, at Ciscos election, either destroy or deliver to Cisco all materials in Mavenirs control or possession that bear the Cisco Marks which were authorized under this Amendment. |
2. General Compliance. Insert a new Section 16.6 as follows: Mavenir represents and warrants that it has complied and shall comply with all applicable laws, regulations and other governmental requirements with respect to the Mavenir Products in effect at the time of development and/or manufacture of each of the Mavenir Products, in the location where the Mavenir Products are manufactured, as well as in the locations where the Mavenir Products will be distributed, sold and used, as identified by Cisco in Attachment 1 attached hereto and incorporated herein. Cisco may, upon request, require Mavenir to provide documentation certifying compliance with any of the applicable laws, regulations or governmental requirements that are applicable to the Mavenir Products, Deliverables or services being furnished hereunder. Mavenir shall comply with Ciscos materials content requirements as provided to Mavenir from time to time and shall undertake testing sufficient to validate compliance with such requirements, or notify Cisco if the case is otherwise. Mavenir shall pursue aligning its operations and performance hereunder in accordance with Ciscos Supplier Code of Conduct as published at Cisco.com and updated from time to time. Mavenir shall promote Ciscos supplier diversity goals by including suppliers, where warranted, that qualify as diverse suppliers in any one or more of the categories identified on Ciscos Supplier Diversity Business Development Website www.cisco.com/supplier/diversity and as further defined at: http://www.cisco.com/supplier/diversity/definitions. shtml.
3. indemnity. In Section 11.1 (b) after negligent, insert Mavenirs failure to comply with Section 16 of the Agreement.
4. Miscellaneous. Capitalized terms used in this Amendment but not defined herein will have the respective meanings ascribed to such terms in the Agreement. In the event of any conflict between the terms of this Amendment and the terms of the Agreement (or any previous amendments), this Amendment shall control. Except as modified by this Amendment, the Agreement shall remain in full force and effect.
MAVENIR SYSTEMS, INC. | CISCO SYSTEMS, INC. | |
By: /s/ Terry Hungle | By: /s/ Nick Lopez | |
Name: Terry Hungle |
Name: Nick Lopez | |
Title: Chief Financial Officer |
Title: Dir Business Development | |
Date: September 22, 2011 |
Date: 04-October-2011 |
Cisco/Mavenir Confidential
ATTACHMENT 1
LIST OF COUNTRIES
U.S.
EU
CANADA
Cisco/Mavenir Confidential
AMENDMENT NO. 4
TO
RESELLER OEM AGREEMENT
This Amendment No. 4 (Amendment No. 4) to the RESELLER OEM AGREEMENT (as amended, the Agreement) between Cisco Systems, Inc., a California corporation, having its principal offices at 170 West Tasman Drive, San Jose, California 95134-1706 (Cisco which term shall also include its Affiliates) and Mavenir Systems, Inc., a Delaware corporation, having its principal offices at 1651 North Glenville Drive, Ste 216, Richardson, Texas 75081 (Mavenir), is entered into as of the date of the last signature below (Effective Date) Cisco and Mavenir are referred to herein individually as a Party and collectively as the Parties.
RECITALS
WHEREAS, the Parties entered into the Agreement, dated as of October 28, 2008;
WHEREAS, Cisco agrees to make a one-time inventory deposit for Mavenir Products and/or services as defined below and under the terms of the Agreement; and
WHEREAS, Mavenir agrees that in addition to such inventory deposit being applied against future shipments of Mavenir Products and/or services, Mavenir agrees to provide certain services to Cisco as set forth below;
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree to amend the Agreement as follows:
1. | Pre-Payment of Inventory Deposit. |
a. | Payment. Subject to the terms and conditions of the Agreement, Cisco agrees to make a one-time pre-payment of Mavenir inventory deposit to Mavenir in the amount of [***] (the Inventory Deposit). |
b. | Invoicing and Payment. Upon execution of the Amendment No. 4 by both Parties and the issuance of a purchase order by Cisco, Mavenir shall invoice Cisco against such purchase order for the Inventory Deposit. Cisco agrees to remit payment of the Inventory Deposit to Mavenir within sixty (60) days from Ciscos receipt of Mavenirs invoice. |
c. | Recovery of Inventory Deposit. Beginning no sooner than July 1, 2013, Mavenir shall use the Inventory Deposit in fulfilling Cisco orders for the Mavenir Products and/or services ordered by Cisco under the Agreement Cisco will deduct up to [***] per Ciscos fiscal quarter of actual shipments and invoices due and |
Cisco/Mavenir Confidential
Amendment No. 4 to Reseller OEM Agreement
*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
payable in accordance with the OEM Agreement against the Inventory Deposit amount, up to the Inventory Deposit amount. After the recovery in full of the Inventory Deposit, Cisco shall pay any further payments in accordance with the Agreement. |
d. | Mavenir agrees to issue to Cisco a credit memo in the amount of [***] on July 1, 2013, October 1, 2013, January 1, 2014 and April 1, 2014 which will be applied against any Mavenir shipments/invoices submitted during such timeframes. |
2. Repayment of Inventory Deposit. Mavenir shall be obligated to repay to Cisco the portion of the Inventory Deposit which has not been deducted from actual payments pursuant to Section 1(c) (Remainder), in the event of any of the following:
a. | Mavenir is in breach of the Agreement and fails to cure the breach within thirty (30) days of notice by Cisco; |
b. | Upon the expiration of the Agreement. |
If a repayment event listed in 2(a) or 2(b) above occurs, Mavenir shall repay the Remainder. Mavenir shall remit the Remainder to Cisco within thirty (30) days of the occurrence of such repayment event.
In the event Ciscos End User fails to accept or pay for any Mavenir Products, then Cisco may redeploy such Mavenir Products to another Cisco End User without incurring any further royalty/payment obligation.
3 Additional Mavenir Services. Mavenir agrees to provide the following services to Cisco at no charge:
a. Provide appropriate professional and technical support, at no charge, for up to five (5) Cisco End User field trial for the Mavenir Products, as reasonably requested by Cisco
b. Integrate and fully productize the Mavenir Software for the Mavenir Products (Telephony Application Server (TAS), Mobility Application Server (MAS), Circuit Switch Fall Back Interworking Function (CSFB-IWF), and Rich Messaging Service (RMS) with Ciscos UCS product. Such Mavenir Products shall have full product capabilities, including, but not limited to: 1+1 active standby with failover protection, load-balancing, high scalability, etc. Lab versions shall be completed on or before August 31, 2012 and a production general availability version completed on or before January 31, 2013. Cisco agrees to provide Mavenir, at no charge, two (2) Cisco UCS systems for completing such integration and productization.
Cisco/Mavenir Confidential
Amendment No. 4 to Reseller OEM Agreement
*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
4. Miscellaneous Provisions.
Any terms not defined in this Amendment No. 4 shall have the meanings ascribed to them in the Agreement. Except as modified herein, all terms and conditions of the Agreement shall remain in full force and effect. In the event of a conflict between the terms and conditions of this Amendment No. 4 and the Agreement, this Amendment No. 4 will prevail.
This Amendment No. 4 and the Agreement are the complete agreement between the Parties and supersede all prior oral and written agreements, representations, warranties and commitments of the Parties regarding the subject matter herein.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 4 to be duly executed by their respective authorized representatives.
Cisco Systems, Inc. | Mavenir Systems, Inc. | |||||||
By: | /s/ Nick Lopez | By: | /s/ Terry Hungle | |||||
Signature | Signature | |||||||
Nick Lopez |
Terry Hungle | |||||||
Name (Print) | Name (Print) | |||||||
Dir Business Development |
Chief Financial Officer | |||||||
Title | Title | |||||||
04-30-12 |
04.13.2012 | |||||||
Date | Date |
Cisco/Mavenir Confidential
Amendment No. 4 to Reseller OEM Agreement
AMENDMENT NO. 5
This Amendment No. 5 (this Amendment NO. 5), effective as of April 9, 2012 (the Effective Date), is made by and between Cisco Systems, Inc. (successor-in-interest to Starent Networks, Corp., (Cisco), having its primary office at 175 West Tasman Drive, San Jose, California 95134 and Mavenir Systems, Inc., a Delaware corporation, with offices at 1700 International Place, Suite 200, Richardson, TX 75081 (Mavenir), in connection with that certain OEM Agreement between Starent and Mavenir dated October 28, 2008 which was assigned to Cisco Systems, Inc. (the OEM Agreement) and Agreement, dated December 29, 2008 for T-Mobile USA, Inc, and amends and restates in its entirety, as of the date signed by the last party, that original Amendment No. 5 executed by and between the parties hereto to be effective as of the Effective Date. Starent and Mavenir shall each be referred to herein individually as a Party or collectively as the Parties.
WHEREAS, Mavenir has agreed to provide, deploy and support certain circuit switch fallback interworking function technologies (CSFB-IWF) to T-Mobile USA. Inc. (TMO) to be integrated into TMOs network, as more fully set forth in that certain Seventh Amendment to the Master Agreement entered into by and between T-Mobile USA, Inc. and Cisco, which was previously delivered to Mavenir on or about the Effective Date (the Solution); and
WHEREAS, the Solution consists of Mavenir products and services and does not include Cisco products or services; and
WHEREAS, the Parties wish to establish the terms and conditions regarding, among other things, the provision of the Solution to TMO.
NOW, THEREFORE, in consideration of the premises set forth above, the Parties agree as follows:
1. | Mavenir shall be fully and solely liable for supplying all products and services in connection with, and for the full and complete performance of the Solution. Mavenir shall be liable for the full amount of any and all liability, penalties, liquidated damages, costs, fees and the like (collectively, Claims) arising in connection with the Solution whether asserted against Cisco or Mavenir. Mavenir shall hold Cisco harmless, and fully indemnify Cisco, with respect to any Claims asserted by TMO or any third party arising in connection with the Solution in accordance with the OEM Agreement. |
2. | Cisco shall remit payment to Mavenir for Mavenir Products and services in accordance with amended Sections 53 and 5.4 of Amendment 2 to the OEM Agreement. Ciscos payment amount to Mavenir shall be equal the amounts set forth in Section 3.1 of the Agreement. |
3. | This Amendment is subject to the OEM Agreement. In the event any discrepancy exists between the OEM Agreement and this Amendment, the terms of this Amendment shall prevail. |
4. | This Amendment and the OEM Agreement (a) are complete, (b) constitute the entire understanding between the parties with respect to the subject matter hereof, and (c) supersede all prior agreements, whether oral or written. No waiver, modification, or addition to this Amendment or the OEM Agreement shall be valid unless in writing and signed by the parties hereto. Except as expressly provided herein, the terms of the OEM Agreement are hereby ratified and confirmed and remain in full force and effect. |
5. | This Amendment shall be effective as of the Effective Date and amends and restates in its entirety that Amendment No. 5 executed by and between Mavenir and Starent on or about the Effective Date. |
IN WITNESS WHEREOF, as of the Effective Date, the Parties have caused this Amendment to be executed by their duly authorized representatives.
CISCO SYSTEMS, INC. | MAVENIR SYSTEMS, INC. | |||||||
By: | /s/ Kulvinder Ahuja | By: | /s/ Terry Hungle | |||||
Name: | Kulvinder (Kelly) Ahuja | Name: | Terry Hungle | |||||
Title: | SVP/GM SP Mobility Group | Title: | Chief Financial Officer | |||||
Date: | February 7, 2013 | Date: | February 4, 2013 |
CISCO/STARENT CONFIDENTIAL AND PROPRIETARY
AMENDMENT NO. 5
TO THE
RESELLER OEM AGREEMENT
Amendment No. 5, dated as of July 2, 2012 (the Effective Date), between Mavenir Systems, Inc. (Mavenir) and Cisco Systems, Inc. (Cisco) (which accepted the assigned Agreement (as defined below) on September 3, 2010 from Starent Networks LLC (f/k/a/ Starent Networks, Corp.)), to the Reseller OEM Agreement, dated as of October 28, 2008, as amended (the Agreement).
The parties agree to modify the Agreement as follows:
1. Fees. Appendix B, titled Fees is deleted in its entirety and replaced with Appendix B-2 attached hereto and incorporated herein.
2. Miscellaneous. Capitalized terms used in this Amendment but not defined herein will have the respective meanings ascribed to such terms in the Agreement. In the event of any conflict between the terms of this Amendment and the terms of the Agreement (or any previous amendments or addenda), this Amendment shall control. Except as modified by this Amendment, the Agreement shall remain in full force and effect.
MAVENIR SYSTEMS, INC. |
CISCO SYSTEMS, INC. | |||||
By: |
/s/ Terry Hungle | By: | /s/ Nick Lopez | |||
Name: |
Terry Hungle | Name: | Nick Lopez | |||
Title: |
Chief Financial Officer | Title: | Dir Business Development | |||
Date: |
July 2, 2012 | Date: | 18-July-2012 |
APPENDIX B-2
FEES
Mavenir Part | CISCO PID |
PRODUCT DESCRIPTION |
Cisco COST | |||||||||
1 |
100-100-100 | HW | MIXS-00-CS1HRSF= | Standard Server Frame | [***] | |||||||
2 |
100-100-150 | HW | MIXS-00-CS1HR42UK= | Standard ATCA Frame | [***] | |||||||
3 |
100-100-200 | HW | MIXS-00-CS1HR42DK= | Deep ATCA Frame | [***] | |||||||
4 |
100-102-100 | HW | MIXS-00-CS1PDUDC= | DC PDU Unipower | [***] | |||||||
5 |
100-110-100 | HW | MIXS-00-CS1HRSFAC= | Standard Server Frame Assembly | [***] | |||||||
6 |
100-150-100 | HW | MIXS-00-CS1HR42UA= | Standard ATCA Frame Assembly | [***] | |||||||
7 |
100-150-200 | HW | MIXS-00-CS1HR42DA= | Deep ATCA Frame Assembly | [***] | |||||||
8 |
100-200-100 | HW | MIXS-00-CS1PD21X4= | DC PDU NEI | [***] | |||||||
9 |
200-103-150 | HW | MIXS-00-CS1FA13= | ATCA Chassis Fan Tray Module | [***] | |||||||
10 |
200-104-150 | HW | MIXS-00-CS1PA13DC= | ATCA Chassis DC Power Entry Module | [***] | |||||||
11 |
200-150-200 | HW | MIXS-00-CS1XA13= | ATCA Chassis | [***] | |||||||
12 |
200-200-100 | HW | MIXS-00-CS1HSA13= | ATCA Shelf Manager | [***] | |||||||
13 |
300-300-200 | HW | MIXS-00-CS1CRM= | Resource Manager Card | [***] | |||||||
14 |
300-350-100 | HW | MIXS-00-CS1CSE= | Switch Engine (SE) | [***] | |||||||
15 |
300-355-100 | HW | MIXS-00-CS1CSER= | Switch Engine (SE) RTM | [***] | |||||||
16 |
300-400-100 | HW | MIXS-00-CS1CSI= | Signaling Interface Card | [***] | |||||||
17 |
300-600-100 | HW | MIXS-00-CS1CN32AM= | Nehalem 32G DIMM 32G Flash | [***] | |||||||
18 |
300-650-100 | HW | MIXS-00-CS1MNRTD= | Application Card RTM (w/ HD) | [***] | |||||||
19 |
300-800-100 | HW | MIXS-00-CS1XN32= | Westmere 32G DIMM 60W | [***] | |||||||
20 |
300-900-100 | HW | MIXS-00-CS1SB6= | Sandy Bridge 6 core 64 DIMM Memory 64 SSD | [***] | |||||||
21 |
300-950-100 | HW | MIXS-00-CS1SB8= | Sandy Bridge 8 core 64 DIMM Memory 64 SSD | [***] | |||||||
22 |
500-100-300 | HW | MIXS-00-CS1MTS48= | NEBS Terminal Server | [***] | |||||||
23 |
500-103-101 | HW | MIXS-00-CS1DS325= | SAS 1TB Hitachi HD SN-2500 | [***] | |||||||
24 |
500-103-102 | HW | MIXS-00-CS1PS325= | SAS DC Power Supply ST2500 | [***] | |||||||
25 |
500-103-103 | HW | MIXS-00-CS1CS325= | SAS Controller ST2500 | [***] |
*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
26 |
500-103-200 | HW | MIXS-00-CS1RA325= | SAS Storage Array | [***] | |||||||||
27 |
500-104-200 | HW | MIXS-00-CS1XHP37= | HP DL370 G6 14TB | [***] | |||||||||
28 |
500-106-200 | HW | MIXS-00-CS1DHP36= | HP DL360 G7 146G HD | [***] | |||||||||
29 |
500-107-200 | HW | MIXS-00-CS1PHP36= | HP DL360 G7 AC Power Supply - 460 watts | [***] | |||||||||
30 |
500-114-200 | HW | MIXS-00-CS1PHP37= | HP DL370 G6 AC Power Supply - 750watts | [***] | |||||||||
31 |
500-115-200 | HW | MIXS-00-CS1FHP37= | HP DL370 G6 System Fan Kit | [***] | |||||||||
32 |
500-116-200 | HW | MIXS-00-CS1DHP37= | HP DL370 G6 1TB Seagate HD | [***] | |||||||||
33 |
500-200-100 | HW | MIXS-00-CS1XG72AC= | HP DL360 G7 192G RAM AC Power | [***] | |||||||||
34 |
500-220-100 | HW | MIXS-00-CS1XG71AC= | HP DL360 G7 64G RAM AC Power | [***] | |||||||||
35 |
500-250-100 | HW | MIXS-00-CS1XG72DC= | HP DL360 G7 192G RAM DC Power | [***] | |||||||||
36 |
500-255-100 | HW | MIXS-00-CS1PHP367= | HP DL360 G7 DC Power Supply - 1200 Watts | [***] | |||||||||
37 |
600-110-100 | HW | MIXS-00-CS1SFC1G= | SFP Copper l000Mps | [***] | |||||||||
38 |
600-115-100 | HW | MIXS-00-CS1SFP10G= | SFP Plus 10G | [***] | |||||||||
39 |
700-160-100 | HW | MIXS-00-CS1CMPC4= | Radisys MPC-IV card | [***] | |||||||||
40 |
700-200-100 | HW | MIXS-00-CS1CMS9KK= | Radisys CMS 9000 Starter Kit (with 400 G.711 RTU License) | [***] | |||||||||
41 |
700-250-100 | HW | MIXS-00-CS1CSCC3= | Radisys SCC-III Card | [***] | |||||||||
42 |
700-720-100 | HW | MIXS-00-CS1XRS30= | Radisys CMS 3000 G.711/SIP Lab System | [***] | |||||||||
43 |
900-100-100 | HW | MIXS-00-CS1FRAWB= | RAWB (Rear Air Management) | [***] | |||||||||
44 |
900-101-100 | HW | MIXS-00-CS1FFAWB= | FAWB (Front Air Management) | [***] | |||||||||
45 |
900-120-100 | HW | MIXS-00-CS1PDTAC= | AC PDU Tripp Lite | [***] | |||||||||
46 |
700-390-100 | HW | MIXS-00-CS1XSAN38= | Acme Net-Net 3820 Lab System (Up to 250 Licenses) | [***] | |||||||||
47 |
700-395-100 | HW | MIXS-00-CS1PAN38= | Acme Net-Net 3820 Power Supply | [***] | |||||||||
48 |
700-400-100 | HW | MIXS-00-CS1CAC416= | Acme Net-Net 4500 SBC with 16K Session Module | [***] | |||||||||
49 |
700-450-100 | HW | MIXS-00-CS1CAC34= | Acme Net-Net 4500 SBC 4K Sessions Expansion Module | [***] | |||||||||
50 |
500-175-100 | HW | MIXS-00-CS1XHB4= | Network Adaptor - Dual port HBA 4G-LC | [***] | |||||||||
51 |
500-770-100 | HW | MIXS-00-CS1XHB8= | Network Adaptor - Dual port HBA 8G-LC | [***] | |||||||||
52 |
500-118-200 | HW | MIXS-00-CS1X41G= | Network Adaptor - Quad port 1G NIC-LC | [***] | |||||||||
53 |
500-760-100 | HW | MIXS-00-CS1X210G= | Network Adaptor - Dual port 10G | [***] |
*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
54 |
500-755-100 | HW | MIXS-00-CS1X110G= | Network Adaptor - Single port 10G LC | [***] | |||||||||
55 |
500-700-100 | HW | MIXS-00-CS1XG38AC= | HP DL380 G7 dual 6-core 128 GB 2.4 TB AC | [***] | |||||||||
56 |
500-750-100 | HW | MIXS-00-CS1XG58AC= | HP DL580 G7 8-core 128GB 7.2 TB AC | [***] | |||||||||
56 | HW PARTS |
*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
Mavenir PN | CISCO PID |
PRODUCT DESCRIPTION |
Cisco COST | |||||||||
1 |
800-110-100 | SW | MIXSA-00-M1SW1= | mOne ATCA System License - FIRST FRAME | [***] | |||||||
2 |
800-150-100 | SW | MIXSA-00-M1SW2= | mOne ATCA System License - SUBSEQUENT FRAME | [***] | |||||||
3 |
800-170-100 | SW | MIXSA-00-M1SWL= | mOne ATCA System License - LAB FRAME | [***] | |||||||
4 |
800-771-100 | SW | MIXSA-00-IW1VLS41= | VOLTE IWF BASE, S (per 10K Subs) | [***] | |||||||
5 |
800-772-100 | SW | MIXSA-00-IW1VLM41= | VOLTE IWF BASE, M (per 10K Subs) | [***] | |||||||
6 |
800-754-100 | SW | MIXSA-00-IW1VLL41= | VOLTE IWF BASE, L (per 10K Subs) | [***] | |||||||
7 |
800-755-100 | SW | MIXSA-00-IW1VLX41= | VOLTE IWF BASE, XL (per 10K Subs) | [***] | |||||||
8 |
800-756-100 | SW | MIXSA-00-CS1FBS41= | CSFB IWF, S (per 10K Subs) | [***] | |||||||
9 |
800-757-100 | SW | MIXSA-00-CSlFBM41= | CSFB IWF, M (per 10K Subs) | [***] | |||||||
10 |
800-761-100 | SW | MIXSA-00-CS1FBL41= | CSFB IWF, L (per 10K Subs) | [***] | |||||||
11 |
800-762-100 | SW | MIXSA-00-CS1FBX41= | CSFB IWF, XL (per 10K Subs) | [***] | |||||||
12 |
800-763-100 | SW | MIXSA-00-SR1VCS41= | SRVCC IWF, S (per 10K Subs) | [***] | |||||||
13 |
800-764-100 | SW | MIXSA-00-SR1VCM41= | SRVCC IWF, M (per 10K Subs) | [***] | |||||||
14 |
800-766-100 | SW | MIXSA-00-SR1VCL41= | SRVCC IWF, L (per 10K Subs) | [***] | |||||||
15 |
800-767-100 | SW | MIXSA-00-SR1VCX41= | SRVCC IWF, XL (per 10K Subs) | [***] | |||||||
16 |
801-101-100 | SW | MIXSA-00-CT1FBS41= | CTAS Base SW, S (per 10K subs) | [***] | |||||||
17 |
801-102-100 | SW | MIXSA-00-CT1FBM41= | CTAS Base SW, M (per 10K subs) | [***] | |||||||
18 |
801-103-100 | SW | MIXSA-00-CT1FBL41= | CTAS Base SW, L (per 10K subs) | [***] | |||||||
19 |
801-104-100 | SW | MIXSA-00-CT1FBX41= | CTAS Base SW, XL (per 10K subs) | [***] | |||||||
20 |
800-605-100 | SW | MIXS-00-GM1T2MM61= | MMTEL GSM, S(per 10K Subs) | [***] | |||||||
21 |
800-605-101 | SW | MIXS-00-GM1T2MM62- | MMTEL GSM, M (per 10K Subs) | [***] | |||||||
22 |
800-605-102 | SW | MIXS-00-GM1T2MM63= | MMTEL GSM, L (per 10K Subs) | [***] | |||||||
23 |
800-605-103 | SW | MIXS-00-GM1T2MM72= | MMTEL GSM, XL (per 10K Subs) | [***] | |||||||
24 |
800-610-100 | SW | MIXS-00-GM1MAS61= | MAS GSM, S (per 10K Subs) | [***] | |||||||
25 |
800-610-101 | SW | MIXS-00-GM1MAS62= | MAS GSM, M (per 10K Subs) | [***] | |||||||
26 |
800-610-102 | SW | MIXS-00-GM1MAS63= | MAS GSM, L (per 10K Subs) | [***] |
*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
27 |
800-610-103 | SW | MIXS-00-GM1MAS72= | MAS GSM, XL (per 10K Subs) | [***] | |||||||||||
28 |
800-500-100 | SW | MIXS-00-PR1S62= | Base Presence & Resource List Server, S (per 10K Subs) | [***] | |||||||||||
29 |
800-500-101 | SW | MIXS-00-PR1S65= | Base Presence & Resource List Server, M (per 10K Subs) | [***] | |||||||||||
30 |
800-500-102 | SW | MIXS-00-PR1S71= | Base Presence & Resource List Server, L (per 10K Subs) | [***] | |||||||||||
31 |
800-500-103 | SW | MIXS-00-PR1S72= | Base Presence & Resource List Server, XL (per 10K Subs) | [***] | |||||||||||
32 |
800-505-100 | SW | MIXS-00-PR2S62= | Social Presence & Resource List Server, S (per 10K Subs) | [***] | |||||||||||
33 |
800-505-101 | SW | MIXS-00-PR2S65= | Social Presence & Resource List Server, M (per 10K Subs) | [***] | |||||||||||
34 |
800-505-102 | SW | MIXS-00-PR2S71= | Social Presence & Resource List Server, L (per 10K Subs) | [***] | |||||||||||
35 |
800-505-103 | SW | MIXS-00-PR2S72= | Social Presence & Resource List Server, XL (per 10K Subs) | [***] | |||||||||||
36 |
800-400-100 | SW | MIXS-00-DB1XDRM61= | XDMS, S (per 10K Subs) | [***] | |||||||||||
37 |
800-400-101 | SW | MIXS-00-DB1XDRM62= | XDMS, M (per 10K Subs) | [***] | |||||||||||
38 |
800-400-102 | SW | MIXS-00-DB1XDRM63= | XDMS, L (per 10K Subs) | [***] | |||||||||||
39 |
800-400-103 | SW | MIXS-00-DB1XDRM72= | XDMS, XL (per 10K Subs) | [***] | |||||||||||
40 |
800-411-100 | SW | MIXS-00-AP1Y62= | Aggregation Proxy, S (per 10K Subs) | [***] | |||||||||||
41 |
800-411-101 | SW | MIXS-00-AP1Y65= | Aggregation Proxy, M (per 10K Subs) | [***] | |||||||||||
42 |
800-411-102 | SW | MIXS-00-AP1Y71= | Aggregation Proxy, L (per 10K Subs) | [***] | |||||||||||
43 |
800-411-103 | SW | MIXS-00-AP1Y72= | Aggregation Proxy, XL (per 10K Subs) | [***] | |||||||||||
44 |
831-101-100 | SW | MIXSA-00-RM1S41= | RMS Base SW, S (per 10K subs) | [***] | |||||||||||
45 |
831-102-100 | SW | MIXSA-00-RM1M41= | RMS Base SW, M (per 10K subs) | [***] | |||||||||||
46 |
831-103-100 | SW | MIXSA-00-RMlL41= | RMS Base SW, L (per 10K subs) | [***] | |||||||||||
47 |
831-104-100 | SW | MIXSA-00-RM1X41= | RMS Base SW, XL (per 10K subs) | [***] | |||||||||||
48 |
832-101-100 | SW | MIXS-00-OM1S62= | OMA IM SW, S (per 10K subs) | [***] | |||||||||||
49 |
832-102-100 | SW | MIXS-00-OM1S65= | OMA IM SW, M (per 10K subs) | [***] | |||||||||||
50 |
832-103-100 | SW | MIXS-00-OM1S71= | OMA IM SW, L (per 10K subs) | [***] | |||||||||||
51 |
832-104-100 | SW | MIXS-00-OM1S72= | OMA IM SW, XL (per 10K subs) | [***] | |||||||||||
52 |
833-101-100 | SW | MIXS-00-RM1SMGW33= | IP-SM-GW SW, S (per 10K subs) | [***] | |||||||||||
53 |
833-102-100 | SW | MIXS-00-RM1SMGW35= | IP-SM-GW SW, M (per 10K subs) | [***] |
*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
54 |
833-103-100 | SW | MIXS-00-RM1SMGW41= | IP-SM-GW SW, L (per 10K subs) | [***] | |||||||||||
55 |
833-104-100 | SW | MIXS-00-SM1GW72= | IP-SM-GW SW, XL (per 10K subs) | [***] | |||||||||||
60 |
800-200-100 | SW | MIXS-00-SM1R33= | SMS Router, S (per 100 TPS) | [***] | |||||||||||
61 |
800-200-101 | SW | MIXS-00-SM1R41= | SMS Router, M (100 TPS) | [***] | |||||||||||
62 |
800-200-102 | SW | MIXS-00-SM1R42= | SMS Router, L (100 TPS) | [***] | |||||||||||
63 |
800-200-103 | SW | MIXS-00-SM1R43= | SMS Router, XL (100 TPS) | [***] | |||||||||||
64 |
800-201-100 | SW | MIXS-00-MG1W33= | Message Gateway, S (per 100 TPS) | [***] | |||||||||||
65 |
800-201-101 | SW | MIXS-00-MG1W41= | Message Gateway, M (per 100 TPS) | [***] | |||||||||||
66 |
800-201-102 | SW | MIXS-00-MG1W42= | Message Gateway, L (per 100 TPS) | [***] | |||||||||||
67 |
800-201-103 | SW | MIXS-00-MG1W43= | Message Gateway, XL (per 100 TPS) | [***] | |||||||||||
68 |
800-202-100 | SW | MIXS-00-SM1B33= | IP-SMSC, Basic, S (per 100 TPS) | [***] | |||||||||||
69 |
800-202-101 | SW | MIXS-00-SM1B41= | IP-SMSC, Basic, M (per 100 TPS) | [***] | |||||||||||
70 |
800-202-102 | SW | MIXS-00-SM1B42= | IP-SMSC, Basic, L (per 100 TPS) | [***] | |||||||||||
71 |
800-202-103 | SW | MIXS-00-SM1B43= | IP-SMSC, Basic, XL (per 100 TPS) | [***] | |||||||||||
72 |
800-203-100 | SW | MIXS-00-SM1P33= | IP-SMSC, Premium, S (per 100 TPS) | [***] | |||||||||||
73 |
800-203-101 | SW | MIXS-00-SM1P41= | IP-SMSC, Premium, M (per 100 TPS) | [***] | |||||||||||
74 |
800-203-102 | SW | MIXS-00-SM1P42= | IP-SMSC, Premium, L (per 100 TPS) | [***] | |||||||||||
75 |
800-203-103 | SW | MIXS-00-SM1P43= | IP-SMSC, Premium, XL (per 100 TPS) | [***] | |||||||||||
76 |
800-203-104 | SW | MIXS-00-SM1CPM= | IP-SMSC, CPM Delivery Engine (per 100 TPS) | [***] | |||||||||||
77 |
800-440-100 | SW | MIXS-00-AG1Y62= | Application Gateway, S (per 10K Subs) | [***] | |||||||||||
78 |
800-440-101 | SW | MIXS-00-AG1Y65= | Application Gateway, M (per 10K Subs) | [***] | |||||||||||
79 |
800-440-102 | SW | MIXS-00-AG1Y71= | Application Gateway, L (per 10K Subs) | [***] | |||||||||||
80 |
800-440-103 | SW | MIXS-00-AG1Y72= | Application Gateway, XL (per 10K Subs) | [***] | |||||||||||
81 |
800-700-100 | SW | MIXS-00-SR1BASE= | Reporting Server (per server) | [***] | |||||||||||
82 |
800-710-101 | SW | MIXS-00-SC1BASE= | Centralized Charging Server (per server) | [***] | |||||||||||
83 |
800-720-102 | SW | MIXS-00-SP1BASE= | Centralized Management System (per active server) | [***] |
*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
84 |
700-260-100 | SW | MIXS-00-CS1RSG71R= | Radisys G.711 RTU Redundant Licenses (per 10 ports) | [***] | |||||||||||
85 |
700-270-100 | SW | MIXS-00-CS1RSG71= | Radisys G.711 RTU Licenses (per 10 ports) | [***] | |||||||||||
86 |
700-280-100 | SW | MIXS-00-CS1RSH26= | Radisys H.263 RTU Licenses (per 10 ports) | [***] | |||||||||||
87 |
700-730-100 | SW | MIXS-00-CS1RSH26L= | Radisys H.263 RTU Licenses (10P Lab System) | [***] | |||||||||||
88 |
851-101-100 | SW | MIXS-00-SM1PAA11= | SWMS MRF Voice Active Port (per 10 ports) | [***] | |||||||||||
89 |
852-101-100 | SW | MIXS-00-SM1PAS11= | SWMS MRF Voice Standby Port (per 10 ports) | [***] | |||||||||||
90 |
853-101-100 | SW | MIXS-00-SM1PVA11= | SWMS MRF Video Active Port (per 10 ports) | [***] | |||||||||||
91 |
854-101-100 | SW | MIXS-00-SM1PVS11= | SWMS MRF Video Standby Port (per 10 ports) | [***] | |||||||||||
92 |
800-751-100 | SW | MIXS-00-OM1CPU1= | AT&T OMA CPM SAG Upgrade Pack 1 | [***] | |||||||||||
93 |
800-752-100 | SW | MIXS-12-CP1FP= | AT&T Foundry CPM Prototype SW | [***] | |||||||||||
94 |
800-753-100 | SW | MIXS-12-CR1MQE= | AT&T Message Query Enhancements (CR018 Bundle) | [***] | |||||||||||
95 |
800-758-100 | SW | MIXS-00-AG1APU= | TMO AG CR7 CDE SW for AG+AP Merge Upgrade Pack | [***] | |||||||||||
96 |
800-765-100 | SW | MIXSA-0D-1W1CSF41= | TMO CSFB IWF (per 10K Subs) | [***] | |||||||||||
97 |
800-768-101 | SW | MIXSA-0D-IW1CSU41= | TMO TAS Upgrade (per 10K Subs) | [***] | |||||||||||
98 |
800-773-100 | SW | MIXSA-0D-TS1CR25U= | TMO SW Upgrade - TAS CR25 Video Calling | [***] | |||||||||||
99 |
800-774-100 | SW | MIXSA-0D-CS1CR23U= | TMO SW Upgrade - CSCF CR23 Video Registration Type | [***] | |||||||||||
100 |
800-775-100 | SW | MIXSA-0D-CS1CR16U= | TMO SW Upgrade - CSCF CR16 Registration per Service | [***] | |||||||||||
101 |
800-880-100 | SW | MIXS-00-MC1SR62= | TMO MCM Server (2M Subs) | [***] | |||||||||||
102 |
800-795-100 | SW | MIXS-00-MC1SRT41= | TMO MCM Server expansion RTU (10K Subs) | [***] | |||||||||||
103 |
800-776-100 | SW | MIXSA-0D-CS1CR15U= | TMO SW Upgrade - CSCF CR15 Error Code | [***] | |||||||||||
104 |
800-798-100 | SW | MIXSA-0D-MC1X41= | TMO MCM Server expansion RTU - No Call Model (10K Subs) | [***] | |||||||||||
105 |
855-110-100 | SW | MIXSA-0D-DB1XDRMU= | TMO XDMS REST Provisioning Interface Upgrade | [***] | |||||||||||
106 |
955-110-100 | SW | MIXSA-0D-BG1CR19U= | TMO BGCF CR19 LRN Routing S/W Upgrade | [***] | |||||||||||
107 |
955-120-100 | SW | MIXSA-0D-CS1SR16U= | TMO CSCF CR16 Service Registration S/W Upgrade | [***] | |||||||||||
108 |
955-130-100 | SW | MIXSA-0D-TS1CR29U= | TMO TAS CR29 SPML Schema S/W Upgrade | [***] | |||||||||||
109 |
955-135-100 | SW | MIXSA-0D-TS1CR31U= | TMO TAS CR31 LTE CGI Support S/W Upgrade | [***] | |||||||||||
110 |
861-103-100 | SW | MIXSA-00-M1SWU1 | mOne UCS Base Product License (per Product Base per deal) | [***] |
*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
111 |
861-101-100 | SW | MIXSA-00-M1SWU2= | mOne UCS System License - Commercial (per CPU) | [***] | |||||||||||
112 |
861-102-100 | SW | MIXSA-00-M1SWUL= | mOne UCS System License - Lab (per CPU) | [***] | |||||||||||
108 | SW PARTS |
Maintenance Support Pricing
The above listed transfer prices include the first year of annual maintenance support. For subsequent annual maintenance support renewals the annual rate shall be [***] of the hardware transfer price and [***] of the software transfer price.
*** Portions of this page have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.
AMENDMENT NO. 7
This Amendment No. 7 (this Amendment No. 7), is effective as of December 20, 2012 (the Effective Date), and is made by and between Cisco Systems, Inc. (successor-in-interest to Starent Networks, Corp., (Cisco), having its primary office at 175 West Tasman Drive, San Jose, California 95134 and Mavenir Systems, Inc., a Delaware corporation, with offices at 1651 N. Glenville, Suite 201, Richardson, TX 75081 (Mavenir), in connection with that certain OEM Agreement as amended between Starent and Mavenir dated October 28, 2008 (the OEM Agreement) and Agreement, dated December 29, 2008 for T-Mobile USA, Inc which was assigned to Cisco Systems, Inc. Starent and Mavenir shall each be referred to herein individually as a Party or collectively as the Parties.
STARENT CONFIDENTIAL AND PROPRIETARY
WHEREAS, Mavenir has agreed to provide, deploy and support The Unified Messaging solution and the WebRTC Gateway solution to T-Mobile USA, Inc. (TMO) to be integrated into TMOs network, as more fully set forth in that certain Eighth Amendment to the Master Agreement entered into by and between TMO and Cisco on or about the Effective Date, which was previously delivered by Cisco to Mavenir (the Solution); and
WHEREAS, the Solution consists of Mavenir products and services and does not include Cisco products or services; and
WHEREAS, the Parties wish to establish the terms and conditions regarding, among other things, the provision of the Solution to TMO.
NOW, THEREFORE, in consideration of the premises set forth above, the Parties agree as follows:
1. | Mavenir shall be fully and solely liable for supplying all products and services in connection with, and for the full and complete performance of, the Solution. Mavenir shall be liable for the full amount of any and all liability, penalties, liquidated damages, costs, fees and the like (collectively, Claims) arising in connection with the Solution whether asserted against Cisco or Mavenir. Mavenir shall hold Cisco harmless, and fully indemnify Cisco, with respect to any Claims asserted by TMO or any third party arising in connection with the Solution in accordance with the OEM Agreement. |
2. | The pricing and technical requirements for the Unified Messaging solution and the WebRTC Gateway solutions from Mavenir to Cisco shall be as set forth in the Sixth Amendment to the Master Agreement between Cisco and TMO previously delivered by Cisco to Mavenir. Cisco shall remit payment to Mavenir for Mavenir Products and services in accordance with amended Sections 5.3 and 5.4 of Amendment 2 to the OEM Agreement. Ciscos payment amount to Mavenir shall be equal the amounts set forth in Section 3.1 of the Agreement. |
3. | This Amendment is subject to the OEM Agreement. In the event any discrepancy exists between the OEM Agreement and this Amendment, the terms of this Amendment shall prevail. |
4. | This Amendment and the OEM Agreement (a) are complete, (b) constitute the entire understanding between the parties with respect to the subject matter hereof, and (c) supersede all prior agreements, whether oral or written. No waiver, modification, or addition to this Amendment or the OEM Agreement shall be valid unless in writing and signed by the parties hereto. Except as expressly provided herein, the terms of the OEM Agreement are hereby ratified and confirmed and remain in full force and effect. |
CISCO/STARENT CONFIDENTIAL AND PROPRIETARY
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5. | This Amendment shall be effective as of the Effective Date. |
IN WITNESS WHEREOF, as of the Effective Date, the Parties have caused this Amendment to be executed by their duly authorized representatives.
CISCO SYSTEMS, INC. | MAVENIR SYSTEMS, INC. | |||||||
By: | /s/ Kulvinder Ahuja | By: | /s/ Terry Hungle | |||||
Name: | Kulvinder (Kelly) Ahuja | Name: | Terry Hungle | |||||
Title: | SVP/GM SP Mobility Group | Title: | Chief Financial Officer | |||||
Date: | February 7, 2013 | Date: | February 4, 2013 |
CISCO/STARENT CONFIDENTIAL AND PROPRIETARY
- 3 -
Exhibit 10.29.1
27 August 2013
VIA EMAIL
Mr. Terry Hungle
Chief Financial Officer
Mavenir Systems, Inc.
1651 N Glenville, Suite 201
Richardson, TX 75081
Re: | Reseller OEM Agreement, dated 28 October 2008 (the Agreement) |
Dear Terry:
Pursuant to Section 14.1 of the above referenced Agreement, please accept this letter as Cisco Systems, Inc. sixty (60) day written notification to Mavenir Systems, Inc. to extend the term of the Agreement for an additional one year term, through 28 October 2014.
If you should have any questions or concerns regarding this matter, please do not hesitate to contact me.
Very truly yours, |
/s/ Dennis Fiore |
Dennis Fiore |
Manager, Product Management MITG |
Cisco Systems, Inc. |
Exhibit 10.30
LOAN AND SECURITY AGREEMENT
(Growth Capital Loan)
This LOAN AND SECURITY AGREEMENT, dated as of June 4, 2013 (this Agreement), is entered by and among MAVENIR SYSTEMS, INC., a Delaware corporation (Mavenir), MAVENIR HOLDINGS, INC., a Delaware corporation (Holdings), MAVENIR SYSTEMS IP HOLDINGS, LLC, a Delaware limited liability company (Mavenir IP, and together with Mavenir and Holdings, individually and collectively, jointly and severally, Borrower), SILVER LAKE WATERMAN FUND, L.P., a Delaware limited partnership, as agent (Agent) for the lenders identified on Schedule 1 hereto (such lenders, together with their respective successors and assigns are referred to hereinafter each individually as a Lender and collectively as the Lenders), and the Lenders.
RECITALS
A. Borrower has requested that Lenders extend a credit facility to Borrower in the original principal amount of Fifteen Million Dollars ($15,000,000) to provide (a) domestic working capital financing for Borrower and (b) funds for other domestic general corporate purposes of Borrower and Lenders are willing to make a loan to Borrower upon the terms and conditions set forth in this Agreement.
B. Borrower has agreed to grant to Agent, for the benefit of Agent and Lenders, a security interest in the property described in this Agreement.
AGREEMENT
In consideration of the covenants, conditions and agreements set forth herein and intending to be legally bound, the parties agree as follows:
Article 1. DEFINITIONS
The following capitalized terms shall have the meanings set forth below:
Acquisition shall mean any transaction or series of related transactions constituting (a) the acquisition of all or substantially all of the assets of a Person, or of any line of business or division of a Person, (b) the acquisition of in excess of fifty percent (50%) of the Equity Securities of any Person, whether or not involving a merger or consolidation with such other Person, or otherwise causing any Person to become a Subsidiary, or (c) any merger or consolidation of a Person (other than a Subsidiary) with and into Borrower or a Subsidiary in which Borrower or the Subsidiary is the surviving Person.
Affiliate shall mean, with respect to any Person, any Person that owns or controls directly or indirectly ten percent (10%) or more of the Equity Securities of such Person, any Person that controls or is controlled by or is under common control with such Person or any Affiliate of such Person and each of such Persons officers, directors, members, joint venturers or partners. When used with respect to a Lender, Affiliate shall also include any Affiliate of Agent.
Agreement shall mean this Loan and Security Agreement, as amended, restated or otherwise modified from time to time.
Applicable Premium shall mean (i) 5% of principal prepaid if the prepayment occurs within twelve (12) months of the Funding Date of the Loan; (ii) 4% of principal prepaid if the prepayment occurs between twelve (12) and twenty-four (24) months of the Closing Date; (iii) 3% of principal prepaid if prepayment occurs between twenty-four (24) and thirty-six (36) months of the Closing Date; or (iv) 2% of principal prepaid if prepayment occurs after the end of thirty-six (36) months of the Closing Date and before the Maturity Date.
Board Observer shall have the meaning set forth in Section 6.12 of this Agreement.
Borrowers Primary Operating Account shall have the meaning set forth in Section 6.04 of this Agreement.
Business Day shall mean any day on which commercial banks are not authorized or required to close in San Francisco, California.
Change of Control shall have the meaning set forth in Section 7.03 of this Agreement.
Closing shall mean the date, time and place as the parties may agree for the execution of this Agreement.
Closing Date shall mean the date of the Closing.
Code shall mean the Uniform Commercial Code as in effect from time to time in the state of New York.
Collateral shall mean property described on Exhibit B attached hereto.
Contractual Obligation of any Person shall mean, any indenture, note, security, deed of trust, mortgage, security agreement, lease, guaranty, instrument, contract, agreement or other form of obligation or undertaking to which such Person is a party or by which such Person or any of its property is bound.
Copyrights shall mean any and all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing, created, acquired or held.
Default shall mean any event or circumstance not yet constituting an Event of Default but which, with the giving of any notice or the lapse of any period of time or both, would become an Event of Default.
Default Rate shall mean, as of any date of determination, an interest rate per annum equal to five percent (5%) in excess of the rate per annum otherwise applicable on such date.
Demonstration Systems shall mean equipment and related goods provided to customers or prospective customers for the purpose of allowing such parties to test Borrowers products and services.
Equity Securities of any Person shall mean (i) all common stock, preferred stock, participations, shares, partnership interests, membership interests or other equity interests in and of such Person (regardless of how designated and whether or not voting or non-voting) and (ii) all warrants, options and other rights to acquire any of the foregoing.
Event of Default shall have the meaning set forth in Article 9 of this Agreement.
Event of Loss shall have the meaning set forth in Section 6.08( a) of this Agreement.
Excluded Materials shall mean any documents, information or other materials (i) access to which would or is reasonably likely to, in the opinion of Borrowers counsel, adversely affect the attorney-client privilege between Borrower and its counsel, (ii) access to which could result in a conflict of interest between Agent, Lender or their respective affiliates or representatives (including the Board Observer), on the one hand, and Borrower or its affiliates or representatives on the other, (iii) which, pursuant to the terms of a bona fide confidentiality agreement
-2-
entered into by Borrower in good faith, Borrower is restricted from providing to Agent, Lenders or other third parties, (iv) prepared or intended for distribution to the board of directors of Borrower for contemplation or discussion during any executive session of the board, except, with respect to (iv) only, such documents, information or other materials related to corporate strategy materials, including, but not limited to, financing, strategic acquisition and IPO matters, or (v) access to which (including such documents, information or other materials directly related to financing, strategic acquisition and IPO matters) the Companys board of directors determines in good faith could result in a breach of its fiduciary duties under any applicable Requirement of Law.
Excluded Property shall mean any property, right or asset that is described on Exhibit B held by Borrower, to the extent that such property, right or asset, or any agreement evidencing such property, right or asset, contains a term or is subject to a rule of law, statute or regulation that restricts, prohibits or requires a consent (that has not been obtained) of a Person (other than Borrower) to the creation, attachment or perfection of the security interest granted herein, and any such restriction, prohibition and/or requirement of consent is effective and enforceable under applicable law; provided, that (i) Excluded Property shall not include any proceeds of any property, right or asset, and (ii) any property, right or asset that at any time ceases to satisfy the definition of Excluded Property, whether as a result of Borrower obtaining any necessary consent, any change in any rule of law, statute or regulation, or otherwise, shall no longer be Excluded Property and shall immediately thereafter be deemed Collateral hereunder, subject to no Liens other than the security interest in favor of Agent and other Permitted Liens.
Financial Statements shall mean, with respect to any accounting period for any Person, statements of operations, cash flows and, with respect to audited statements only, stockholders equity of such Person for such period, and a balance sheet of such Person as of the end of such period, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year if such period is less than a full fiscal year or, if such period is a full fiscal year, corresponding figures from the preceding fiscal year, all prepared in reasonable detail and in accordance with generally accepted accounting principles, except, in the case of unaudited Financial Statements, for the absence of footnotes and normal year-end adjustments. Unless otherwise indicated, each reference to Financial Statements of any Person shall be deemed to refer to Financial Statements prepared on a consolidated basis.
Funding Date shall mean the date on which the Loan is made to or on account of Borrower under this Agreement.
Governmental Authority shall mean any domestic or foreign national, state or local government, any political subdivision thereof, any department, agency, authority or bureau of any of the foregoing, or any other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
Governmental Rule shall mean any law, rule, regulation, ordinance, order, code interpretation, judgment, decree, directive, guidelines, policy or similar form of decision of any Governmental Authority.
Guarantor shall mean any present or future guarantor of the Obligations.
Holdings is defined in the preamble hereto.
Indebtedness of any Person shall mean and include the aggregate amount of, without duplication (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services (other than accounts payable incurred in the ordinary course of business aged not more than 180 days from when due), (iv) all obligations under capital leases of such Person, (v) all obligations or liabilities of others secured by a lien on any asset of such Person, whether or not such obligation or liability is assumed, (vi) all guaranties of such Person of the obligations of another Person, (vii) all obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of the seller or lender under such agreement upon an event of default are limited to repossession or sale of such property), and (viii) all reimbursement and other payment obligations, contingent or otherwise, in respect of letters of credit.
-3-
Intellectual Property shall mean: (i) all inventions, designs, know-how, methods, processes, drawings, specifications or other data or information and all memoranda, notes and records with respect to any research and development, and all embodiments or fixations thereof whether in tangible or intangible form, (ii) Copyrights, Trademarks, Patents and Mask Works; (iii) any and all trade secrets, and any and all intellectual property rights in computer software and computer software products; (iv) any and all design rights; (v) any and all claims for damages by way of past, present and future infringement of any of the rights included above, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the intellectual property rights identified above; (vi) all licenses or other rights to use any of the Copyrights, Patents, Trademarks, Mask Works, or any other property rights described above; (vii) all amendments, renewals and extensions of any of the Copyrights, Trademarks, Patents or Mask Works; and (viii) all proceeds and products of the foregoing.
Intercompany Investments shall mean (i) unsecured Indebtedness of any Subsidiary owed to Borrower, unsecured guarantee obligations of Borrower with respect to leases or commercial contacts of any other Borrower or any Subsidiary entered into in the ordinary course of business, and Investments by Borrower in any Subsidiary, in an aggregate amount for this clause (i) not to exceed Eight Million Dollars ($8,000,000) for any trailing three-month period, for reasonable operating expenses and capital expenditures of Borrower or Subsidiaries incurred in the ordinary course of business, in amounts and in a manner consistent with past practices, (ii) Indebtedness of any Borrower owing to any other Borrower, (iii) Investments by any Borrower in any other Borrower, (iv) Indebtedness of any Subsidiary (which is not a Borrower) to any other Subsidiary (which is not a Borrower), and (v) Investments by any Subsidiary in any Borrower. For purposes of clarification, the cap specified for clause (i) above is the maximum permitted amount of new Intercompany Investments described in clause (i) that are made, incurred or assumed during the applicable three-month period and does not apply to or limit any Indebtedness or Investments made, incurred or assumed during any prior periods.
Investment shall mean (i) the purchase, acquisition or beneficial ownership of any Equity Securities, or any obligations or other securities of, any Person, (ii) the making of any advance, loan, extension of credit or capital contribution to, or any other investment in, any Person, or (iii) any Acquisition.
IPO shall mean the initial public offering of the Companys common stock effected pursuant to a registration statement on Form S-1 (or its successor) filed under the Securities Act of 1933, as amended.
Lien shall mean, with respect to any property, any security interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of, or on such property or the income therefrom, including, without limitation, the interest of a vendor or lessor under a conditional sale agreement, capital lease or other title retention agreement, or any agreement to provide any of the foregoing.
Loan shall have the meaning set forth in Section 2.01 of this Agreement.
Loan Percentage shall mean, with respect to a Lender, the percentage of the Loan specified opposite such Lenders name on Schedule 1 hereto.
Mask Works shall mean all mask works or similar rights available for the protection of semiconductor chips, now owned or hereafter acquired.
Material Adverse Effect shall mean a material adverse effect on (i) the business, assets, operations or financial or other condition of Borrower and its Subsidiaries, taken as a whole; (ii) the ability of Borrower and its Subsidiaries to pay or perform the Obligations in accordance with the terms of this Agreement and the other Transaction Documents; or (iii) the rights and remedies of Agent and the Lenders under this Agreement, the other Transaction Documents or any related document, instrument or agreement.
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Maturity Date means June 30, 2017.
Mavenir is defined in the preamble hereto.
Mavenir IP is defined in the preamble hereto.
Note shall mean a promissory note or notes of Borrower substantially in the form attached as Exhibit A hereto.
Notice of Advance Request shall have the meaning set forth in Section 2.03(c) of this Agreement.
Obligations shall mean and include all loans, advances, debts, liabilities, and obligations, including, without limitation, the obligation to make each payment scheduled to be made under each subsection of Section 2.02, howsoever arising, owed by Borrower to Lenders of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), now existing or hereafter arising under or pursuant to the terms of this Agreement or the other Transaction Documents, including, without limitation, all interest, fees, charges, expenses, attorneys fees and costs to and payable by Borrower hereunder and thereunder, in each case, whether direct or indirect, absolute or contingent, due or to become due, and whether or not arising after the commencement of a proceeding under Title 11 of the United States Code (11 U.S.C. Section 101 et seq.), as amended from time to time (including post-petition interest) and whether or not allowed or allowable as a claim in any such proceeding.
Patents shall mean all patents, patent applications and like protections, including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.
Payment Date shall have the meaning set forth in Section 2.02(b) of this Agreement.
Perfection and Disclosure Certificate shall mean the Perfection and Disclosure Certificate delivered by Borrower to Agent on or prior to the date of this Agreement.
Permitted Acquisitions shall mean Acquisitions (a) with respect to which: (i) the acquired Person or assets are in a line of business permitted by Section 7.10; (ii) the transactions related to such Acquisition shall be consummated in all material respects in accordance with all Requirements of Law; (iii) immediately prior thereto, no Default or Event of Default shall exist, and after giving effect thereto, no Default or Event of Default would exist, (iv) Agent shall have received at least 10 Business Days prior written notice describing the transaction; and (v) the net purchase price (including assumed liabilities, but excluding reasonable costs and expenses relating to such transaction) incurred by Borrower in connection with any one Permitted Acquisition shall not exceed $35,000, provided that the net purchase price (including assumed liabilities, but excluding reasonable costs and expenses relating to such transaction) for all Permitted Acquisitions shall not exceed $250,000 in any fiscal year; and (b) Acquisitions to which Agent and the Lenders have consented to in writing.
Permitted Indebtedness shall mean: (i) Indebtedness of Borrower in favor of Lenders arising under this Agreement or any other Transaction Document and Indebtedness of Borrower in favor of Silicon Valley Bank described under clause (i) of the definition of Permitted Liens; (ii) Indebtedness existing at Closing and disclosed on the Perfection and Disclosure Certificate; (iii) Indebtedness secured by a lien described in clauses (vi) or (vii) of the definition of Permitted Liens, provided (A) such Indebtedness does not exceed the lesser of the cost or fair market value of the equipment financed with such Indebtedness, (B) such Indebtedness does not exceed $250,000 in the aggregate at any given time, and (C) if applicable, the holder of such Indebtedness agrees to waive any rights of set off such holder may have with respect to such Indebtedness in the deposit or investment accounts of Borrower and its Subsidiaries on terms reasonably satisfactory to Agent; (iv) Subordinated Debt; (v) Intercompany Investments; (vi) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business; (vii) other Indebtedness in an aggregate amount not to exceed $100,000 outstanding at any time; and (viii) extensions, refinancings, modifications, amendments and restatements of any item of Permitted Indebtedness described in (i) through (v) above.
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Permitted Investments shall mean: (i) Investments existing at Closing disclosed in the Perfection and Disclosure Certificate; (ii) (A) marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any State thereof maturing within one (1) year from the date of acquisition thereof, (B) commercial paper maturing no more than one (1) year from the date of creation thereof and currently having a rating of at least A-2 or P-2 from either Standard & Poors Corporation or Moodys Investors Service, Inc., (C) certificates of deposit maturing no more than one (1) year from the date of investment therein, and (D) money market funds at least 95% of the assets of which are invested in the kinds of assets described above in clauses (A), (B) and (C); (iii) temporary advances to cover incidental expenses in the ordinary course of business; (iv) investments in joint ventures, strategic alliances, licensing and similar arrangements customary in Borrowers industry and which do not require Borrower to assume or otherwise become liable for the obligations of any third party not directly related to or arising out of such arrangement or require Borrower to transfer ownership of non-cash assets to such joint venture or other entity; (v) Investments consisting of (A) travel advances, employee relocation loans and other employee loans and advances in the ordinary course of business and (B) non-cash loans to employees, officers or directors relating to the purchase of equity securities of Borrower pursuant to employee stock purchase plans or arrangements approved by Borrowers board of directors; (vi) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business; (vii) Investments consisting of notes receivable of, or prepaid royalties from and other credit obligations of, customers, suppliers and debtors of Borrower, who are not Affiliates, in the ordinary course of business; (viii) Permitted Acquisitions; (ix) Intercompany Investments; (x) Investments consisting of deposit accounts in which Agent has a perfected security interest unless otherwise permitted by Section 7.09; (xi) Investments accepted in connection with Transfers permitted by Section 7.02; and (xii) other Investments in an aggregate amount not to exceed $100,000 outstanding at any time.
Permitted Liens shall mean and include: (i) Liens in favor of Agent and Liens that are prior to the Lien in favor of Agent covering the Silicon Valley Bank Indebtedness and subject to an intercreditor agreement between Silicon Valley Bank and the Lenders that is acceptable to Agent; (ii) Liens existing at Closing and disclosed in the Perfection and Disclosure Certificate; (iii) other Liens subordinated to the Liens in favor of Agent; (iv) Liens of carriers, warehousemen, mechanics, materialmen, vendors, and landlords incurred in the ordinary course of business for sums not overdue or being contested in good faith, provided provision is made to the reasonable satisfaction of Agent for the eventual payment thereof if subsequently found payable; (v) leases or subleases and non-exclusive licenses or sublicenses granted in the ordinary course of Borrowers business; (vi) Liens upon or in any equipment which was acquired or held by Borrower or any of its Subsidiaries to secure the purchase price of such equipment (and any accessions, attachments, replacements or improvements thereon) or indebtedness incurred solely for the purpose of financing the acquisition of such equipment (and any accessions, attachments, replacements or improvements thereon); (vii) Liens existing on any equipment (and any accessions, attachments, replacements or improvements thereon) at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and any accessions, attachments, replacements or improvements thereon, and the proceeds of such equipment (and any accessions, attachments, replacements or improvements thereon); (viii) bankers liens, rights of setoff and similar Liens incurred on deposits or securities accounts made in the ordinary course of business to the extent Agent has a security interest in such accounts; (ix) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default; (x) Liens for taxes not at the time delinquent or thereafter payable without penalty or being contested in good faith, provided provision is made to the reasonable satisfaction of Agent for the eventual payment thereof if subsequently found payable; (xi) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of customs duties in connection with the importation of goods; (xii) Liens on insurance proceeds in favor of insurance companies granted solely as security for financed premiums; (xiii) Liens securing Subordinated Debt; (xiv) Liens to secure payment of workers compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business; (xv) easements, rights of way, covenants, restrictions, reservations, exceptions and other similar restrictions and encumbrances or title defects, in each case incurred in the ordinary course of business which, in the
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aggregate, do not materially detract from the value or usefulness of the property subject thereto or materially interfere with the ordinary conduct of business of Borrower; and (xvi) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clauses (i) through (iii) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase.
Person shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or a Governmental Authority.
Regulation shall mean Department of Labor Regulation Section 2510.3 -101(d).
Requirement of Law applicable to any Person shall mean (i) any Governmental Rule applicable to such Person, (ii) any license, permit, approval or other authorization granted by any Governmental Authority to or for the benefit of such Person and (iii) any judgment, decision or determination of any Governmental Authority or arbitrator, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
SBA Documents means those documents set forth in Exhibit J hereto.
Silicon Valley Bank Indebtedness means Indebtedness of Borrower in favor of Silicon Valley Bank in an aggregate principal amount not to exceed $32,500,000, of which accounts receivable based revolving loans shall not exceed an aggregate principal amount of $15,000,000, non-formula revolving based loans shall not exceed an aggregate principal amount of $5,000,000, letters of credit, Cash Management Services (as defined in the SVB Loan Documents) and FX Reduction Amounts relating to FX Forward Contracts (each as defined in the SVB Loan Documents) shall not exceed an aggregate principal amount of $2,500,000 and term loans shall not exceed an aggregate principal amount of $10,000,000, as such Indebtedness may be modified in accordance with the terms of the intercreditor agreement entered into between Lender and Silicon Valley Bank.
SLW Designated Deposit Account means that certain Borrowers account, account number ##############, maintained at Silicon Valley Bank, in which proceeds of the Loan will be deposited.
SLW Fund shall mean Silver Lake Waterman Fund, L.P., a Delaware limited partnership.
Subordinated Debt shall mean any debt incurred by Borrower that is subordinated to the debt owing by Borrower to Lenders on terms acceptable to Lenders.
Subsidiary of any Person shall mean (i) any corporation of which more than fifty percent (50%) of the issued and outstanding equity securities having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Persons other Subsidiaries, and (ii) any partnership, limited liability company, joint venture, or other business entity of which more than fifty percent (50%) of the equity interest having the power to vote, direct or control the management of such partnership, limited liability company, joint venture or other business entity is at the time owned and controlled by such Person, by such Person and one or more of the other Subsidiaries or by one or more of such Persons other Subsidiaries. Any reference to a Subsidiary without designation of the ownership of such Subsidiary shall be deemed to refer to a Subsidiary of Borrower.
SVB Loan Documents shall mean the Senior Loan and Security Agreement and the Subordinated Loan and Security Agreement providing for the making of the Silicon Valley Bank Indebtedness, and all other documents or instruments evidencing or securing same or issued or entered into in connection therewith, as same may be amended, modified, restated, renewed or extended from time to time.
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Total Commitment shall mean Fifteen Million Dollars ($15,000,000).
Trademarks shall mean any trademark and service mark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.
Transaction Documents shall mean, collectively, this Agreement, the Notes, the Warrant and the other documents executed in connection herewith and any guaranty of the Obligations and any security documents related to such guaranty.
Warrant shall mean a warrant or warrants to purchase capital stock of Mavenir issued by Mavenir to Lenders or their Affiliates as provided by this Agreement.
All terms defined in the Code and not otherwise defined herein shall have the respective meanings specified in the Code.
Article 2. THE LOAN.
Section 2.01. Commitment. Subject to the terms and conditions of this Agreement, Lenders severally agree in accordance with Section 12.07 to loan to Borrower on the Funding Date specified in the Notice of Advance Request delivered on the Closing Date, but not later than thirty (30) days after the date of this Agreement, a term loan (the Loan) in an aggregate principal amount equal to the Total Commitment. Borrower may prepay the Loan only in accordance with Section 2.02(c). Amounts prepaid may not be reborrowed.
Section 2.02. Interest and Payments.
(a) | Interest. Borrower shall pay interest in arrears on the unpaid principal amount of the Loan from the date of the Loan until the Loan is paid in full at a per annum rate of interest equal to twelve percent (12% ). Interest on the Loan shall be calculated based upon a year of 360 days and actual days elapsed. If Borrower pays interest on the Loan which is determined to be in excess of the then legal maximum rate, then that portion of each interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of the Loan. |
(b) | Payments of Principal and Interest. |
(i) | Interest. Except as set forth in Section 2.02( c), on the first Business Day of each month (each a Payment Date), commencing on the first Payment Date after the Funding Date and on each subsequent Payment Date through and including the Maturity Date, for the Loan, Borrower shall make payments to each Lender of interest accrued through and including such Payment Date according to each Lenders Loan Percentage. |
(ii) | Payments on Maturity Date. On the Maturity Date, Borrower shall pay to Agent and the Lenders the entire principal amount of the Loan then outstanding, all accrued and unpaid interest and all other amounts then due to Agent and the Lenders. |
(c) | Prepayment. Upon five (5) Business Days prior written notice to Agent, Borrower may, at its option, at any time, prepay all and not less than all of the Loan, in an amount equal to (A) the outstanding principal amount of the Loan, plus (B) accrued and unpaid interest thereon through and including the date of such prepayment, plus (C) the Applicable Premium for the Loan, plus (D) any other amounts then due to Lenders, according to each Lenders Loan Percentage. Notwithstanding the foregoing, in the event the Loan is prepaid in connection with an IPO, the Applicable Premium shall not apply. |
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Section 2.03. Use of Proceeds; the Loan and the Notes; Disbursement.
(a) | Use of Proceeds. In accordance with Section 2.03(c), the proceeds of the Loan will be deposited into the SLW Designated Deposit Account and such proceeds shall not be used substantially for Borrowers foreign operations and shall be used substantially for Borrowers domestic operations in the United States, including, without limitation, to fund salaries of employees in the United States, rent payments for property in the United States, the acquisition of materials to be used in the United States to create Borrowers products and other similar working capital needs in the United States. |
(b) | The Loan and the Notes. The obligation of Borrower to repay the aggregate unpaid principal amount of and interest on the Loan shall be evidenced by Notes in favor of each Lender setting forth the principal amount of the Loan payable to such Lender and the payments due. Agent shall keep a record of the payments made under each Note on its books which records shall be prima facie evidence of the amounts paid under the Notes absent manifest error. Any failure by Agent to obtain or retain such a Note shall not limit or otherwise affect the obligations of Borrower to pay amounts due hereunder with respect to the Loan. |
(c) | Notice and Disbursement. At the Closing, Borrower shall notify Agent in writing of the desired Funding Date, which shall be no earlier than June 7, 2013, and which notice shall be irrevocable and shall be substantially in the form of Exhibit F hereto (Notice of Advance Request). Lenders obligation to make the Loan shall be subject to the satisfaction of the conditions set forth in Section 4.01(b ). Lenders shall have the right to request that Borrower furnish Lenders with such additional information with respect to the Loan and the satisfaction of the conditions set forth in Section 4.01(b) as Lenders shall reasonably request. Subject to the satisfaction of the conditions set forth in this Agreement which shall be confirmed to Agent and the Lenders in writing as of the date of funding, each Lender shall disburse its pro rata portion of the Loan to the SLW Designated Deposit Account. |
Section 2.04. Other Payment Terms.
(a) | Place and Manner. All regularly scheduled payments due to the Lenders shall be effected by automatic debit of the appropriate funds from Borrowers Primary Operating Account. Borrower shall make all other payments due to the Lenders in lawful money of the United States, in immediately available funds, according to the instructions for other payments specified in Schedule 2. |
(b) | Date. Whenever any payment due hereunder shall fall due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of interest or fees, as the case may be. |
(c) | Default Rate. After the occurrence and during the continuance of an Event of Default, Borrower shall pay interest on the aggregate, outstanding principal balance hereunder from the date due until such Event of Default is no longer continuing, at a per annum rate equal to the Default Rate. All computations of such interest shall be based on a year of 360 days and actual days elapsed. |
(d) | Commitment Fee. Borrower has paid to Lenders (or Agent for the benefit of Lenders) an aggregate commitment fee in the amount of $40,000 (the Commitment Fee). The Commitment Fee is fully earned. |
(e) | Closing Fee. In connection with the funding of the Loan, on the Funding Date, Borrower shall pay to Agent for the ratable benefit of Lenders an aggregate closing fee in the amount of $100,000, less the Commitment Fee |
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Article 3. CREATION OF SECURITY INTEREST.
Section 3.01. Grant of Security Interest. Borrower grants and pledges to Agent on behalf of all Lenders a continuing security interest in all presently existing and hereafter acquired or arising Collateral in order to secure prompt payment of any and all Obligations and in order to secure prompt performance by Borrower of each of its covenants and duties under the Transaction Documents. Except as provided in Section 12.18, notwithstanding termination of this Agreement, Agents Lien on the Collateral shall remain in effect for so long as any Obligations (other than inchoate indemnity obligations and obligations arising under the Warrant) are outstanding.
Article 4. CLOSING.
Section 4.01. Conditions Precedent. The obligation of Lenders to fund the Loan shall be subject to the following conditions precedent:
(a) | Conditions to Closing. Agent shall have received on or before the Closing in form and substance satisfactory to Agent and the Lenders: |
(i) | This Agreement, duly executed by Borrower. |
(ii) | Copies, certified by the Secretary or Assistant Secretary of Borrower, of: (A) the Certificate of Incorporation and Bylaws of Borrower (as amended to the date of this Agreement), (B) the resolutions adopted by Borrowers board of directors authorizing the transaction and the documents being executed in connection therewith, and (C) the incumbency of the officers executing this Agreement and the other Transaction Documents on behalf of Borrower, in substantially similar form as Exhibit E hereto. |
(iii) | Good Standing Certificate(s) with respect to Borrower from Borrowers state of incorporation and principal place of business, if different, (each) as of a date acceptable to Agent. |
(iv) | Certificate(s) of insurance and evidence of the insurance coverage required by Section 6.05 of this Agreement. |
(v) | The Warrant(s) to be issued to the designees of the Lenders in forms provided by Agent and agreed to by Borrower, duly executed by Mavenir, in substantially similar form as Exhibit H hereto. |
(vi) | The Perfection and Disclosure Certificate, in substantially similar form as Exhibit G hereto. |
(vii) | The SBA Documents. |
(viii) | All other documents as Agent shall have reasonably requested. |
(ix) | A legal opinion of counsel to Borrower covering the matters set forth in Exhibit C hereto in form and substance reasonably satisfactory to Agent. |
(x) | The Commitment Fee specified in Section 2.04( d). |
(xi) | An intercreditor agreement with Silicon Valley Bank. |
(xii) | A duly executed Notice of Advance Request with respect to the Loan in substantially similar form as Exhibit F hereto. |
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(xiii) | A detailed capitalization table of Borrower. |
(xiv) | A duly executed Authorization for Automatic Payment in substantially similar form as Exhibit I hereto. |
(b) | Conditions to Funding of the Loan. Prior to the funding of the Loan, the following conditions with respect to the Loan shall have been satisfied by Borrower or waived by Agent and the Lenders: |
(i) | Borrower shall have executed and delivered one or more Note(s) in favor of Lenders prepared by Agent setting forth the terms of the Loan. |
(ii) | No Event of Default or Default shall have occurred and be continuing. |
(iii) | In Agents commercially reasonable discretion, no event shall have occurred or condition shall exist that has had or could be reasonably expected to have a Material Adverse Effect. |
(iv) | The representations and warranties contained in this Agreement and the other Transaction Documents to which Borrower is a party shall be true and correct in all material respects as if made on the date of funding of the Loan, except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date. |
(v) | Each of the Transaction Documents shall be in full force and effect. |
(vi) | Lender has received control agreements sufficient to perfect a security interest in Borrowers deposit accounts and securities accounts (subject to any excluded accounts pursuant to Section 7.09) executed by each applicable bank or other financial institution, in forms reasonably acceptable to Agent. |
(vii) | Borrower shall have provided to Agent such documents, instruments and agreements, including financing statements or amendments to financing statements, as Agent shall reasonably request to evidence the perfection and priority of the security interests granted to Agent. |
Article 5. REPRESENTATIONS AND WARRANTIES OF BORROWER.
Borrower represents and warrants to Agent and the Lenders as of the date hereof and as set forth in Article 4 that:
Section 5.01. Due Incorporation. Qualification. etc. Each of Borrower and its Subsidiaries (i) is a registered organization duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation; (ii) has the power and authority to own, lease and operate its properties and carry on its business as now conducted; and (iii) is duly qualified, licensed to do business and in good standing as a foreign registered organization in each jurisdiction where the failure to be so qualified or licensed could reasonably be expected to have a Material Adverse Effect.
Section 5.02. Authority. The execution, delivery and performance by Borrower of each Transaction Document to be executed by Borrower and the consummation of the transactions contemplated thereby (i) are within the power of Borrower and (ii) have been duly authorized by all necessary actions on the part of Borrower.
Section 5.03. Enforceability. Each Transaction Document executed, or to be executed, by Borrower has been, or will be, duly executed and delivered by Borrower and constitutes, or will constitute, a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors rights generally and general principles of equity.
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Section 5.04. Non-Contravention. The execution and delivery by Borrower of the Transaction Documents executed by Borrower and the performance and consummation of the transactions contemplated thereby do not and will not (i) violate its certificate of incorporation or bylaws, (ii) violate in any material respect any Requirement of Law applicable to Borrower; (iii) violate any provision of, or result in the breach or the acceleration of, or entitle any other Person to accelerate (whether after the giving of notice or lapse of time or both), any material Contractual Obligation of Borrower; or (iv) result in the creation or imposition of any Lien upon any property, asset or revenue of Borrower (except such Liens as may be created in favor of Agent pursuant to this Agreement or the other Transaction Documents).
Section 5.05. Approvals. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Authority or other Person (including, without limitation, the shareholders of any Person) is required in connection with the execution and delivery of the Transaction Documents executed by Borrower and the performance and consummation of the transactions contemplated thereby, other than (i) consents, approvals, orders or authorizations, or registrations, declarations or filings that have already been obtained, (ii) state securities filings related to the Warrant, and (iii) UCC financing statement filings.
Section 5.06. No Violation or Default. None of Borrower or Borrowers Subsidiaries is in violation of or in default with respect to (i) its certificate of incorporation or bylaws; (ii) any Requirement of Law; or (iii) any Contractual Obligation, where, in each case, such violation or default, individually, or together with all such violations or defaults, could reasonably be expected to have a Material Adverse Effect. No Event of Default or Default has occurred and is continuing.
Section 5.07. Litigation. Except as disclosed to Agent in writing, no actions (including, without limitation, derivative actions), suits, proceedings or investigations are pending or, to the knowledge of Borrower, threatened against Borrower or Borrowers Subsidiaries at law or in equity in any court or before any other Governmental Authority which (i) involves more than, individually or in the aggregate, Two Hundred Fifty Thousand Dollars ($250,000) or (ii) seeks to enjoin, either directly or indirectly, the execution, delivery or performance by Borrower of the Transaction Documents or the transactions contemplated thereby. Except as set forth in the Perfection and Disclosure Certificate, the Borrower has no commercial tort claims.
Section 5.08. Collateral. Borrower has good and marketable title to all Collateral, free and clear of all Liens, other than Permitted Liens. Borrower has no deposit accounts or securities accounts, other than the deposit accounts and securities accounts described in the Perfection and Disclosure Certificate and those permitted under Section 7.09. Except as described in the Perfection and Disclosure Certificate or as permitted under Section 6.09, the Collateral is not in the possession of any third party bailee (such as at a warehouse).
Section 5.09. Financial Statements. The Financial Statements of Borrower which have been delivered to Agent (i) are in accordance with the books and records of Borrower and its Subsidiaries, which have been maintained in accordance with good business practice; (ii) have been prepared in conformity with generally accepted accounting principles (other than, with respect to interim Financial Statements, the absence of footnotes and normal year-end adjustments); and (iii) fairly present in all material respects the consolidated financial position of Borrower as of the dates presented therein and the results of operations, cash flows, and, if applicable stockholders equity, for the periods presented therein. As of the date hereof, none of Borrower or any of Borrowers Subsidiaries has any contingent obligations, liability for taxes or other outstanding obligations which are material in the aggregate, except as disclosed in the most recent audited Financial Statements (including the notes thereto) furnished by Borrower to Agent prior to the date hereof. There have not been any changes in the financial condition or results of operations of Borrower which are material in the aggregate since the most recent Financial Statements furnished by Borrower to Agent.
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Section 5.10. Solvency. The fair salable value of Borrowers assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature.
Section 5.11. Taxes. Each of Borrower and its Subsidiaries has filed or caused to be filed all tax returns that are required to be filed by it except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. Borrower and Borrowers Subsidiaries have paid, or made provision for the payment of, all taxes which have or may have become due pursuant to said returns or otherwise, except such taxes, if any, which are being contested in good faith and as to which adequate reserves (determined in accordance with generally accepted accounting principles) have been provided or which could not reasonably be expected to have a Material Adverse Effect if unpaid.
Section 5.12. Catastrophic Events; Labor Disputes. Neither Borrower nor Borrowers Subsidiaries and none of their properties is or has been affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or other casualty that could reasonably be expected to have a Material Adverse Effect. There are no disputes presently subject to grievance procedure, arbitration or litigation under any of the collective bargaining agreements, employment contracts or employee welfare or incentive plans to which Borrower or Borrowers Subsidiaries is a party, and there are no strikes, lockouts, work stoppages or slowdowns, or, to the best knowledge of Borrower, jurisdictional disputes or organizing activity occurring or threatened which could reasonably be expected to have a Material Adverse Effect.
Section 5.13. No Material Adverse Effect. No event has occurred and no condition exists which could reasonably be expected to have a Material Adverse Effect.
Section 5.14. First Priority. Assuming the timely filing of financing statements the security interest granted hereby constitutes a first priority security interest in and Lien on all of the Collateral, subject only to Permitted Liens.
Section 5.15. Perfection and Disclosure Certificate. All of the information set forth in the Perfection and Disclosure Certificate delivered to Agent is correct in all material respects as of the date hereof.
Section 5.16. Intellectual Property. Borrower is the sole owner of, or has the right to use, the Intellectual Property, except for non-exclusive licenses granted by Borrower to its customers in the ordinary course of business. To Borrowers knowledge, no part of the Intellectual Property has been judged invalid or unenforceable, in whole or in part, and, except as otherwise disclosed to Agent in writing, no claim has been made that any part of the Intellectual Property violates the rights of any third party. Borrower has no registered copyrights.
Article 6. AFFIRMATIVE COVENANTS.
While any Obligations or unfunded amount of the Total Commitment remain outstanding:
Section 6.01. Financial Statements. Borrower shall provide to Agent the Financial Statements specified in Sections 6.0l(a) and (b) and the other information specified below; provided, however, that after the effective date of the IPO, Borrower shall only be required to deliver those financial statements and other information required to be filed by the Securities and Exchange Commission, to be provided as soon as practicable and no less frequently than quarterly.
(a) | As soon as practicable (and in any event within thirty (30) days after the end of each quarter), unaudited Financial Statements for such quarter, certified by Borrowers Chief Executive Officer or Chief Financial Officer to fairly present in all material respects the data reflected therein, together with a Compliance Certificate in substantially similar form as Exhibit D hereto. |
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(b) | As soon as practicable (and in any event within five (5) days after completion), audited Financial Statements for such year, setting forth in comparative form the corresponding figures for the preceding fiscal year, and accompanied by an audit report and unqualified opinion of the independent certified public accountants of recognized national standing selected by Borrower. |
(c) | No later than January 31 of each year, financial projections and the budget for such fiscal year approved by Borrowers Board of Directors and, on a quarterly basis, any changes to such financial projections or budget. |
Section 6.02. Other Information. Borrower shall promptly provide to Agent:
(a) | copies of all board packages delivered to its board of directors in connection with board meetings or otherwise, within seven (7) days of such event; provided, however, that Borrower shall not be required to provide any Excluded Materials and this Section 6.02(a) shall terminate upon the termination of Lenders rights pursuant to Section 6.12; |
(b) | detailed capitalization tables (by round and investor) upon Agents request; provided, however, that this Section 6.02(b) shall terminate upon the termination of Lenders rights pursuant to Section 6.12; |
(c) | notice of all actions, suits and proceedings before any Governmental Authority that could reasonably be expected to result in costs or damages to Borrower of Two Hundred Fifty Thousand Dollars ($250,000) or more; |
(d) | notice of any Default, Event of Default, Event of Loss, or any matter which has resulted or could reasonably be expected to result in a Material Adverse Effect; |
(e) | notice of the formation of any subsidiary; |
(f) | any additional information as Agent shall reasonably request to evaluate Borrowers continuing financial obligations; |
(g) | Copies of 409(A) valuation reports, if any, within thirty (30) days of completion; provided, however, that this Section 6.02(g) shall terminate upon the termination of Lenders rights pursuant to Section 6.12; and |
(h) | if an Event of Default has occurred pursuant to Section 9.01(d) as a result of the occurrence of a default under other Indebtedness, and the relevant default under such other Indebtedness is subsequently cured or waived pursuant to Section 9.01(d), Borrower shall discuss the details thereof with Agent or any Lender upon their request. |
Section 6.03. Corporate Identity. Borrower shall notify Agent in writing thirty (30) days prior to any change in Borrowers principal place of business or chief executive office and any change of Borrowers name, type of entity or jurisdiction of formation.
Section 6.04. Authorization for Automated Clearinghouse Funds Transfer. Borrower shall (i) authorize Agent to initiate debit entries to Borrowers account specified in Schedule 2 (Borrowers Primary Operating Account) through Automated Clearing House (ACH) transfers, in order to satisfy regularly scheduled payments of principal and interest; (ii) provide Agent at least thirty (30) days prior written notice of any change in Borrowers Primary Operating Account; and (iii) grant Agent any additional authorizations necessary to begin ACH debits from a new account which becomes Borrowers Primary Operating Account.
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Section 6.05. Insurance. Borrower shall, at its own expense, obtain and carry insurance in amounts and forms reasonably acceptable to Agent, including insurance against loss or damage to the Collateral and commercial general liability insurance. The insurance against loss or damage to the Collateral shall name Agent as loss payee with respect to the Collateral, shall not be invalidated by any action of or breach of warranty by Borrower of any provision thereof and shall waive subrogation against Agent. The liability policy(ies) shall name Agent as an additional insured in the full amount of Borrowers liability coverage limits (or the coverage limits of any successor to Borrower or such successors parent which is providing coverage), be primary and without contribution as respects any insurance carried by Agent and contain cross liability and severability of interest clauses. All policies of insurance shall provide that Agent shall be given thirty (30) days notice of cancellation of coverage. On or prior to the Funding Date and prior to each policy renewal, Borrower shall furnish to Agent, certificates of insurance or other evidence satisfactory to Agent that insurance complying with all of the above requirements is in effect.
Section 6.06. Taxes. Borrower shall pay all material taxes and other governmental or regulator 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 material tax returns.
Section 6.07. Further Assurances.
(a) | Borrower shall promptly furnish to Agent from time to time such statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Agent may reasonably request, all in reasonable detail. Borrower shall take such further actions as Agent may reasonably request to perfect or maintain Agents security interest granted in this Agreement or to otherwise further the purposes of this Agreement. |
(b) | Agent and Lenders (through any of their officers, employees, or agents) shall have the right, upon reasonable prior notice, from time to time during Borrowers usual business hours, to inspect Borrowers books and records and to make copies thereof and to inspect, test, and appraise the Collateral in order to verify Borrowers financial condition or the amount, condition of, or any other matter relating to, the Collateral. |
Section 6.08. Loss; Damage; Destruction and Seizure.
(a) | If while payment Obligations are outstanding any item of Collateral is lost, stolen, destroyed, damaged beyond repair or seized by a Governmental Authority (an Event of Loss), then, if no Event of Default has occurred and is continuing, any proceeds of insurance or any award paid by the seizing Governmental Authority that is received by Agent or Borrower shall be applied, at Borrowers option, (i) to the Obligations, or (ii) to purchase an item of Collateral to replace the item of Collateral which was subject to the Event of Loss, or to purchase other property used in Borrowers business, and such replacement item, or such other property, shall become part of the Collateral. If any such proceeds or awards are paid while an Event of Default has occurred and is continuing, Agent may, at its option, apply such proceeds or awards to the Obligations. |
(b) | So long as no Event of Default has occurred and is continuing, any proceeds of insurance received by Agent or Borrower with respect to an item of Collateral the repair of which is practicable shall, at the election of Borrower, be applied either to the repair of such Collateral or to the reimbursement of Borrower for the cost of such repair. If any such proceeds or awards are paid while an Event of Default has occurred and is continuing, Agent may at its option apply such proceeds or awards to the Obligations. |
Section 6.09. Collateral Control. Except for Collateral that is of a type that is moved from location to location in the ordinary course of business and other Collateral located at any one location having a value not in excess of Fifty Thousand Dollars ($50,000), Borrower shall keep all items of Collateral at (i) Borrowers facility located at the address specified in Section 12.06, (ii) the locations specified in the Perfection and Disclosure Certificate, (iii) any suppliers, warehouse or storage facility located outside the United States, or, if the bailee shall have executed a bailee agreement reasonably acceptable to Agent (unless Agent waives such requirement in writing), within the
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United States, or (iv) such other places reasonably agreed to in writing by Agent subject to any conditions reasonably imposed by Agent. Borrower shall furnish to Agent from time to time such statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Agent may reasonably request, all in reasonable detail.
Section 6.10. Compliance with Requirements of Law. Each of Borrower and Borrowers Subsidiaries shall comply in all material respects with all Requirements of Law.
Section 6.11. Management Rights.
(a) | From and after the date hereof, Lenders independently shall have the following contractual management rights. Such rights shall be in addition to, and nothing in this Agreement shall be deemed to limit, any other rights that a Lender may hold as a lender to or equity holder of Borrower or otherwise. |
(i) | Each Lender shall be entitled to consult with and advise management of Borrower on significant business issues, including without limitation managements proposed quarterly and annual operating plans. Upon request of a Lender, management of Borrower shall meet with authorized representatives of the Lender, at a mutually agreeable time and place, within thirty days after the end of each calendar quarter for such consultation and advice and to review progress in achieving such plans. |
(ii) | Each Lender shall be entitled to examine the books and records of Borrower, inspect its facilities, and receive other information at reasonable times and intervals concerning the general status of Borrowers financial condition and operations. |
(b) | Borrower shall not be required under this Agreement to provide access to any Excluded Materials. Borrower acknowledges and agrees that the preceding sentence is not intended to prevent a Lender from obtaining information necessary for a Lender to substantially participate in, or substantially influence the conduct of, management of Borrower within the meaning of the Regulation. |
(c) | The management rights granted in Section 6.11(a) shall terminate upon the termination of Lenders rights pursuant to Section 6.12. |
Section 6.12. Board Observer Rights. Lenders shall have the right to appoint an employee of Agent as a non-voting observer to all meetings of the board of directors of Borrower (the Board Observer), and, in this respect, Borrower shall provide such Board Observer with copies of all notices, minutes, consents and other materials provided to its directors; provided, however, that the Borrower reserves the right to withhold any Excluded Materials, and to exclude such Board Observer from any meeting of the board of directors or portion thereof if (a) attendance at such meeting would or is reasonably likely to, in the opinion of Borrowers counsel, adversely affect the attorney-client privilege between Borrower and its counsel, (b) attendance at such meeting could result in a conflict of interest between Agent, Lenders, the Board Observer or their respective affiliates or representatives, on the one hand, and Borrower or its affiliates or representatives on the other concerning the financing transaction between Borrower, Agent and Lenders or other matters involving Lenders or their affiliates, (c) pursuant to the terms of a bona fide confidentiality agreement entered into by Borrower in good faith, Borrower is restricted from providing information relating thereto to Agent, Lenders or other third parties, (d) there is an executive session at any such meeting and the board of directors of Borrower requests that the Board Observer be excluded from such executive session; provided, however, that clause (d) shall not prevent the Board Observer from attending any portion of such executive session relating to corporate strategy matters, including but not limited to financing, strategic acquisition and IPO matters, or (e) the Companys board of directors determines in good faith attendance at such meeting (including an executive session relating to corporate strategy matters, including but not limited to financing, strategic acquisition and IPO matters) could result in a breach of its fiduciary duties under any applicable Requirement of Law. The rights set forth in this Section 6.12 will terminate upon the earliest to occur of (A) payment in full of the Obligations, (B) the consummation of a Change of Control or (C) the consummation of an
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IPO. Prior to attending any board meetings or receiving any materials relating thereto, Lenders shall cause the Board Observer to execute a confidentiality agreement with Mavenir and/or for the express and enforceable benefit of Mavenir having a term extending one (1) year beyond the Maturity Date or earlier full repayment of the Loan, and otherwise on substantially similar terms to that certain Non-Disclosure Agreement, dated as of July 18, 2012, by and between Silver Lake Waterman Management Company, L.L.C. and Mavenir.
Section 6.13. Intellectual Property. Borrower shall cause all material Intellectual Property now owned or hereafter developed or acquired by Borrower and its Subsidiaries, including but not limited to all Intellectual Property related to VoLTE, RCS and IMSCore (except for (i) Intellectual Property that constitutes Excluded Property and (ii) Intellectual Property owned by Holdings (fka Airwide Solutions, Inc.) or any of its direct or indirect Subsidiaries at the time Holdings was acquired by Mavenir), to be owned by Borrower, and shall, upon Agents reasonable request, promptly provide Agent a list of any applications or registrations of Intellectual Property rights of Borrower and its Subsidiaries, including the dates of such filings and the application or registration numbers, if any. Notwithstanding the foregoing, Borrower may elect to add as a Borrower under this Agreement any Subsidiary of Borrower that owns material Intellectual Property and in connection therewith shall take all such action as may be reasonably required by Agent and Lenders to cause each such Subsidiary to become a Borrower under the Transaction Documents and grant a continuing pledge and security interest in and to the assets (as defined as Collateral herein and described on Exhibit B hereto) of such Subsidiary. Borrower shall execute and deliver any instruments and documents as Agent shall reasonably request to maintain the perfection and priority of Agents security interest, on behalf of all Lenders, in Borrowers Intellectual Property Collateral.
Section 6.14. Additional Borrowers or Guarantors. At Agents or any Lenders request, Borrower shall take all such action as may be reasonably required by Agent or any Lender to cause any Subsidiary of Borrower that is material, or which owns assets which individually or in the aggregate are, based on Agents or Lenders good faith business judgment, material to the business of Borrower and its Subsidiaries, to (a) become a Borrower or Guarantor under this Agreement and any other Transaction Document, and in connection therewith to (b) grant a continuing pledge and security interest in and to the assets (as defined as Collateral herein and described on Exhibit B hereto) of such Subsidiary; provided, however, that as a condition to clause (b) above, so long as the SVB Loan Documents remain in effect, Borrower shall cause or have caused such Subsidiary to pledge and grant a prior and superior lien on its assets in favor of Silicon Valley Bank.
Article 7. NEGATIVE COVENANTS.
While any Obligations or unfunded amount of the Total Commitment remain outstanding:
Section 7.01. Liens. Borrower shall not (i) in any way create or permit to exist any Lien with respect to any of its or its Subsidiaries property, except for Permitted Liens; (ii) enter into or permit to exist any agreement that restricts the ability of Borrower or such Subsidiary to grant a Lien to Agent or Lenders in any of Borrowers or such Subsidiarys property (other than (A) restrictions that would be unenforceable or ineffective pursuant to Section 9-408 of the Code or the Uniform Commercial Code as adopted in any other applicable jurisdiction, (B) restrictions in agreements governing property subject to a Lien that is otherwise permitted pursuant to clause (vi) or clause (vii) of the definition of Permitted Lien, (C) restrictions contained in the SVB Loan Documents, (D) restrictions in agreements governing Excluded Property, and (E) as otherwise permitted in the definition of Permitted Liens herein); or (iii) register any copyrights with the United States Copyright Office unless Borrower has given Agent thirty (30) days prior written notice and made arrangements to file a notice of Agents security interest in such copyrights as promptly as possible after such registration.
Section 7.02. Transfers. Borrower shall not sell, transfer, assign, pledge, collaterally assign, exchange, or otherwise dispose of (collectively, a Transfer), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, other than Transfers: (i) of inventory in the ordinary course of business; (ii) of non-exclusive licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of business; (iii) of worn-out, unneeded or obsolete equipment; (iv) in connection with Permitted Liens and Permitted Investments; (v) of Demonstration Systems to customers or prospective customers in the ordinary course
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of business; (vi) of property from one Borrower to another Borrower; (vii) Transfers of cash collateral used to secure letters of credit or as security deposits under leases provided that any Liens on such cash collateral constitute Permitted Liens; or (viii) other Transfers of property having a book value not exceeding $100,000.
Section 7.03. Change of Control. Without the prior written consent of Agent and the Lenders, there shall not occur any transaction or series of transactions, whether by merger, consolidation, sale of stock or otherwise, pursuant to which the holders of Borrowers voting Equity Securities prior to the transaction or series of transaction do not hold at least 50% of the voting power of Borrower or any resulting Person after such transaction or transactions, or through the sale of all or substantially all of its assets (a Change of Control), unless (i) the Obligations are assumed or unconditionally guaranteed in a manner satisfactory to Agent and the Lenders by a Person which is the ultimate parent entity (the Acquirer) of the acquiring person and (ii) the Acquirer is a creditworthy entity (as determined by Agent in its sole discretion). Notwithstanding the foregoing, a Change of Control shall not include (a) a sale of Equity Securities to venture capital investors, provided that Borrower identifies to Agent the venture capital investors prior to the closing of the transaction and provides to Agent a description of the material terms of the transaction, or (b) an IPO.
Section 7.04. Distributions. Without the prior written consent of Agent and the Lenders, Borrower shall not (i) pay any dividends or make any distributions on its Equity Securities; (ii) purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Securities (other than repurchases pursuant to the terms of employee stock purchase plans, employee restricted stock agreements or similar arrangements either (1) by the cancellation of Indebtedness or (2) in an aggregate amount not to exceed $100,000 in any fiscal year); (iii) return any capital to any holder of its Equity Securities as such; (iv) make any distribution of assets, Equity Securities, obligations or securities to any holder of its Equity Securities as such; or (v) set apart any sum for any such purpose; provided, however, Borrower may (a) convert any of its convertible securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange thereof, and (b) declare dividends payable solely in common stock and make cash payments in lieu of the issuance of fractional shares upon the conversion of convertible securities. Borrower shall not suffer or permit any Subsidiary to be a party to, or be bound by, an agreement that restricts such Subsidiary from paying dividends or otherwise distributing property to Borrower other than Permitted Liens and other agreements entered into in the ordinary course of business where such restrictions relate to the subject matter of such agreements.
Section 7.05. Indebtedness. Borrower shall not, and shall not permit its Subsidiaries to, create, incur, assume or suffer to exist any Indebtedness, other than Permitted Indebtedness.
Section 7.06. Investments. Borrower shall not, and shall not permit its Subsidiaries to, directly or indirectly acquire or own, or make any Investment in or to, any Person (including a Subsidiary) other than Permitted Investments.
Section 7.07. Transactions with Affiliates. Borrower shall not, and shall not permit its Subsidiaries to, directly or indirectly enter into or permit to exist any material transaction with any Affiliate, except for transactions that are in the ordinary course of such Persons business, upon fair and reasonable terms that are no less favorable to Borrower, or such Subsidiary, than would be obtained in an arms length transaction with a non affiliated Person; provided that the foregoing restriction shall not apply to (i) any transaction between Borrower and any of its Subsidiaries or between any Subsidiaries that is not otherwise prohibited by this Agreement, (ii) reasonable and customary fees paid to members of the board of directors of Borrower and its Subsidiaries, and (iii) compensation arrangements and benefit plans for officers and other employees of Borrower and its Subsidiaries entered into or maintained in the ordinary course of business.
Section 7.08. Indebtedness Payments. Borrower shall not (i) prepay, redeem, purchase, defease or otherwise satisfy in any manner prior to the scheduled repayment thereof any Indebtedness for borrowed money or any lease obligations (other than (A) amounts voluntarily prepaid against the Silicon Valley Bank Indebtedness or otherwise paid in accordance with the provisions of the SVB Loan Documents; provided that any Silicon Valley Bank Indebtedness constituting term loans arising under that certain Subordinated Loan and Security Agreement, dated as
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of October 18, 2012, by and between Borrower and Silicon Valley Bank, as amended, once repaid, may not be reborrowed, (B) amounts due or permitted to be prepaid under this Agreement or any intercreditor agreement related to such Indebtedness or (C) the conversion of convertible debt securities into equity securities and in connection therewith cash payments in lieu of issuing fractional shares), (ii) amend, modify or otherwise change the terms of any Indebtedness (other than the Loan) or capital lease obligations so as to accelerate the scheduled repayment thereof or (iii) repay any Indebtedness to officers, directors or shareholders. Notwithstanding the foregoing, Borrower shall not be restricted from making any payments in connection with Intercompany Investments.
Section 7.09. Accounts. Borrower shall not maintain any deposit accounts or securities accounts except (i) accounts with respect to which Agent has obtained a control agreement with the bank or other financial institution sufficient to perfect a security interest in such deposit accounts or securities accounts, (ii) deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrowers employees and identified to Agent by Borrower as such, (iii) Mavenirs deposit account with Comerica Bank set forth on the Perfection and Disclosure Certificate that receives customer payments, provided that such funds are promptly (and in any event within one (1) Business Day after the funds are available) transferred to an account described in clause (i) above, and (iv) Mavenirs deposit account with HSBC Canada set forth on the Perfection and Disclosure Certificate that Borrower intends to close promptly after the Closing Date, provided that such account shall at no time contain funds in excess of $7,000.
Section 7.10. Line of Business. Borrower shall not, and shall not permit its Subsidiaries to, engage in any line of business other than the lines of business of Borrower and its Subsidiaries existing on the date hereof, together with lines of business reasonably related, complimentary or ancillary thereto.
Article 8. PRESERVATION OF COLLATERAL.
Should Borrower fail or refuse to make any payment, perform or observe any other covenant, condition or obligation, or take any other action which Borrower is obligated under any Transaction Document to make, perform, observe, take or do at the time or in the manner provided in any Transaction Document, then at Agents sole and absolute discretion, without notice to or demand upon Borrower and without releasing Borrower from any obligation, covenant or condition in any Transaction Document, Agent may make, perform, observe, take or do the same in such manner and to such extent as Agent may deem necessary to protect its security interest in or the value of the Collateral. In furtherance of the foregoing rights, Borrower does hereby irrevocably appoint Agent (which appointment is coupled with an interest), the true and lawful attorney-in-fact of Borrower with full power of substitution, for it and in its name (i) to perform (but Agent shall not be obligated to and shall incur no liability to Borrower or any third party for failure to perform) any act which Borrower is obligated by this Agreement to perform, (ii) to ask, demand, collect, receive, receipt for, sue for any and all rents, issues, profits, avails, distributions, income, payment draws and other sums in which a security interest is granted under Section 3.01 with full power to settle, adjust or compromise any claim thereunder as fully as if Agent were Borrower itself, (iii) to receive payment of and to endorse the name of Borrower to any items of Collateral (including checks, drafts and other orders for the payment of money) that come into Agents possession or under Agents control, (iv) to make all demands, consents and waivers, or take any other action with respect to, the Collateral, (v) in Agents discretion, to file any claim or take any other action or institute proceedings, either in its own name or in the name of Borrower or otherwise, which Agent may reasonably deem necessary or appropriate to protect and preserve the right, title and interest of Agent in and to the Collateral, and (vi) to otherwise act with respect thereto as though Agent were the outright owner of the Collateral; provided, however, that the power of attorney herein granted shall be exercisable only upon the occurrence and during the continuation of an Event of Default. Borrower agrees to reimburse Agent upon demand for all reasonable costs and expenses, including reasonable attorneys fees and expenses, which Agent may incur while acting as Borrowers attorney in fact or otherwise under this Article 8, all of which costs and expenses are included within the Obligations.
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Article 9. EVENTS OF DEFAULT.
Section 9.01. Events of Default. The occurrence of any of the following shall constitute an Event of Default under the Transaction Documents:
(a) | Failure to Pay. Borrower shall fail to pay when due any principal, interest or other payment required under the terms of this Agreement or any other Transaction Document on the date due and such payment shall not have been made within three (3) Business Days of the due date; provided that no Event of Default under this Section 9.01(a) shall occur as a result of the failure by Lender to timely debit Borrowers account for any such payments of principal and/or interest; or |
(b) | Breaches of Other Covenants. Borrower or any of its Subsidiaries shall fail to perform or observe (i) any of the covenants or agreements contained in Sections 6.03, 6.05, or 6.10 or Article 7 hereof or (ii) any other covenant, or agreement contained in any Transaction Document (other than the other Events of Default specified in this Article 9) and such failure remains unremedied for ten (10) days from the earlier of (x) the date on which the Agent has given the Borrower written notice of such failure and (y) the date on which the Borrower knew or should have known of such failure; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period of time (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but the Loan shall not be made during such cure period). Cure periods provided under clause (ii) of this section shall not apply to the covenant set forth in clause (i) of this section; or |
(c) | Representations and Warranties. Any representation, warranty, certificate, or other statement (financial or otherwise) made or furnished by or on behalf of Borrower to Agent in writing in connection with this Agreement or any of the other Transaction Documents, or as an inducement to Agent or Lenders to enter into the Transaction Documents, shall be false or misleading in any material respect when made or furnished; or |
(d) | Other Payment Obligations. Borrower or any of its Subsidiaries shall (i)(a) fail to make any payment when due under the terms of any Indebtedness to be paid by such Person (excluding this Agreement and the other Transaction Documents but including any other Indebtedness of Borrower or any of its Subsidiaries to Agent or any Lender) and such failure shall continue beyond any period of grace provided with respect thereto, or (b) shall default in the observance or performance of any other agreement, term or condition contained in any such Indebtedness, and the effect of such failure or default under (a) or (b) above is to cause, or permit the holder or holders thereof to cause Indebtedness in an aggregate amount of Two Hundred Fifty Thousand Dollars ($250,000) or more to become due prior to its stated date of maturity, or (ii) default under any material agreement that could have a material adverse effect, on Borrowers or Guarantors business, taken as a whole; provided, however, that the Event of Default under this 9.04(d) caused by the occurrence of a breach or default under such other agreement shall be cured or waived for purposes of this Agreement upon Agent receiving written notice from the party asserting such breach or default of such cure or waiver of the breach or default under such other agreement, if at the time of such cure or waiver under such other agreement (x) Agent or the Lenders have not declared an Event of Default under this Agreement in writing; (y) any such cure or waiver does not result in an Event of Default under any other provision of this Agreement or any other Transaction Document; and (z) in connection with any such cure or waiver under such other agreement, the terms of any agreement with such third party are not modified or amended in any manner which could in the good faith business judgment of Agent and the Lenders be materially less advantageous to Borrower or any Guarantor; or |
(e) | RESERVED. |
(f) | Voluntary Bankruptcy or Insolvency Proceedings. Borrower or any of its Subsidiaries shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its obligations generally as they |
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come due or otherwise become insolvent, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated in full or in part or be subject to a distressed sale, (v) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vi) take any action for the purpose of affecting any of the foregoing; or |
(g) | Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or custodian of Borrower or any of its Subsidiaries or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to Borrower or any of its Subsidiaries or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within thirty (30) days of commencement; or |
(h) | Judgments. A final judgment or order for the payment of money in excess of Five Hundred Thousand Dollars ($500,000) (that is not covered by insurance) shall be rendered against Borrower or any of its Subsidiaries and the same shall remain undischarged for a period of thirty (30) days during which execution shall not be effectively stayed, or any judgment, writ, assessment, warrant of attachment, or execution or similar process shall be issued or levied against a substantial part of the property of Borrower or any of its Subsidiaries and such judgment, writ, or similar process shall not be released, stayed, vacated or otherwise dismissed within thirty (30) days after issue or levy; or |
(i) | Transaction Documents. Any Transaction Document or any material term thereof shall cease to be, or be asserted by Borrower not to be, a legal, valid and binding obligation of Borrower enforceable in accordance with its terms or if, after Agent has properly filed financing statements and continuation statements, as necessary, and obtained control agreements, the Liens of Agent in the Collateral shall, through no fault or action of Agent or Lenders, cease to be or shall not be valid, perfected Liens subject only to Permitted Liens or any other party to any subordination or intercreditor agreements entered into by Lenders or Borrower shall assert that such Liens are not valid, perfected Liens or shall assert that the terms of subordination are not valid. |
(j) | Material Adverse Effect. An event shall occur or a condition shall exist that constitutes a Material Adverse Effect. |
Article 10. AGENTS RIGHTS AND REMEDIES
Section 10.01. Rights of Agent upon Default. Upon the occurrence and during the existence of any Event of Default (other than an Event of Default referred to in Sections 9.01(f) and 9.01(g)) and at any time thereafter during the continuance of such Event of Default, Agent and the Lenders may, by written notice to Borrower, declare all outstanding Obligations, including, without limitation, the obligation to make each payment scheduled to be made under each subsection of Section 2.02, payable by Borrower hereunder to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Notes to the contrary notwithstanding. Upon the occurrence or existence of any Event of Default described in Sections 9.01(f) and 9.01(g), immediately and without notice, all outstanding Obligations, including, without limitation, the noncancelable obligation to make each payment scheduled to be made under each subsection of Section 2.02, payable by Borrower hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Notes to the contrary notwithstanding.
Section 10.02. Rights Regarding Collateral. Borrower agrees that when any Event of Default has occurred and is continuing, Lenders or Agent, on behalf of Lenders, shall have the rights, options, duties and remedies of a secured party as permitted by law and, in addition to and without limiting the foregoing, Lenders or Agent may, at the
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election of Lenders, exercise any one or more or all, and in any order, of the remedies herein set forth, including the following: (i) Agent or Lenders, personally or by agents or attorneys, shall have the right (subject to compliance with any applicable mandatory legal requirements) to require Borrower to assemble the Collateral and make it available to Agent at a place to be designated by Agent or to take immediate possession of the Collateral, or any portion thereof, and for that purpose may pursue the same wherever it may be found, and may enter any premises of Borrower, with or without notice, demand, process of law or legal procedure, to the extent permitted by applicable law, and search for, take possession of, remove, keep and store the same, or use and operate or lease the same until sold; (ii) Agent or Lenders may, if at the time such action may be lawful and always subject to compliance with any mandatory legal requirements, either with or without taking possession and either before or after taking possession, without instituting any legal proceedings whatsoever, having first given notice of such sale by registered or certified mail to Borrower once at least ten (10) days prior to the date of such sale, and having first given any other notice which may be required by law, sell and dispose of the Collateral, or any part thereof, at a private sale or at public auction, to the highest bidder, in one lot as an entirety or in separate lots, and either for cash or on credit and on such terms as Lenders may determine, and at any place (whether or not it be the location of the Collateral or any part thereof) designated in the notice referred to above. Agent and its agents and any purchasers at or after foreclosure are hereby granted a non-exclusive, irrevocable, perpetual, fully paid, royalty-free license or other right, solely pursuant to the provisions of this Section 10.02, to use, without charge, Borrowers intellectual property that remains embedded or contained in the Collateral, including without limitation, labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any property of a similar nature, now or at any time hereafter owned or acquired by Borrower or in which Borrower now or at any time hereafter has any rights; provided, however, such license shall only be exercisable in connection with the disposition of Collateral upon Agents or Lenders exercise of their remedies hereunder. To the extent permitted by applicable law, any such sale or sales may be adjourned from time to time by announcement at the time and place appointed for such sale or sales, or for any such adjourned sale or sales, without further published notice, and Borrower, Agent, Lenders, or the holder or holders of the Note, or of any interest therein, may bid and become the purchaser at any such sale; and (iii) Agent or Lenders may proceed to protect and enforce this Agreement and the other Transaction Documents by suit or suits or proceedings in equity, at law or in bankruptcy, and whether for the specific performance of any covenant or agreement herein contained or in execution or aid of any power herein granted; or for foreclosure hereunder, or for the appointment of a receiver or receivers for any real property security or any part thereof, or for the recovery of judgment for the Obligations or for the enforcement of any other proper, legal or equitable remedy available under applicable law. With respect to any of Borrowers owned premises, if any, Borrower hereby grants Agent a license to enter into possession of such premises and to occupy the same, without charge, for up to one hundred twenty (120) days in order to exercise any of Agents or Lenders rights or remedies provided herein, at law, in equity, or otherwise.
Section 10.03. Agents Liability for Collateral. So long as Agent and the Lenders comply with their obligations, if any, under the Code and otherwise comply with reasonable banking practices regarding the safe keeping of the Collateral in the possession or under the control of Agent or Lenders, neither Agent nor Lenders shall in any way or manner be liable or responsible for: (i) the safekeeping of the Collateral; (ii) any loss or damage thereto occurring or arising in any manner of fashion from any cause other than Agents or such Lenders gross negligence or willful misconduct; (iii) any diminution in the value thereof; or (iv) any act or default of any carrier, warehouseman, bailee, forwarding agency, or other Person whomsoever. All risk of loss, damage or destruction of the Collateral shall be borne by Borrower.
Section 10.04. Application of Collateral Proceeds. The proceeds of the Collateral, or any part thereof, resulting from Agents or Lenders exercise of remedies hereunder (as well as any other amounts of any kind held by Agent at the time of, or received by Agent after, the occurrence of an Event of Default hereunder) shall be paid to and applied as follows: (i) First, to the payment of reasonable costs and expenses, including all amounts expended to preserve the value of the Collateral, of foreclosure or suit, if any, and of such sale and the exercise of any other rights or remedies, and of all proper fees, expenses, liability and advances, including reasonable legal expenses and attorneys fees, incurred or made hereunder by Agent or Lenders; (ii) Second, to the payment to Lenders pro rata in accordance with the Loan Percentages of the amounts then owing or unpaid on the Notes, including each payment scheduled to be made under Sections 2.02(b) and 2.02(c) of this Agreement; (iii) Third, to the payment of other amounts then
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payable to Agent or Lenders under any of the Transaction Documents; and (iv) Fourth, to the payment of the surplus, if any, to Borrower, its successors and assigns, or to whomsoever may be lawfully entitled to receive the same. In the event that, notwithstanding the foregoing, proceeds of the Collateral shall be received by a Lender in excess of its ratable share, then the portion of such payment or distribution in excess of such Lenders ratable share shall be received by such Lender in trust for and shall be promptly paid over to the other Lenders ratably for application to the payments of amounts due to the other Lenders.
Section 10.05. Reinstatement of Rights. If Agent and Lenders shall have proceeded to enforce any right under this Agreement or any other Transaction Document by foreclosure, sale, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely, then and in every such case (unless otherwise ordered by a court of competent jurisdiction), Agent and Lenders shall be restored to their former position and their rights hereunder with respect to the property subject to the security interest created under this Agreement shall be reinstated.
Section 10.06. Agency for Perfection. Each Lender hereby appoints Agent and each other Lender as agent and bailee for the purpose of perfecting the security interests in and liens upon the Collateral in assets which, in accordance with the Code, can be perfected only by possession or control (or where the security interest of a secured party with possession or control has priority over the security interest of another secured party) and Agent and each Lender hereby acknowledges that it holds possession or control of any such Collateral for the benefit of the Agent as secured party. Should any Lender obtain possession or control of any such Collateral, such Lender shall notify the Agent thereof, and, promptly upon the Agents request therefor shall deliver possession or control of such Collateral to the Agent or in accordance with the Agents instructions. Borrower by its execution and delivery of this Agreement hereby consents to the foregoing.
Article 11. BORROWER LIABILITY.
Section 11.01. Borrower Liability. Any Borrower may, acting singly, request the Loan hereunder. Each Borrower hereby appoints the other as agent for the other for all purposes hereunder, including with respect to requesting the Loan hereunder. Each Borrower hereunder shall be jointly and severally obligated to repay the Loan made hereunder, regardless of which Borrower actually receives said Loan, as if each Borrower hereunder directly received the Loan. Each Borrower waives (a) any suretyship defenses available to it under the Code or any other applicable law, and (b) any right to require Agent or the Lenders to: (i) proceed against any Borrower or any other person; (ii) proceed against or exhaust any security; or (iii) pursue any other remedy. Agent and the Lenders may exercise or not exercise any right or remedy it has against any Borrower or any security it holds (including the right to foreclose by judicial or non-judicial sale) without affecting any Borrowers liability. Notwithstanding any other provision of this Agreement or other related document, so long as any Obligation remains outstanding, each Borrower irrevocably subordinates in priority and payment to the indefeasible repayment in full in cash of the Obligations all rights that it may have at law or in equity (including, without limitation, any law subrogating Borrower to the rights of Lenders and Agent under this Agreement) to seek contribution, indemnification or any other form of reimbursement from any other Borrower, or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise. Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section 11.01 shall be null and void. If any payment is made to a Borrower in contravention of this Section 11.01, such Borrower shall hold such payment in trust for Agent and the Lenders and such payment shall be promptly delivered to Agent and Lenders for application to the Obligations, whether matured or unmatured.
Article 12. MISCELLANEOUS.
Section 12.01. Modifications, Amendments or Waivers. The provisions of any Transaction Document may be modified, amended or waived only by a written instrument signed by the parties thereto.
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Section 12.02. No Implied Waivers; Cumulative Remedies; Writing Required. No delay or failure of any party hereto in exercising any right, power or remedy hereunder shall affect or operate as a waiver thereof; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power or remedy preclude any further exercise thereof or of any other right, power or remedy. The rights and remedies hereunder of Agent and the Lenders are cumulative and not exclusive of any rights or remedies which they would otherwise have. Any waiver, permit, consent or approval of any kind or character of any breach or default under this Agreement or any such waiver of any provision or condition of this Agreement must be in writing and shall be effective only in the specified instance and to the extent specifically set forth in such writing.
Section 12.03. Reimbursement. Borrower shall reimburse Agent and the Lenders for all costs and expenses, including without limitation, reasonable attorneys fees and disbursements expended or incurred in any arbitration, mediation, judicial reference, legal action or otherwise in connection with (i) the negotiation, documentation, execution and delivery of this Agreement, the other Transaction Documents and the transactions contemplated hereby in an amount not to exceed $40,000 through and including the Closing Date, (ii) the amendment and enforcement of the Transaction Documents, including without limitation during any workout, attempted workout and/or in connection with the rendering of legal advice as to Agents or Lenders rights, remedies and obligations under the Transaction Documents, (iii) enforcing the Transaction Documents or collecting any sum which becomes due Agent or Lender under any Transaction Document, (iv) any proceeding for declaratory relief, any counterclaim to any proceeding, or any appeal, or (v) the protection, preservation or enforcement of any rights of Agent or Lenders. For the purpose of this section, attorneys fees shall include, without limitation, fees incurred in connection with the following: (1) contempt proceedings; (2) 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) post-judgment 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 by Borrower upon demand by Agent, and if not paid within thirty (30) days of presentation of invoices shall bear interest at the highest applicable Default Rate.
Section 12.04. Indemnification. Borrower shall indemnify, reimburse and hold Agent and the Lenders and their permitted assigns, each of Agents, Lenders or their permitted assigns members, and each of their respective successors, assigns, agents, officers, directors, shareholders, members, servants, agents and employees harmless from and against all liabilities, losses, damages, actions, suits, demands, claims of any kind and nature (including claims relating to environmental discharge, cleanup or compliance), all costs and expenses whatsoever to the extent they may be incurred or suffered by such indemnified party in connection therewith (including reasonable attorneys fees and expenses), fines, penalties (and other charges of applicable governmental authorities), licensing fees relating to any item of Collateral, damage to or loss of use of property (including consequential or special damages to third parties or damages to Borrowers property), or bodily injury to or death of any person (including any agent or employee of Borrower) (each, a Claim), directly or indirectly relating to or arising out of the use of the proceeds of the Loan, including the falsity of any representation or warranty of Borrower or Borrowers failure to comply with the terms of this Agreement or any other Transaction Document; provided, however, that Borrower shall not indemnify Agent or any Lender for any liability incurred by such Person as a result of that Persons gross negligence or willful misconduct. Such indemnities shall continue in full force and effect, notwithstanding the expiration or termination of this Agreement. Upon Agents written demand, Borrower shall assume and diligently conduct, at its sole cost and expense, the entire defense of Agent or any Lender and its permitted assigns, each of Agents, Lenders or their permitted assigns members, and each of their respective successors, assigns, agents, officers, directors, shareholders, members, servants, agents and employees against any indemnified Claim described in this Section 12.04. Borrower shall not settle or compromise any Claim against or involving Agent or any Lender without first obtaining such Persons written consent thereto, which consent shall not be unreasonably withheld. The obligations in this Section 12.04 shall survive payment of all other Obligations until all applicable statute of limitation periods with respect to actions that may be brought against Agent or Lenders have run. All amounts owing under this Section 12.04 shall be paid within thirty (30) days after written demand.
Section 12.05. Limitation on Damages. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS LOAN AGREEMENT OR ANYWHERE ELSE, NO PARTY TO THIS AGREEMENT SHALL SEEK FROM AGENT OR ANY OTHER PARTY TO THIS AGREEMENT UNDER ANY THEORY OF LIABILITY (INCLUDING ANY THEORY IN TORTS), ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES.
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Section 12.06. Notices. All notices and other communications given to or made upon any party hereto in connection with this Agreement shall be in writing and shall be delivered by certified mail, postage prepaid, return receipt requested, by a nationally recognized overnight courier, by facsimile, by electronic mail or other means of electronic communication or personally delivered to the respective parties, as follows:
Borrower: | Agent: | |
MAVENIR SYSTEMS, INC. MAVENIR HOLDINGS, INC. MAVENIR SYSTEMS IP HOLDINGS, LLC 1700 International Parkway, Suite 200 Richardson, TX 75081 Telephone: 469-919-4393 Fax: 469-916-4397 Email: sam@mavenir.com Attention: Sam Garrett, General Counsel |
SILVER LAKE WATERMAN FUND, L.P
2775 Sand Hill Road, Suite 100 Menlo Park, CA 94024 Telephone: 415-525-8705 Fax: 415-956-8233 Email: SLWContracts@silverlake.com Attention: Contract Administration |
With a copy to :
ANDREWS KURTH LLP
111 Congress Avenue, Suite 1700
Austin, TX 78701
Telephone : 512-320-9229
Fax : 512-542-5219
Email : alanbickerstaff@andrewskurth.com
Attention : Alan Bickerstaff
or in accordance with any subsequent written direction from either party to the other. All such notices and other communications shall be effective, (i) in the case of delivery by messenger or overnight delivery service, when left at the appropriate address; (ii) in the case of facsimile transmission, upon the senders receipt of electronic confirmation of receipt; (iii) in the case of electronic mail, upon the senders receipt of an acknowledgement from the intended recipient (such as by the return receipt requested function, as available, return e-mail or other written acknowledgement), and (iv) in all other cases, upon actual receipt however evidenced.
Section 12.07. Lenders and Allocations of Loan. Notwithstanding anything herein to the contrary, each Lender severally commits to make such Lenders Loan Percentage of the Loan. No Lender shall have liability for the commitment to make loans of any other Lender. Borrower agrees that by notice to Borrower, Agent or a Lender may reallocate the Loan Percentages among the Lenders or among the Lenders and other investment funds affiliated with Agent or a Lender. Whether or not specified in any provision of this Agreement, all references to Agent in this Agreement shall mean Agent for the benefit of the Lenders unless the context otherwise requires.
Section 12.08. Severability. If any provision of any Transaction Document is held invalid or unenforceable to any extent or in any application, the remainder of such Transaction Document and all other Transaction Documents, or the application of such provision to different Persons or circumstances or in different jurisdictions, shall not be affected thereby.
Section 12.09. Reliance by Agent and the Lenders. All covenants, agreements, representations and warranties made herein by Borrower shall be deemed to be material to and have been relied upon by Agent and the Lenders, notwithstanding investigation by Agent.
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Section 12.10. No Set-Offs by Borrower. All sums payable by Borrower pursuant to this Agreement or any of the other Transaction Documents shall be payable without notice or demand and shall be payable without set-off or deduction in any manner whatsoever.
Section 12.11. Survival. All representations, warranties, covenants and agreements of Borrower contained herein or made in writing in connection herewith shall survive the execution and delivery of the Transaction Documents, the making of the Loan hereunder, the granting of security and the issuance of the Notes.
Section 12.12. Confidentiality. Agent and the Lenders agree to hold non-public information received in confidence and shall not disclose such information to third parties except to their employees, members, partners or the partners of its affiliated investment funds, their lenders, and professional advisors to the foregoing, including attorneys and accountants, and others under a similar duty of confidentiality, and as Agent may deem necessary in its reasonable judgment to satisfy its legal obligations or to enforce Agents or Lenders rights under any Transaction Document. Borrower acknowledges that Lenders may issue press releases, advertisements, and other promotional materials, either in print or on Lenders website(s), describing any successful outcome of services provided on Borrowers behalf. Borrower agrees that Lenders shall have the right to identify Borrower by name and use Borrowers corporate logo in those materials, solely for marketing purposes.
Section 12.13. Choice of Law and Venue; Jury Trial Waiver. THIS LOAN AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. BORROWER, AGENT AND THE LENDERS HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN NEW YORK. BORROWER, AGENT AND THE LENDERS HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. Nothing in this Agreement shall be deemed to operate to preclude Agent and the Lenders from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Agent and the Lenders. Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in Section 12.06 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrowers actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH HEREINABOVE, AGENT AND THE LENDERS SHALL SPECIFICALLY HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH AGENT AND THE LENDERS DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE AGENTS AND THE LENDERS RIGHTS AGAINST BORROWER OR ITS PROPERTY
Section 12.14. Successors and Assigns. This Agreement and the other Transaction Documents shall be binding upon and inure to the benefit of Agent and the Lenders, all future holders of the Note, Borrower and their respective successors and permitted assigns, except that Borrower may not assign or transfer its rights hereunder or thereunder or any interest herein or therein without the prior written consent of Agent. Agent or Lenders may grant a security interest or assign all or any portion of their rights hereunder and under one or more Notes, without the consent of Borrower, including to any of its affiliated investment funds or affiliated companies or to any one or more financial institutions or funds or companies or an agent or trustee for such financial institutions or funds or companies (an
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Assignee) and may sell to any of its affiliated investment funds or affiliated companies or to any one or more financial institutions or funds or companies or an agent or trustee for such financial institutions or funds or companies (a Participant) participation interests in Agents or Lenders rights hereunder and under one or more Notes, provided, that in no event may Agent or Lenders assign any portion of their rights hereunder to a competitor of Borrower. Agent and the Lenders may disclose the Transaction Documents and any other financial or other information relating to Borrower or any Subsidiary to any potential Assignee or Participant, provided that such Assignee or Participant agrees to protect the confidentiality of such documents and information using the same measures that it uses to protect its own confidential information and otherwise conform to the requirements of Section 12.12.
Section 12.15. Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which, when so executed and delivered, shall be an original, but all such counterparts shall together constitute one and the same instrument.
Section 12.16. Further Assurances. Borrower will, at its own expense and at Agents request, from time to time do, execute, acknowledge and deliver all and every further acts, deeds, conveyances, transfers and assurances, and all financing and continuation statements and similar notices, reasonably necessary or proper for the perfection of the security interest being herein provided for in the Collateral, whether now owned or hereafter acquired.
Section 12.17. Entire Agreement. This Agreement and each of the other Transaction Documents, taken together, constitute and contain the entire agreement of Borrower, Agent and the Lenders and supersede any and all prior agreements, negotiations, correspondence, understandings and communications among the parties, whether written or oral, respecting the subject matter hereof.
Section 12.18. Termination of Security Interest and Agreement. Upon the payment in full of all Obligations (other than inchoate indemnity obligations and obligations arising under the Warrant) and the termination of any commitment to make the Loan, this Agreement and the security interest granted herein shall terminate and all rights to the Collateral shall revert to Borrower; provided, however, that provisions set forth herein which, by their nature, are intended to be performed after such termination, shall survive the termination of this Agreement. Upon transmission of such payment and Agents or Lenders written verification to Borrower of receipt of such payment, which verification shall not be unreasonably delayed, withheld or conditioned, Agent and Lenders hereby authorize Borrower to file any UCC termination statements necessary to effect such termination and Agent and Lenders will return any Collateral in its possession to Borrower and will execute and deliver to Borrower any additional documents or instruments as Borrower shall reasonably request to evidence such termination.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
AGENT: | BORROWER: | |||||||
SILVER LAKE WATERMAN FUND, L.P., | MAVENIR SYSTEMS, INC., | |||||||
a Delaware limited partnership | a Delaware corporation | |||||||
By: | SILVER LAKE TECHNOLOGY ASSOCIATES | |||||||
WATERMAN, L.L.C., | ||||||||
its General Partner | ||||||||
By: | By: | /s/ Terry Hungle | ||||||
Name: | Name: | Terry Hungle | ||||||
Title: | Title: | Chief Financial Officer | ||||||
LENDERS: | BORROWER: | |||||||
SILVER LAKE WATERMAN FUND, L.P., | MAVENIR HOLDINGS, INC., | |||||||
a Delaware limited partnership | a Delaware corporation | |||||||
By: | SILVER LAKE TECHNOLOGY ASSOCIATES | |||||||
WATERMAN, L.L.C., | ||||||||
its General Partner | ||||||||
By: | By: | /s/ Terry Hungle | ||||||
Name: | Name: | Terry Hungle | ||||||
Title: | Title: | Secretary and Chief Financial Officer | ||||||
BORROWER: | ||||||||
MAVENIR SYSTEMS IP HOLDINGS, LLC, | ||||||||
a Delaware limited liability company | ||||||||
By: | /s/ Terry Hungle | |||||||
Name: | Terry Hungle | |||||||
Title: | Vice President |
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
AGENT: | BORROWER: | |||||||
SILVER LAKE WATERMAN FUND, L.P., | MAVENIR SYSTEMS, INC., | |||||||
a Delaware limited partnership | a Delaware corporation | |||||||
By: | SILVER LAKE TECHNOLOGY ASSOCIATES | |||||||
WATERMAN, L.L.C., | ||||||||
its General Partner | ||||||||
By: | /s/ Richard Stubblefield | By: | /s/ Terry Hungle | |||||
Name: | Richard D. Stubblefield | Name: | Terry Hungle | |||||
Title: | Managing Director | Title: | Chief Financial Officer | |||||
LENDERS: | BORROWER: | |||||||
SILVER LAKE WATERMAN FUND, L.P., | MAVENIR HOLDINGS, INC., | |||||||
a Delaware limited partnership | a Delaware corporation | |||||||
By: | SILVER LAKE TECHNOLOGY ASSOCIATES | |||||||
WATERMAN, L.L.C., | ||||||||
its General Partner | ||||||||
By: | /s/ Richard Stubblefield | By: | /s/ Terry Hungle | |||||
Name: | Richard D. Stubblefield | Name: | Terry Hungle | |||||
Title: | Managing Director | Title: | Secretary and Chief Financial Officer | |||||
BORROWER: | ||||||||
MAVENIR SYSTEMS IP HOLDINGS, LLC, | ||||||||
a Delaware limited liability company | ||||||||
By: | /s/ Terry Hungle | |||||||
Name: | Terry Hungle | |||||||
Title: | Vice President |
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Schedule 1 | Lenders | |
Schedule 2 | Account Information | |
Exhibit A- | Form Secured Promissory Note | |
Exhibit B- | Collateral Description | |
Exhibit C- | Form Opinion of Counsel | |
Exhibit D- | Form Compliance Certificate | |
Exhibit E- | Form Incumbency Certificate | |
Exhibit F- | Form Notice of Advance Request | |
Exhibit G- | Form Perfection and Disclosure Certificate | |
Exhibit H- | Form Warrant | |
Exhibit I- | Form ACH Authorization | |
Exhibit J- | Form SBA Documents |
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SCHEDULE I
Lenders |
Loan Percentage | |||
SILVER LAKE WATERMAN FUND, L.P. |
100 | % |
SCHEDULE 2
Account for Disbursements to Borrower:
Credit: | MAVENIR SYSTEMS, INC. | |
Bank Name: | Silicon Valley Bank | |
Bank Address: | 3003 Tasman Drive | |
Santa Clara, CA 95054 | ||
Account Number: | ############## | |
ABA Routing Number: | ############## | |
Reference: | SILVER LAKE WATERMAN FUND, L.P. Loan |
All regularly scheduled payments due to Agent and Lenders shall be effected by automatic debit of the appropriate funds from Borrowers Primary Operating Account set forth below:
Account Holder: | MAVENIR SYSTEMS, INC. | |
Bank Name: | Silicon Valley Bank | |
Bank Address: | 3003 Tasman Drive | |
Santa Clara, CA 95054 | ||
Account Number: | ############## | |
ABA Routing Number: | ############## | |
Reference: | Mavenir Systems, Inc. |
All payments to Agent and Lenders other than regularly scheduled payments may be made via wire transfer as follows:
Wire Transfer Payment | ||
Credit: | SILVER LAKE WATERMAN FUND, L.P. | |
Bank Name: | Silicon Valley Bank | |
Bank Address: | 3003 Tasman Drive | |
Santa Clara, CA 95054 | ||
Account Number: | ############## | |
ABA Routing Number: | ############## | |
Reference: | ____________________ |
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EXHIBIT A
SECURED PROMISSORY NOTE
(Growth Capital Loan)
$15,000,000 | Dated: , 2013 |
FOR VALUE RECEIVED, the undersigned, MA VENIR SYSTEMS, INC., a Delaware corporation (Mavenir), and MAVENIR HOLDINGS, INC., a Delaware corporation (Holdings) and MAVENIR SYSTEMS IP HOLDINGS, LLC, a Delaware limited liability company (together with Mavenir and Holdings, individually and collectively, jointly and severally, the Borrower), HEREBY PROMISES TO PAY to the order of SILVER LAKE WATERMAN FUND, L.P. (Lender) the principal amount of Fifteen Million Dollars ($15,000,000.00) advanced to Borrower pursuant to the Loan and Security Agreement referred to below (as amended, restated or otherwise modified from time to time, the Loan Agreement), plus all other payments arising under Section 2.02 (excluding the portion of the payments representing the principal amounts) of the Loan Agreement with respect to such Loan, on the dates and in the amounts set forth in the Loan Agreement. Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Loan Agreement.
The interest rate per annum for the Loan evidenced by this Note determined in accordance with the Loan Agreement is 12%. All payments due under this Note or under the Loan Agreement shall be payable as and when specified in the Loan Agreement.
This Note is one of the notes referred to in, and is entitled to the benefits of, the Loan and Security Agreement, dated as of June , 2013 among Borrower, Agent and the Lenders. This Note and the obligation of Borrower to repay the unpaid principal amount of the Loan, interest on the Loan, premium, if any, and all other amounts due Agent and Lenders under the Loan Agreement is secured under the Loan Agreement.
Presentment for payment, demand, notice of protest and all other demands and notices of any kind in connection with the execution, delivery, performance and enforcement of this Note are hereby waived.
Borrower shall pay all reasonable fees and expenses, including, without limitation, reasonable attorneys fees and costs, incurred by Agent or any Lender in the enforcement or attempt to enforce any of Borrowers obligations hereunder not performed when due. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of its officers thereunto duly authorized on the date hereof.
MAVENIR SYSTEMS, INC., | ||
a Delaware corporation | ||
By: |
| |
Name: |
| |
Title: |
| |
MAVENIR HOLDINGS, INC., a Delaware corporation | ||
By: |
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-2-
Name: |
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Title: |
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MAVENIR SYSTEMS IP HOLDINGS, LLC, a Delaware limited liability company | ||
By: |
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Name: |
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Title: |
|
-3-
EXHIBIT B
COLLATERAL DESCRIPTION
The Collateral consists of all right, title and interest in and to the following property, whether now existing or hereafter acquired:
All accounts, chattel paper, commercial tort claims listed on any Attachment 1 hereto, deposit accounts and cash, documents, equipment, general intangibles, goods, instruments, inventory, investment property, letter-of-credit rights, and, to the extent not otherwise included, all proceeds and products of any and all of the foregoing. Each of the foregoing terms defined in the Uniform Commercial Code of the State of New York shall have the respective meanings given to such terms therein.
Notwithstanding the foregoing, the Collateral does not include the Excluded Property.
-4-
Attachment 1
Commercial Tort Claims
[None.]
-5-
EXHIBIT C
OPINIONS
1. Borrower is a corporation or limited liability company, duly organized, validly existing and in good standing under the laws of the State of Delaware and Mavenir and Holdings are duly qualified to do business and in good standing in the State of Texas.
2. Borrower has the requisite corporate power and authority to execute, deliver and perform the Transaction Documents and to issue the Warrant. All action on the part of Borrower, its directors and its shareholders necessary for the authorization, execution, delivery and performance of the Transaction Documents, has been taken. The Transaction Documents have been duly executed and delivered by an authorized officer of Borrower.
3. The execution, delivery and performance of the Transaction Documents do not conflict with or violate any provision of Borrowers Certificate of Incorporation or Bylaws or of applicable law and, to the best of our knowledge, do not conflict with or constitute a default under any provision of any judgment, writ, decree, order or material agreement, indenture, or instrument to which Borrower is a party or by which it is bound.
4. The Transaction Documents constitute legal, valid and binding obligations of Borrower, enforceable in accordance with their respective terms. Except for filings which are necessary to perfect the security interests granted under certain of the Transaction Documents and such other filings, authorizations or approvals as are specifically contemplated by the Transaction Documents, to our knowledge, no filing need be made with any governmental authority with respect to the Transaction Documents.
5. The Common Stock issuable upon exercise of the Warrant have been duly authorized and reserved for issuance upon such exercise, and when issued in accordance with the terms of the Warrant, will be duly authorized, validly issued, fully paid and non-assessable.
EXHIBIT D
FORM OF COMPLIANCE CERTIFICATE
The undersigned, to induce Silver Lake Waterman Fund, L.P. (Agent) and the Lenders to extend or continue financial accommodations to Mavenir Systems, Inc., Delaware corporation (Mavenir), and Mavenir Holdings, Inc., a Delaware corporation (together with Mavenir, individually and collectively, jointly and severally, the Borrower), pursuant to the terms of that certain Loan and Security Agreement dated , 2013 (the Loan Agreement), hereby certifies that on the date hereof:
1. | I am a duly elected and authorized officer of Borrower. |
2. | The information submitted herewith is in fact what it purports to be, and all financial statements have been prepared in accordance with GAAP consistently applied from one period to the next, except, in the case of unaudited financial statements, for the absence of footnotes and subject to year-end adjustments. |
3. | The information delivered herewith is true, correct and complete. |
4. | Borrower is currently able to meet its obligations as they come due. |
5. | All representations and warranties in the Loan Agreement are true and correct in all material respects on this date except as noted below; provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date. |
6. | I understand that Agent and Lenders are relying upon the truthfulness, accuracy and completeness hereof in connection with the Loan Agreement. |
7. | I will advise you if it comes to my attention that, as of the date hereof, the information submitted herewith was not in fact true, correct and complete. |
IN WITNESS WHEREOF, the undersigned has executed this Compliance Certificate on , 20 .
MAVENIR SYSTEMS, INC. | ||
By: |
| |
Name: |
| |
Title:. |
| |
MAVENIR HOLDINGS, INC. | ||
By: |
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Name: |
| |
Title: |
|
MAVENIR SYSTEMS IP HOLDINGS, LLC | ||
By: |
| |
Name: |
| |
Title: |
|
EXHIBIT E
INCUMBENCY CERTIFICATE
The undersigned, , hereby certifies on behalf of the Company (defined below) that:
1. He/She is the duly elected and acting of , a Delaware corporation (the Company).
2. That on the date hereof, each person listed below holds the office in the Company indicated opposite his or her name and that the signature appearing thereon is the genuine signature of each such person:
NAME |
OFFICE |
SIGNATURE | ||
|
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| ||
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3. Attached hereto as Exhibit A is a true and correct copy of the Certificate of Incorporation of the Company, as amended, as in effect as of the date hereof.
4. Attached hereto as Exhibit B is a true and correct copy of the Bylaws of the Company, as amended, as in effect as of the date hereof.
5. Attached hereto as Exhibit C is a copy of the resolutions of the Board of Directors of the Company authorizing and approving the Companys execution, delivery and performance of a loan facility with Silver Lake Waterman Fund, L.P.
IN WITNESS WHEREOF, the undersigned has executed this Incumbency Certificate on , 2013.
By: |
| |
Name: |
| |
Title: |
|
I, the of the Company, do hereby certify that is the duly qualified, elected and acting of the Company and that the above signature is his or her genuine signature.
IN WITNESS WHEREOF, the undersigned has executed and delivered this Incumbency Certificate on , 2013.
By: |
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Name: |
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Title: |
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EXHIBIT F
NOTICE OF ADVANCE REOUEST
, 2013
Silver Lake Waterman Fund, L.P.
2775 Sand Hill Road, Suite 100
Menlo Park, CA 94024
Attn.: Contract Administration
Contract Administration:
Reference is made to the Loan and Security Agreement dated as of the date hereof (as it may be amended from time to time, the Loan Agreement, initially capitalized terms used herein have the meanings ascribed therein), among Silver Lake Waterman Fund, L.P., as agent for the Lenders identified on Schedule 1 thereto, the Lenders, Mavenir Systems, Inc. (the Company) and Mavenir Holdings, Inc.
The undersigned is the of the Company, and hereby irrevocably requests an Advance under the Loan Agreement and in that connection certifies as follows:
1. The amount of the proposed Advance is $15,000,000, and will be advanced on .
2. As of this date, no Event of Default, or event which with notice or the passage of time would constitute an Event of Default, has occurred and is continuing, or will result from the making of the proposed Advance, and the representations and warranties of the Company contained in Article 5 of the Loan Agreement are true and correct in all material respects, except to the extent such representations and warranties expressly refer to an earlier date, in which case they were true and correct in all material respects as of such earlier date.
3. No event that could reasonably be expected to have a material adverse effect on the ability of Borrower to fulfill its obligations under the Loan Agreement 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 Advance if any of the matters to which I have certified above shall not be true and correct on the Funding Date.
Very truly yours, | ||
MAVENIR SYSTEMS, INC. | ||
By: |
| |
Name: |
| |
Title: |
|
EXHIBIT G
FORM OF PERFECTION AND DISCLOSURE CERTIFICATE
PERFECTION AND DISCLOSURE CERTIFICATE
OF
MAVENIR SYSTEMS, INC.
The undersigned, Terry Hungle, Chief Financial Officer of MAVENIR SYSTEMS, INC. (Mavenir) and MAVENIR HOLDINGS, INC. (Holdings), and Treasurer and Vice President of MAVENIR SYSTEMS IP HOLDINGS, LLC (Mavenir IP, and together with Mavenir and Holdings, the Company) hereby certifies as of June 4, 2013 with reference to the Loan and Security Agreement dated as of June 4, 2013 (the Loan Agreement), among the Company, SILVER LAKE WATERMAN, L.P., as agent (Agent), and the Lenders named therein (capitalized terms defined in the Loan Agreement being used herein as therein defined), to the Agent as follows (for purposes of this Perfection and Disclosure Certificate:
1. | Names and Identifying Information. |
(a) | The exact legal name of the Company as it appears in its articles or certificate of incorporation, as amended to date, is as follows: |
Mavenir Systems, Inc.
Mavenir Holdings, Inc.
Mavenir Systems IP Holdings, LLC
(b) | The following is a list of all other names (including trade names or similar appellations) used by the Company, or any of its divisions or other business units, or any other business or organization to which the Company became the successor by merger, consolidation, acquisition, change in form, nature or jurisdiction of organization or otherwise, now or at any time during the past five years together with the dates such names were used: |
Mavenir Holdings, Inc. was formerly known as Airwide Solutions, Inc. prior to May 26,2011.
(c) | The following is a list of all subsidiaries of the Company (whether wholly owned, or where the Company has a controlling or majority interest): |
Mavenir Systems North America Ltd., Mavenir Systems (Shanghai) Co., Ltd., Mavenir Systems Private Limited, Mavenir Systems Holdings Ltd., Mavenir Systems Oy, Mavenir Systems S.L., Mavenir Systems Pte. Ltd., Mavenir Systems UK Ltd., Mavenir Systems Australia Pty. Limited, Mavenir Systems (Malaysia) Sdn. Bhd., Airwide Solutions India Private Limited, Mavenir Systems d.o.o., Mavenir Systems GmbH, Mavenir Holdings (MA), LLC, Mavenir Systems Czech Republic S.r.o. *, Mavenir Systems Netherlands B.V. *, Mavenir Systems Austria GmbH*
* | Denotes entities which may be acquired or formed prior to or following closing. |
(d) | The following is the type of organization of the Company: |
Mavenir Systems, Inc. is a corporation.
Mavenir Holdings, Inc. is a corporation.
Mavenir Systems IP Holdings, LLC is a limited liability company.
(e) | The jurisdiction of organization of the Company is as follows: |
Delaware
(f) | The following is the Companys state issued organizational identification number, if any: |
Mavenir Systems, Inc. - 4134477
Mavenir Holdings, Inc. - 3291167
Mavenir Systems IP Holdings, LLC - 5221005
(g) | The Companys federal taxpayer identification number is: |
Mavenir Systems, Inc. - 61-1489105
Mavenir Holdings, Inc. - 98-0346517
Mavenir Systems IP Holdings, LLC - 46-1398662
(i) | Attached hereto as Schedule A is the information required above for any other business or organization to which the Company became the successor by merger, consolidation, acquisition, change in form, nature or jurisdiction of organization or otherwise, now or at any time during the past five (5) years. |
2. | Bank and Securities Accounts. The Company currently maintains its bank and investment accounts at: |
(b) | Bank Accounts |
Depository Bank |
Bank Address |
Type of Account |
Acct. No. | |||
Mavenir Systems, Inc | ||||||
Silicon Valley Bank | 14185 Dallas Parkway | DDA | ############## | |||
Dallas, Tx | ||||||
Comerica Bank | 1717 Main Street | DDA, CD | ############## | |||
Dallas, Texas | ||||||
Mavenir Holdings, Inc | ||||||
Silicon Valley Bank | 14185 Dallas Parkway | DDA | ############## | |||
Dallas, Texas | ||||||
HSBC Canada | 1500-582 Chemin De | DDA | ############## | |||
Touraine, Boucheville | ||||||
Quebec, Canada |
(b) | Securities Accounts |
Financial Institution |
Address |
Type of Account |
Acct. No. |
2
3. | Current Locations. |
(a) | The following is the mailing address of the Company: |
Mailing Address |
City |
State | ||
1700 International Parkway, Suite 200 | Richardson, | Texas 75081 |
(b) | If different from its mailing address, the Companys place of business, or if more than one, its chief executive office is located at the following address: |
Mailing Address |
City |
State | ||
above |
(c) | If different from the addresses set forth in subparagraphs (a) and (b) above, the following are all other locations in which the Company maintains any books or records relating to any of the Collateral consisting of accounts, instruments, chattel paper, general intangibles or mobile goods: |
Mailing Address |
City |
State | ||
above |
(d) | If different from the addresses set forth in subparagraphs (a), (b) or (c) above, the following are all places of business of the Company and/or locations maintained by the Company where any Collateral consisting of equipment and/or inventory are located: |
Mailing Address |
City |
State | ||
above |
(e) | The following are the names and addresses of all persons or entities other than the Company (such as lessees, bailees, consignees, warehousemen, or purchasers of chattel paper), which have possession or are intended to have possession of any of the Collateral consisting of instruments, chattel paper, inventory or equipment and the nature of such partys possession (such as lessee, bailee, consignee, warehouseman, purchaser of chattel paper, or other): |
3
Name |
Mailing Address |
City |
State |
Nature of Possession | ||||
none |
4. | Prior Locations. (a) Set forth below is the information required by subparagraphs (a), (b), (c) and (d) of paragraph 3 with respect to each location or place of business previously maintained by the Company at any time during the past five (5) years in a state in which the Company has previously maintained a location or place of business: |
Mailing Address |
City |
State | ||
1651 N. Glenville Dr., Suite 216, Richardson, | TX 75081 |
(b) | Set forth below is the information required by subparagraph (e) of paragraph 3 with respect to each other location at which, or other person or entity with which, any of the Collateral consisting of instruments, chattel paper, inventory or equipment has been previously held at any time during the past twelve months: |
Name |
Mailing Address |
City |
State |
Nature of Possession | ||||
None |
5. | Fixtures. Attached hereto as Schedule B is the information required by U.C.C. §9-502(b) or former U.C.C. §9-402(5) of each state in which any of the Collateral consisting of fixtures are or are to be located and the name and address of each real estate recording office where a mortgage on the real estate on which such fixtures are or are to be located would be recorded. |
None
6. | No Unusual Transactions. Except for those purchases, acquisitions, and other transactions as set forth in Schedule A or Schedule B attached hereto, all of the Collateral has been originated by the Company in the ordinary course of the Companys business or consists of goods which have been acquired by the Company in the ordinary course from a person in the business of selling goods of that kind. |
7. | Litigation. Actions or proceedings pending or threatened in writing by or against Borrower or any Subsidiary in which an adverse decision could reasonably be expected to cause a Material Adverse Change: Eon Corp. IP Holdings, LLC v. Sensus USA, Inc. et al.: IP infringement suit filed by patent troll in September 2010; 16 current defendants, including Cisco, Motorola and Sprint; trial is currently scheduled for June 2014. |
8. | Commercial Tort Claims. The following is a brief written description of each commercial tort claim held by the Company: None |
4
9. | Indebtedness. The following is a listing of all existing Indebtedness of Borrower and its Subsidiaries: |
Silicon Valley Bank Indebtedness as of May 15, 2013 Total is $25,000,000, supported by guarantees from various Subsidiaries.
Intercompany Indebtedness owed by one or more Borrowers or Subsidiaries to one or more other Borrowers or Subsidiaries. Balances as of March 31, 2013 are reflected in the attached worksheet.
10. | Investments. The following is a listing of all existing Investments (including loans to third parties) of Borrower and its Subsidiaries: |
Equity Securities issued by the Subsidiaries of Borrower and its Subsidiaries.
Intercompany Indebtedness owed by one or more Borrowers or Subsidiaries to one or more other Borrowers of Subsidiaries.
11. | Liens. The following is a listing of all existing Liens of Borrower and its Subsidiaries: |
Liens securing the Silicon Valley Bank Indebtedness and other Permitted Liens.
12. | Capitalization. The following table sets forth Borrowers equity capitalization as of the date specified: |
Current as of June 3, 2013: See attached schedule.
Class or Series of Stock |
Authorized | Outstanding | Aggregate
Liquidation Preference |
|||||
Common |
||||||||
Series A Preferred |
||||||||
Options |
||||||||
Total: |
$ |
To the extent any item above is not completed, the response shall be deemed to be None.
The undersigned hereby acknowledges and agrees that the Agent and the Lenders are relying on the representations and warranties made herein.
5
IN WITNESS WHEREOF, I have executed this Perfection and Disclosure Certificate as of the date first written above.
MAVENIR SYSTEMS, INC. | ||
By:. | ||
Name: Terry Hungle | ||
Title: Chief Financial Officer | ||
MAVENIR HOLDINGS, INC. | ||
By: | ||
Name: Terry Hungle | ||
Title: Chief Financial Officer | ||
MAVENIR SYSTEMS IP HOLDINGS, LLC | ||
By: | ||
Name: Terry Hungle | ||
Title: Treasurer, Vice President |
6
SCHEDULE A
Airwide Solutions, Inc., a Delaware corporation, was merged with Mavenir Holdings, Inc. (Merger Sub), a Delaware corporation on May 26, 2011. Airwide Solutions, Inc. was the surviving entity and simultaneously changed its name to Mavenir Holdings, Inc.
The organizational identification number of Merger Sub was 4983924.
SCHEDULE B
Name of debtor: Mavenir Systems, Inc.
Name of secured party: Silver Lake Waterman, L.P.
Collateral to be covered by fixture filing: fixtures comprising part of the Collateral, as defined in the Loan Agreement.
Real Property: CENTRAL PARK, BLK E LT 1B-A ACS 3.834 as set forth in Deed recorded under Vol. 98079, P. 2818, Real Property Records of Dallas County, Texas
Record Owner: Telecom Commerce III, Ltd.
Recorders Office: Dallas County Clerks Office, 509 Main Street, 2nd Floor, Suite 200, Dallas, Texas 75202
7
Summary of Intercompany Balances (Translated to US $ at FX rate on Date of Measure)
As At September 30, 2012
A/R FROM BORROWERS / GUARANTORS | INTERCOMPANY POSITIONS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MS Holdings |
MS Inc |
US ENTITIES |
CANADA | UK Holdings |
UK Limited |
Singapore | TOTAL | Australia | Finland | India | China | Other | TOTAL | |||||||||||||||||||||||||||||||||||||||||||||||
Balances with Borr/Guar of SVB Facility |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MS Holdings |
2,850 | 2,850 | (10,693 | ) | (15,301 | ) | (3,523 | ) | 1,379 | (28,138 | ) | 7,641 | (19,135 | ) | (233 | ) | | (318 | ) | (12,046 | ) | |||||||||||||||||||||||||||||||||||||||
MS Inc |
(2,850 | ) | | (2,850 | ) | (521 | ) | | (1,607 | ) | | (2,128 | ) | | (490 | ) | (503 | ) | 54 | | (940 | ) | ||||||||||||||||||||||||||||||||||||||
Canada |
11,047 | 521 | 11,567 | | | (18,469 | ) | (860 | ) | 19,329 | (2,045 | ) | (2,031 | ) | | | 420 | (3,656 | ) | |||||||||||||||||||||||||||||||||||||||||
UK Holding |
7,384 | | 7,384 | | | 1,105 | | 1,105 | | | | | (1 | ) | (1 | ) | ||||||||||||||||||||||||||||||||||||||||||||
UK Ltd |
11,113 | 1,607 | 12,720 | 19,109 | (2,356 | ) | | 3,239 | 19,992 | (5,475 | ) | (12,472 | ) | 34 | | (3,087 | ) | (21,000 | ) | |||||||||||||||||||||||||||||||||||||||||
Singapore |
(1,379 | ) | | (1,379 | ) | 832 | | (3,242 | ) | | (2,410 | ) | (1 | ) | 7,727 | 86 | | 871 | 8,682 | |||||||||||||||||||||||||||||||||||||||||
| | 30,293 | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||
Balances with other subs |
| | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||
Australia |
(8,228 | ) | | (8,228 | ) | 2,132 | | 5,896 | 1 | 8,029 | | 1,556 | 74 | | 170 | 1,800 | ||||||||||||||||||||||||||||||||||||||||||||
Finland |
19,291 | 491 | 19,782 | 1,966 | | 12,478 | (7,727 | ) | 6,717 | (1,445 | ) | | | | 1,995 | 550 | ||||||||||||||||||||||||||||||||||||||||||||
India |
(233 | ) | 503 | 270 | | | (21 | ) | (86 | ) | (107 | ) | (68 | ) | | | | | (68 | ) | ||||||||||||||||||||||||||||||||||||||||
China |
| (54 | ) | (54 | ) | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||
Others |
318 | | 318 | (417 | ) | 1 | 2,857 | (871 | ) | 1,570 | (158 | ) | (1,032 | ) | | | | (1,190 | ) | |||||||||||||||||||||||||||||||||||||||||
| | 12,089 | | | | | 16,209 | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
TOTAL |
36,463 | 5,918 | 42,382 | 12,408 | (17,656 | ) | (4,526 | ) | (4,924 | ) | (14,699 | ) | (1,552 | ) | (25,879 | ) | (543 | ) | 54 | 368 | (27,552 | ) | 131 | |||||||||||||||||||||||||||||||||||||
As At March 31, 2013 |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A/R FROM BORROWERS / GUARANTORS | INTERCOMPANY POSITIONS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MS Holdings |
MS Inc |
US ENTITIES |
CANADA | UK Holdings |
UK Limited |
Singapore | TOTAL | Australia | Finland | India | China | Others | TOTAL | |||||||||||||||||||||||||||||||||||||||||||||||
Balances with Borr/Guar of SVB Facility |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MS Holdings |
| 808 | 808 | (10,074 | ) | (14,834 | ) | (4,548 | ) | 1,253 | (28,203 | ) | 8,145 | (18,138 | ) | (233 | ) | | (145 | ) | (10,372 | ) | ||||||||||||||||||||||||||||||||||||||
MS Inc |
(808 | ) | | (808 | ) | (1,032 | ) | | (1,451 | ) | (174 | ) | (2,557 | ) | (58 | ) | (667 | ) | (2,512 | ) | 3,270 | 866 | 898 | |||||||||||||||||||||||||||||||||||||
Canada |
10,074 | 1,036 | 11,110 | | | (21,228 | ) | (1,097 | ) | (22,325 | ) | (2,480 | ) | (1,594 | ) | | | (2 | ) | (4,075 | ) | |||||||||||||||||||||||||||||||||||||||
UK Holding |
14,974 | | 14,974 | | | 1,038 | | 1,038 | | | | | (15 | ) | (15 | ) | ||||||||||||||||||||||||||||||||||||||||||||
UK Ltd |
4,548 | 1,442 | 5,990 | 21,354 | (1,255 | ) | | 862 | 20,961 | (6,817 | ) | (9,174 | ) | 99 | | (1,381 | ) | (17,272 | ) | |||||||||||||||||||||||||||||||||||||||||
Singapore |
(1,253 | ) | 174 | (1,080 | ) | 1,097 | | (857 | ) | | 241 | 113 | 6,158 | 86 | | | 6,356 | |||||||||||||||||||||||||||||||||||||||||||
| | 30,995 | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||
Balances with other subs |
| | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||
Australia |
(8,149 | ) | 58 | (8,091 | ) | 2,480 | | 6,814 | (108 | ) | 9,186 | | 2,712 | 73 | | | 2,785 | |||||||||||||||||||||||||||||||||||||||||||
Finland |
18,309 | 667 | 18,976 | 1,594 | | 9,205 | (6,197 | ) | 4,601 | (2,712 | ) | | | | 1,094 | (1,618 | ) | |||||||||||||||||||||||||||||||||||||||||||
India |
233 | 2,539 | 2,772 | | | (99 | ) | (86 | ) | (185 | ) | (270 | ) | | | | | (270 | ) | |||||||||||||||||||||||||||||||||||||||||
China |
| (3,261 | ) | (3,261 | ) | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||
Others |
318 | (866 | ) | (547 | ) | (416 | ) | 19 | 3,426 | (1,222 | ) | 1,808 | | (1,113 | ) | | | | (1,113 | ) | ||||||||||||||||||||||||||||||||||||||||
| | 9,848 | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
TOTAL |
38,246 | 2,596 | 40,842 | 15,003 | (16,070 | ) | (7,700 | ) | (6,768 | ) | (15,535 | ) | (4,079 | ) | (21,817 | ) | (2,486 | ) | 3,270 | 416 | (24,697 | ) | 611 |
Change in Net Account from Sept 2012 to Mar 2013
US Books | Other Borrowers | Non Borrowers | ||||||||||||||
China Equity Contribution |
(3,208 | ) | 3208 | |||||||||||||
US / UK |
700 | -700 | ||||||||||||||
Ca/UK |
2510 | 0 | ||||||||||||||
UK/Sing |
2385 | 0 | ||||||||||||||
Fin/Uk |
-3273 | 3273 | ||||||||||||||
UK/Aus |
918 | -918 | ||||||||||||||
All Others |
969 | 2,219 | (2,708 | ) | ||||||||||||
Total Change |
(1,539 | ) | (836 | ) | 2,855 | |||||||||||
Net Funds flow to (from) borrowers Adjusted for China |
1,669 | (836 | ) |
Mavenir Systems, Inc.
Capitalization Table - By Type
Date: 6/3/2013
Type | Outstanding | Common Equivalents |
Total | Percentage Ownership (as converted, fully diluted) (1) |
||||||||||||||||
Preferred Stock (53,527,759 Authorized) |
||||||||||||||||||||
Series A Convertible Preferred Stock (26,137,758 Authorized) |
26,137,758 | 26,137,758 | 15.95 | % | ||||||||||||||||
Series B Convertible Preferred Stock (26,727,505 Authorized) |
26,727,505 | 26,727,505 | 16.31 | % | ||||||||||||||||
Series C Preferred Stock (24,683,530 Authorized) |
18,316,941 | 18,316,941 | 11.18 | % | ||||||||||||||||
Series D Preferred Stock (12,100,007 Authorized) |
12,100,007 | 12,100,007 | 7.39 | % | ||||||||||||||||
Series E Preferred (32,135,213 Authorized) |
31,885,207 | 31,885,207 | 19.46 | % | ||||||||||||||||
Subtotal |
115,167,418 | 115,167,418 | 115,167,418 | 70.30 | % | |||||||||||||||
Common Stock (155,203,902 Authorized) |
9,380,644 | 9,380,644 | 9,380,644 | 5.73 | % | |||||||||||||||
Warrants - Series B Preferred (0 Authorized) |
0 | 0 | 0 | 0.00 | % | |||||||||||||||
2005 Stock Plan (22,322, 760 Authorized) |
||||||||||||||||||||
Shares Authorized |
22,322,760 | |||||||||||||||||||
Granted |
31,372,691 | |||||||||||||||||||
Exercised |
4,626,269 | |||||||||||||||||||
Cancellations |
8,215,431 | |||||||||||||||||||
Repurchases |
830,000 | |||||||||||||||||||
Options Outstanding (Granted - Exercised - Cancellations) |
18,530,991 | 18,530,991 | 11.31 | % | ||||||||||||||||
Options Available for Grant (Authorized - Grants + Cancellations + Repurchases) |
-4,500 | -4,500 | 0.00 | % | ||||||||||||||||
Options Outstanding + Options Available |
18,526,491 | 18,526,491 | 18,526,491 | 11.31 | % | |||||||||||||||
2013 EQUITY INCENTIVE PLAN (13,470,939 Authorized) |
||||||||||||||||||||
Shares Authorized |
13,470,939 | |||||||||||||||||||
Granted |
950,468 | |||||||||||||||||||
Exercised |
0 |
Mavenir Systems, Inc.
Capitalization Table - By Type
Date: 6/3/2013
Cancellations |
13,500 | |||||||||||||||||||
Repurchases |
0 | |||||||||||||||||||
Options Outstanding (Granted - Exercised - Cancellations) |
936,968 | 936,968 | 0.57 | % | ||||||||||||||||
Options Available for Grant (Authorized - Grants + Cancellations + Repurchases) |
12,533,971 | 12,533,971 | 7.65 | % | ||||||||||||||||
Options Outstanding + Options Available |
13,470,939 | 13,470,939 | 13,470,939 | 8.22 | % | |||||||||||||||
Common Stock Warrants (920,000 Authorized) |
||||||||||||||||||||
Shares Authorized |
920,000 | |||||||||||||||||||
Granted |
940,000 | |||||||||||||||||||
Exercised |
0 | |||||||||||||||||||
Cancellations |
20,000 | |||||||||||||||||||
Repurchases |
0 | |||||||||||||||||||
Options Outstanding (Granted - Exercised - Cancellations) |
920,000 | 920,000 | 0.56 | % | ||||||||||||||||
Options Available for Grant (Authorized - Grants + Cancellations + Repurchases) |
0 | 0 | 0.00 | % | ||||||||||||||||
Options Outstanding + Options Available |
920,000 | 920,000 | 920,000 | 0.56 | % | |||||||||||||||
Warrants - Series C Preferred (6,366,589 Authorized) |
||||||||||||||||||||
Shares Authorized |
6,366,589 | |||||||||||||||||||
Granted |
6,366,588 | |||||||||||||||||||
Exercised |
0 | |||||||||||||||||||
Cancellations |
0 | |||||||||||||||||||
Repurchases |
0 | |||||||||||||||||||
Options Outstanding (Granted - Exercised - Cancellations) |
6,366,588 | 6,366,588 | 3.89 | % | ||||||||||||||||
Options Available for Grant (Authorized - Grants + Cancellations + Repurchases) |
1 | 1 | 0.00 | % | ||||||||||||||||
Options Outstanding + Options Available |
6,366,589 | 6,366,589 | 6,366,589 | 3.89 | % | |||||||||||||||
Total |
163,832,081 | 100.00 | % |
Mavenir Systems, Inc.
Capitalization Table - By Type
Date: 6/3/2013
(1) | Percentage ownership assuming all convertible securities are converted common stock, all notes are converted to common stock, all outstanding |
EXHIBIT H
FORM OF WARRANT
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 8 OF THIS WARRANT.
MAVENIR SYSTEMS. INC.
WARRANT
THIS CERTIFIES THAT, for value received and subject to the provisions and upon the terms and conditions set forth in this Warrant, SILVER LAKE WATERMAN FUND, L.P. and its assignees are entitled to subscribe for and purchase 1,362,858 shares of Common Stock of MAVENIR SYSTEMS, INC., a Delaware corporation (the Company), at the price of $0.001 per share (such price and such other price as shall result, from time to time, from the adjustments specified in 5 hereof is referred to as the Exercise Price).
1. Definitions. As used herein, capitalized terms not otherwise defined herein shall have the following respective meanings:
(a) Acquisition means any transaction or series of related transactions involving (i) any consolidation or merger of the Company with another entity (other than a merger or consolidation effected exclusively to change the Companys domicile) or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Companys (or the surviving or successor entitys) outstanding voting power immediately after such merger, consolidation or reorganization, or (ii) the sale of all or substantially all of the assets of the Company.
(b) Act means the Securities Act of 1933, as amended.
(c) Common Stock means the Common Stock of the Company.
(d) Date of Grant means June 4, 2013.
(e) Holder means the initial holder of this Warrant set forth in the first paragraph of this Warrant and any other person or entity which becomes a holder of this Warrant pursuant to the terms of this Warrant.
(f) IPO means the initial public offering of the Companys Common Stock effected pursuant to a registration statement on Form S-1 (or its successor) filed under the Act.
(g) Shares means the shares of Common Stock of Company issuable upon exercise of this Warrant.
2. Term. The purchase right represented by this Warrant is exercisable, in whole or in part, at any time and from time to time from the Date of Grant through the earlier of (i) the seventh anniversary of the Date of Grant, (ii) the third anniversary of the effective date of the registration statement filed in connection with the Companys IPO or (iii) the consummation of an Acquisition.
3. Method of Exercise; Payment; Issuance of New Warrant; Net Issuance.
(a) Subject to Section 2 hereof, the purchase right represented by this Warrant may be exercised by the Holder, in whole or in part and from time to time, at the election of the Holder, by (a) the delivery of the notice of exercise substantially in the form attached hereto as Exhibit A-1, duly completed and executed, at the principal office of the Company and by the payment to the Company, by certified or bank check, or by wire transfer to an account designated by the Company of an amount equal to the then applicable Exercise Price multiplied by the number of Shares then being purchased; (b) if in connection with a registered public offering of the Companys securities, the delivery of the notice of exercise form attached hereto as Exhibit A-2, duly completed and executed, at the principal office of the Company together with notice of arrangements reasonably satisfactory to the Company for payment to the Company from the proceeds of the sale of shares to be sold by the Holder in such public offering of an amount equal to the then applicable Exercise Price per share multiplied by the number of Shares then being purchased; or (c) exercise of the net issuance right provided for in Section 3{b) hereof. The person or persons in whose name(s) Shares shall be registered upon exercise of this Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the shares represented thereby (and such shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is exercised. In the event of any exercise of this Warrant, certificates for the shares of stock so purchased shall be delivered to the Holder as soon as possible and in any event within thirty (30) days after such exercise and, unless this Warrant has been fully exercised or expired, a new Warrant representing the portion of the Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder (subject to delivery of the old Warrant to the Company) as soon as possible and in any event within such thirty-day period; provided, however, that at such time as the Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, if requested by the Holder, the Company shall cause its transfer agent to deliver the certificate representing Shares issued upon exercise of this Warrant to, or credit the securities account of, a broker or other person (as directed by the Holder exercising this Warrant) within the time period required to settle any trade made by the Holder after exercise of this Warrant.
(b) Right to Convert Warrant into Stock: Net Issuance.
(i) Right to Convert. In addition to and without limiting the rights of the Holder under the terms of this Warrant, the Holder shall have the right to convert this Warrant or any portion thereof (the Conversion Right) into shares of Common Stock as provided in this Section 3(b) at any time or from time to time during the term of this Warrant. Upon exercise of the Conversion Right with respect to a particular number of shares subject to this Warrant (the Converted Warrant Shares), the Company shall deliver to the Holder (without payment by the Holder of any exercise price or any cash or other consideration) that number of shares of fully paid and nonassessable Common Stock as is determined according to the following formula:
X = |
B-A | |||
Y | ||||
Where: |
X = |
the number of shares of Common Stock that shall be issued to Holder | ||
Y = |
the fair market value of one share of Common Stock | |||
A = |
the aggregate Exercise Price of the specified number of Converted Warrant Shares immediately prior to the exercise of the Conversion Right (i.e., the number of Converted Warrant Shares multiplied by the Exercise Price) |
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B = | the aggregate fair market value of the specified number of Converted Warrant Shares (i.e., the number of Converted Warrant Shares multiplied by the fair market value of one Converted Warrant Share) |
(ii) Method of Exercise. The Conversion Right may be exercised by the Holder by the delivery by Holder of a written statement (which may be in the form of Exhibit A-1 or Exhibit A-2 hereto) specifying that the Holder thereby intends to exercise the Conversion Right and indicating the number of shares subject to this Warrant which are being surrendered (referred to in Section 3(b)(i) hereof as the Converted Warrant Shares) in exercise of the Conversion Right. Such conversion shall be effective upon receipt by the Company of the aforesaid written statement, or on such later date as is specified therein, and, at the election of the Holder, may be made contingent upon the closing of the sale of the Companys Common Stock to the public in a public offering pursuant to a registration statement under the Act (a Public Offering).
(iii) Determination of Fair Market Value. For purposes of this Section 3(b), fair market value of a share of Common Stock as of a particular date (the Determination Date) shall mean:
(1) If the Conversion Right is exercised in connection with and contingent upon a Public Offering, and if the Companys registration statement relating to such Public Offering (Registration Statement) has been declared effective by the Securities and Exchange Commission, then the initial Price to Public specified in the final prospectus with respect to such Public Offering.
(2) If the Conversion Right is exercised in connection with an Acquisition, then the fair market value shall be the value received in such Acquisition by the holders of Common Stock if the consideration is cash or stock for which there is a liquid public market, or if there is no liquid public market, then the fair market value shall be reasonably be determined in good faith by the board of directors of the Company.
(3) If the Conversion Right is not exercised in connection with and contingent upon a Public Offering or an Acquisition, then as follows:
(A) If regularly traded on a nationally recognized securities exchange, interdealer quotation system or over-the-counter market (not including any secondary market for securities of non-public companies)_ the fair market value of the Common Stock shall be deemed to be the closing price or last sale price of the Common Stock on the trading day immediately prior to the Determination Date; and
(B) If there is no liquid public market for the Common Stock, then fair market value shall be reasonably determined in good faith by the board of directors of the Company.
(iv) If closing prices or last sale prices are no longer reported by a securities exchange or other trading system, the closing price or last sale price shall be that which is reported by such securities exchange or other trading system at 4:00 p.m. New York City time on the applicable trading day.
4. Stock Fully Paid; Reservation of Shares. All Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance pursuant to the terms and conditions herein, be fully paid and nonassessable, and free from all preemptive rights and taxes, liens and charges with respect to the issue thereof. 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 the issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant.
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5. Adjustment of Exercise Price and Number of Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows:
(a) Corporate Events. In case of any reclassification or change of securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in case of any merger of the Company with or into another corporation (other than a merger with another corporation in which the Company is the acquiring and the surviving corporation and which does not result in any reclassification or change of outstanding securities issuable upon exercise of this Warrant and other than an Acquisition that results in the exercise or termination of this Warrant) (each, a Corporate Event), the Company, or such successor corporation, as the case may be, shall duly execute and deliver to the Holder a new Warrant (in form and substance satisfactory to the Holder), or the Company shall make appropriate provision without the issuance of a new Warrant, so that the Holder shall have the right to receive upon exercise of this Warrant, at a total purchase price not to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in lieu of the shares of Common Stock theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such Corporate Event by a holder of the number of shares of Common Stock then purchasable under this Warrant. Any new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 5. The provisions of this Section 5(a) shall similarly apply to successive Corporate Events.
(b) Subdivision or Combination of Shares. If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its outstanding shares of Common Stock, the Exercise Price shall be proportionately decreased and the number of Shares issuable hereunder shall be proportionately increased in the case of a subdivision and the Exercise Price shall be proportionately increased and the number of Shares issuable hereunder shall be proportionately decreased in the case of a combination.
(c) Stock Dividends and Other Distributions. If the Company at any time while this Warrant is outstanding and unexpired shall (i) pay a dividend with respect to Common Stock payable in Common Stock, then the Exercise Price shall be adjusted, from and after the date of determination of shareholders entitled to receive such dividend or distribution, to that price determined by multiplying the Exercise Price in effect immediately prior to such date of determination by a fraction (A) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution, and (B) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend or distribution; or (ii) make any other distribution with respect to Common Stock (except any distribution specifically provided for in Sections 5(a) and 5(b)), then, in each such case, provision shall be made by the Company such that the Holder shall receive upon exercise of this Warrant a proportionate share of any such dividend or distribution as though it were the holder of the Common Stock as of the record date fixed for the determination of the shareholders of the Company entitled to receive such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the Exercise Price, the number of Shares of Common Stock purchasable hereunder shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment in the Exercise Price by a fraction, the numerator of which shall be the Exercise Price immediately prior to such adjustment and the denominator of which shall be the Exercise Price immediately thereafter.
(e) Charter. A true and complete copy of the Companys Certificate of Incorporation, as amended through the Date of Grant, is attached hereto as Exhibit B (the Charter). The Company shall provide the Holder with any restatement, amendment, modification or waiver of the Charter promptly after the same has been made.
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6. Notice of Adjustments. Whenever the Exercise Price or the number of Shares purchasable hereunder shall be adjusted pursuant to Section 5 hereof, the Company shall deliver to Holder a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Exercise Price and the number of Shares purchasable hereunder after giving effect to such adjustment.
7. Fractional Shares. No fractional shares of Common Stock will be issued in connection with any exercise or conversion hereunder, but in lieu of such fractional shares the Company shall make a cash payment therefor based on the fair market value of the Common Stock on the date of exercise or conversion as reasonably determined in good faith by the Companys Board of Directors.
8. Compliance with Act: Disposition of Warrant or Shares of Common Stock.
(a) Compliance with Act. The Holder, by acceptance hereof, agrees that this Warrant, and the shares of Common Stock to be issued upon exercise hereof are being acquired for investment and that the Holder will not offer, sell or otherwise dispose of this Warrant, or any shares of Common Stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Act or any applicable state securities laws. Upon exercise of this Warrant, unless such exercise is registered under the Act and any applicable state securities laws or an exemption from such registration is available, the Holder shall confirm in writing that the shares of Common Stock so purchased are being acquired for investment and not with a view toward distribution or resale in violation of the Act and shall confirm such other matters related thereto as may be reasonably requested by the Company. This Warrant and all shares of Common Stock issued upon exercise of this Warrant (unless no longer required under applicable law) shall be stamped or imprinted with a legend in substantially the following form:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 8 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY.
Said legend shall be removed by the Company, upon the request of the Holder, at such time as the restrictions on the transfer of the applicable security shall have terminated. In addition, in connection with the issuance of this Warrant, the Holder specifically represents to the Company by acceptance of this Warrant as follows:
(1) The Holder is aware of the Companys business affairs and financial condition, and has acquired information about the Company sufficient to reach an informed and knowledgeable decision to acquire this Warrant. The Holder is acquiring this Warrant for its own account for investment purposes only and not with a view to, or for the resale in connection with, any distribution thereof in violation of the Act. The Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares. The Holder further represents that Holder does not currently have any contract, undertaking, agreement or arrangement with any unaffiliated person to sell or transfer to such person or any unaffiliated third person any of the Shares.
(2) The Holder understands that this Warrant has not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holders investment intent as expressed herein.
(3) The Holder further understands that this Warrant must be held indefinitely unless subsequently registered under the Act and qualified under any applicable state securities laws, or unless exemptions from registration and qualification are otherwise available. The Holder is aware of the provisions of Rule 144, promulgated under the Act.
-5-
(4) The Holder agrees that the Shares shall be subject to the market standoff provisions in Section 1.14 of the Amended and Restated Investors Rights Agreement, dated May 26, 2011, by and among the Company and the investors named therein, as such agreement may be amended or restated from time to time and as the provisions thereof may be waived from time to time. The Holder further agrees that, in connection with the execution of this Warrant, the Holder will execute a lock-up agreement, a form of which is attached hereto as Exhibit C.
(5) The Holder is an accredited investor as such term is defined in Rule 501 of Regulation D promulgated under the Act.
(b) Disposition of Warrant or Shares. With respect to any offer, sale or other disposition of this Warrant or any shares of Common Stock acquired pursuant to the exercise of this Warrant, the Holder agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of counsel (at the Companys expense), or other evidence, if reasonably satisfactory to the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state securities law then in effect) of this Warrant or such shares of Common Stock and indicating whether or not under the Act certificates for this Warrant or such shares of Common Stock to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with such law. Upon receiving such written notice and reasonably satisfactory opinion or other evidence, the Company, as promptly as practicable but no later than fifteen (15) days after receipt of the written notice, shall notify the Holder that the Holder may sell or otherwise dispose of this Warrant or such shares of Common Stock, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 8(b) that the opinion of counsel or other evidence is not reasonably satisfactory to the Company, the Company shall so notify the Holder promptly with details thereof after such determination has been made. Notwithstanding the foregoing, this Warrant or such shares of Common Stock may, as to such federal laws, be offered, sold or otherwise disposed of (i) pursuant to an effective registration statement covering such securities or (ii) in accordance with Rule 144 or 144A under the Act, provided that the Company shall have been furnished with such information as the Company may reasonably request to provide a reasonable assurance that the provisions of Rule 144 or 144A have been satisfied. Each certificate representing this Warrant or the shares of Common Stock thus transferred (except a transfer pursuant to an effective registration statement or Rule 144 or 144A) shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the Holder, such legend is not required in order to ensure compliance with such laws. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.
(c) Applicability of Restrictions. Neither any restrictions of any legend described in this Warrant nor the requirements of Section 8(b) above shall apply to any transfer of, or grant of a security interest in, this Warrant (or the Common Stock obtainable upon exercise thereof) or any part hereof (i) to a partner of the Holder if the Holder is a partnership or to a member of the Holder if the Holder is a limited liability company, (ii) to a partnership of which the Holder is a partner or to a limited liability company of which the Holder is a member, or (iii) to a single affiliate of the Holder if the Holder is a corporation, where, in each case, the transferee is an accredited investor; provided, however, in any such transfer, if applicable, the transferee shall on the Companys request agree in writing to be bound by the terms of this Warrant as if an original holder hereof.
9. Rights as Shareholders; Information. No Holder, as a holder of this Warrant, shall be entitled to vote or receive dividends or be deemed the holder of Common Stock for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, until this Warrant shall have been exercised or converted and the Shares purchasable upon the exercise or conversion hereof shall have
-6-
become deliverable, as provided herein. Notwithstanding the foregoing, the Company will transmit to the Holder such information, documents and reports as are generally distributed to the holders of any class or series of the securities of the Company concurrently with the distribution thereof to the shareholders. In addition, the Company agrees to provide in a timely manner any information reasonably requested by the Holder to enable the Holder and its affiliates to comply with their accounting reporting requirements. Prior to the effective date of an I PO, Company will also provide Holder the following information:
(a) As soon as practicable (and in any event within thirty (30) days after the end of each quarter), unaudited financial statements for such quarter, certified by Companys Chief Executive Officer or Chief Financial Officer to fairly present in all material respects the data reflected therein.
(b) As soon as practicable (and in any event within five (5) days after completion), audited financial statements for such year, setting forth in comparative form the corresponding figures for the preceding fiscal year, and accompanied by an audit report and unqualified opinion of the independent certified public accountants of recognized national standing selected by Company.
(c) Copies of 409(A) valuation reports, if any, within thirty (30) days of completion.
(d) Upon request by the Holder, detailed capitalization tables (by round and investor).
10. Additional Rights.
(a) Notice of Transactions. The Company shall provide the Holder with at least seven (7) days written notice prior to closing thereof of the terms and conditions of any of the following transactions (to the extent the Company has notice thereof): (i) any Acquisition of the Company or any liquidation or winding up of the Company, (ii) any declaration of a dividend or distribution, whether in cash, property, stock, or other securities; (iii) any offer for subscription or sale pro rata to the holders of the outstanding shares of Common Stock any additional shares of any class or series of the Companys stock (other than pursuant to contractual pre-emptive rights); or (iv) the effectiveness of the IPO.
(b) Exercise Prior to Expiration. To the extent this Warrant is not previously exercised as to all of the Shares subject hereto, and if the fair market value of one share of the Common Stock is greater than the Exercise Price then in effect, this Warrant shall be deemed automatically exercised pursuant to Section 3(b) above (even if not surrendered) immediately before its expiration. For purposes of such automatic exercise, the fair market value of one share of Common Stock upon such expiration shall be determined pursuant to Section 3(b). To the extent this Warrant or any portion thereof is deemed automatically exercised pursuant to this Section 10(b), the Company agrees to promptly notify the Holder of the number of Shares, if any, the Holder is to receive by reason of such automatic exercise.
11. Representations and Warranties. The Company represents and warrants to the Holder as of the date hereof as follows:
(a) This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and the rules of law or principles at equity governing specific performance, injunctive relief and other equitable remedies.
(b) The Shares have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and nonassessable and free from preemptive rights.
-7-
(c) The rights, preferences, privileges and restrictions granted to or imposed upon the Common Stock and the holders thereof are as set forth in the Charter.
(d) The execution and delivery of this Warrant are not, and the issuance of the Shares upon exercise of this Warrant in accordance with the terms hereof will not be, inconsistent with the Companys Charter or by-laws, do not and will not contravene any law, governmental rule or regulation, judgment or order applicable to the Company, and do not and will not conflict with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound or require the consent or approval of, the giving of notice to, the registration or filing with or the taking of any action in respect of or by, any Federal, state or local government authority or agency or other person, except for the filing of notices pursuant to federal and state securities laws, which filings will be effected by the time required thereby.
(e) There are no actions, suits, audits, investigations or proceedings pending or, to the knowledge of the Company, threatened against the Company in any court or before any governmental commission, board or authority which, if adversely determined, could have a material adverse effect on the ability of the Company to perform its obligations under this Warrant.
(f) The number of shares of Common Stock of the Company outstanding on the date hereof, on a fully diluted basis (assuming the conversion of all outstanding convertible securities and the exercise of all outstanding options and warrants), does not exceed 163,832,081 shares.
12. 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.
13. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, by commercial delivery service, mailed by registered or certified mail (return receipt requested), sent via facsimile (with confirmation of receipt) or electronic mail to the parties at the address for each party as set forth on the signature page hereto (or at such other address for a party as such party may designate pursuant to this Section 13).
Notice given by personal delivery, courier service or mail shall be effective upon actual receipt. Notice given by facsimile shall be effective upon actual receipt if received during the recipients normal business hours, or at the beginning of the recipients next business day after receipt if not received during the recipients normal business hours. All notices by facsimile shall be confirmed by the sender promptly after transmission via certified mail or personal delivery. Any party may change any address to which notice is to be given to it by giving notice as provided above or such change of address.
An electronic communication (Eiectronic Notice) shall be deemed written notice for purposes of this Section 13 if sent with return receipt requested to the electronic mail address specified by the receiving party in a signed writing in a nonelectronic form. Electronic Notice shall be deemed received at the time the party sending Electronic Notice receives verification of receipt by the receiving party. Any party receiving Electronic Notice may request and shall be entitled to receive the notice on paper, in a nonelectronic form (Nonelectronic Notice) which shall be sent to the requesting party within ten (10) days of receipt of the written request for Nonelectronic Notice.
14. 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 Companys assets, and all of the obligations of the Company relating to the Common Stock issuable upon the exercise or conversion of this Warrant shall survive the exercise, conversion and termination of this Warrant and all of the covenants and agreements of the Company shall inure to the benefit of the successors and assigns of the Holder.
-8-
15. Lost Warrants or Stock Certificates. The Company covenants to the Holder that, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant or any 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 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. Descriptive Headings. The descriptive headings of the various Sections of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. The language in this Warrant shall be construed as to its fair meaning without regard to which party drafted this Warrant.
17. Governing Law. 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 Delaware.
18. Survival of Representations, Warranties and Agreements. All representations and warranties of the Company and the Holder contained herein shall survive the Date of Grant, the exercise or conversion of this Warrant (or any part hereof) or the termination or expiration of rights hereunder. All agreements of the Company and the Holder contained herein shall survive indefinitely until, by their respective terms, they are no longer operative.
19. Remedies. In case any one or more of the covenants and agreements contained in this Warrant shall have been breached, the Holder (in the case of a breach by the Company), or the Company (in the case of a breach by the Holder), may proceed to protect and enforce their or its rights either by suit in equity and/or by action at law, including, but not limited to, an action for damages as a result of any such breach and/or an action for specific performance of any such covenant or agreement contained in this Warrant.
20. Severability. The invalidity or unenforceability of any provision of this Warrant in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction, or affect any other provision of this Warrant, which shall remain in full force and effect.
21. Recovery of Litigation Costs. If any legal action or other proceeding is brought for the enforcement of this Warrant, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Warrant, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled.
22. Entire Agreement. This Warrant constitutes the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations, and undertakings of the parties, whether oral or written, with respect to such subject matter.
23. Counterparts; Facsimile/Electronic Signatures. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement. Any signature page delivered electronically or by facsimile shall be binding to the same extent as an original signature page with regards to any agreement subject to the terms hereof or any amendment thereto.
-9-
The Company has caused this Warrant to be duly executed and delivered as of the Date of Grant specified above.
MAVENIR SYSTEMS, INC. | ||
By |
| |
Title |
| |
Address: | ||
1700 International Parkway, Suite 200 | ||
Richardson, TX 75081 | ||
Telephone: 469-919-4393 | ||
Fax: | ||
Email: sam@mavenir.com | ||
Attention: Sam Garrett, General Counsel | ||
SILVER LAKE WATERMAN FUND, L.P. | ||
By |
SILVER LAKE TECHNOLOGY ASSOCIATES WATERMAN, L.L.C., its General Partner | |
By |
| |
Title |
| |
Address: | ||
2775 Sand Hill Road, Suite 100 | ||
Menlo Park, CA 94024 | ||
Telephone: 415-525-8705 | ||
Fax: 415-956-8233 | ||
Email: SLWContracts@silverlake.com | ||
Attention: Contract Administration |
-10-
EXHIBIT A-1
NOTICE OF EXERCISE
To: MAVENIR SYSTEMS, INC. (the Company)
Re: Warrant dated , 2013, issued by the Company to SILVER LAKE WATERMAN FUND, L.P. (the Warrant)
1. The undersigned hereby:
¨ | elects to purchase shares of Common Stock of the Company pursuant to the terms of the Warrant, and tenders herewith payment of the purchase price of such shares in full, or |
¨ | elects to exercise its net issuance rights pursuant to Section 3(b) of the Warrant with respect to shares of Common Stock. |
2. Please issue a certificate or certificates representing shares in the name of the undersigned or in such other name or names as are specified below:
(Name) | ||||
(Address) |
3. The undersigned represents that the aforesaid shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares, all except as in compliance with applicable securities laws.
(Signature) |
(Date) |
EXHIBIT A-2
NOTICE OF EXERCISE
To: MAVENIR SYSTEMS, INC. (the Company)
Re: Warrant dated , 2013 issued by Company to SILVER LAKE WATERMAN FUND, L.P. (the Warrant)
1. Contingent upon and effective immediately prior to the closing (the Closing) of the Companys public offering contemplated by the Registration Statement on Form S filed , 20 , the undersigned hereby:
¨ | elects to purchase shares of Common Stock of the Company (or such lesser number of shares as may be sold on behalf of the undersigned at the Closing) pursuant to the terms of the Warrant, or |
¨ | elects to exercise its net issuance rights pursuant to Section 3(b) of the Warrant with respect to Shares of Common Stock. |
2. Please deliver to the custodian for the selling shareholders a stock certificate representing such shares.
3. The undersigned has instructed the custodian for the selling shareholders to deliver to the Company $ or, if less, the net proceeds due the undersigned from the sale of shares in the aforesaid public offering. If such net proceeds are less than the purchase price for such shares, the undersigned agrees to deliver the difference to the Company prior to the Closing.
(Signature) |
(Date) |
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EXHIBIT B
CHARTER
EXHIBIT C
LOCK-UP AGREEMENT
EXHIBIT I
AUTHORIZATION FOR AUTOMATIC PAYMENT
The undersigned, on behalf of MAVENIR SYSTEMS, INC. (Borrower), authorizes SILVER LAKE WATERMAN FUND, L.P. (Lender) and the bank I financial institution (Bank) named below to initiate variable debit and/or credit entries to Borrowers deposit, checking or savings accounts as designated below and to cause funds transfers to an account of Lender as payment of any and all amounts due under the Loan and Security Agreement among Borrower, Mavenir Holdings, Inc., Mavenir Systems IP Holdings, LLC and Lender dated , 2013 (the Loan Agreement).
1. Lender is hereby authorized to initiate variable debit and/or credit transactions and resulting funds transfers in Borrowers designated accounts with respect to amounts due and owing to Lender by Borrower periodically under the Loan Agreement. Borrower consents to all such debit and/or credit transactions and resulting funds transfers and hereby authorizes Lender to take all such actions as may be required by Bank with respect to such transactions. Borrower acknowledges and agrees that such credit and/or debit entries may be made in amounts due under the Loan Agreement in order to cause timely payments as required by the terms of the Loan Agreement.
2. Borrower hereby authorizes Lender to release to Bank all information concerning Borrower that may be necessary or desirable for Bank to investigate or recover any erroneous funds transfers that may occur.
3. Borrower acknowledges and agrees that all such debit and/or credit transactions and funds transfers are intended to be made through an Automated Clearing House system and in compliance with the NACHA Rules and in compliance with Banks security procedures.
4. Borrower represents and warrants that the account information set forth below is accurate and complete and that each of the account(s) set forth below is a business account maintained in Borrowers name and for Borrowers account.
This Consent shall be effective as of , 2013 and shall remain in effect until the Loan Agreement has been terminated. Any cancellation by Borrower of this consent shall (i) be made in writing and (ii) delivered to Bank and Lender in such time as to afford Bank and Lender a reasonable opportunity to act on said cancellation.
Silicon Valley Bank
|
||||||||
(Name of Borrowers Bank) |
||||||||
3003 Tasman Drive |
Santa Clara | CA | 95054 | |||||
(Address of Bank) |
(City) | (State) | (Zip Code) | |||||
Bank Routing Number |
############## |
|||||||
Account Number: |
############## (checking / deposit / savings) (circle one) |
Copy of a voided check is attached to this form
Borrower Name: Mavenir Systems, Inc.
Borrower Address: 1700 International Parkway, Suite 200
Richardson, TX 75081
Authorized by: |
Its: |
EXHIBITJ
FORM OF SBA DOCUMENTS
MAVENIR SYSTEMS, INC.
1700 International Parkway, Suite 200
Richardson, TX 75081
June 4, 2013
Silver Lake Waterman Fund, L.P.
2775 Sand Hill Road, Suite 100
Menlo Park, CA 94025
Ladies and Gentlemen:
The undersigned company (the Borrower) acknowledges that Silver Lake Waterman Fund, L.P. (SLW Fund) is licensed by the U.S. Small Business Administration (SBA) to extend loans as a small business investment company (SBIC) pursuant to the Small Business Investment Act of 1958, as amended, and the associated regulations (collectively, the SBIC Act). All or portions of the loan to Borrower will be made under the SBA license and the SBIC Act and pursuant to that certain Loan and Security Agreement (the Agreement) by and between the Borrower and SLW Fund dated as of the date hereof (the Agreement) and to the provisions of this side letter agreement (Side Letter Agreement). Capitalized terms used herein and not otherwise defined shall have the meaning set forth in the Agreement.
Section 1.01. Borrowers Business. For purposes of this Side Letter Agreement, the term Borrower shall be deemed to include its affiliates as defined in Title 13 Code of Federal Regulations Section 121.103. Borrower represents and warrants to SLW Fund (as of the time of application for financing on April 8, 2013 (date of the accepted signed term sheet)) and covenants to SLW Fund as follows:
(a) Size Status. Check all that apply:
(i) þ Borrower is a Small Business Concern within the meaning of 15 U.S.C. Section 662(5), which is Section 103(5) of the SBIC Act, and the regulations promulgated thereunder, including 13 C.F.R. Section 107, because Borrower either:
(a) þ meets the applicable size eligibility criteria set forth in 13 C.F.R. Section 121.301 ( c )(2), that has both a tangible net worth not in excess of $18 million and (if Borrower pays no income taxes) average net income after Federal income taxes (excluding any carry-over losses) for the preceding two completed fiscal years not in excess of $6 million; or
(b) þ meets the industry standard covering the industry in which Borrower is primarily engaged as set forth in 13 C.F.R. Section 121.301(c)(l); or
(ii) þ Borrower is a Smaller Enterprise within the meaning of 15 U.S.C. Section 662(12), which is Section 103(12) of the SBIC Act, and the regulations promulgated thereunder, including 13 C.F.R. Section 107, because Borrower either:
(a) ¨ meets the applicable size eligibility criteria set forth in 13 C.F.R. Section 121.301(c)(2), that has both a tangible net worth not in excess of $6 million and (if Borrower pays no income taxes) average net income after Federal income taxes (excluding any carry-over losses) for the preceding two completed fiscal years in excess of $2 million; or
1
(b) þ meets the industry standard covering the industry in which Borrower is primarily engaged as set forth in 13 C.P.R. Section 121.301(c)(l) .
(b) Lending Activities. Borrowers primary business activity does not involve, directly or indirectly, providing funds to others, purchasing debt obligations, factoring, or long-term leasing of equipment with no provision for maintenance or repair;
(c) Not a Passive Business. Borrower is engaged in a regular and continuous business operation (excluding the mere receipt of payments such as dividends, rents, lease payments, or royalties). Borrowers employees are carrying on the majority of day to day operations. Borrower will not pass through substantially all of the proceeds of the Loan to another entity;
(d) Not a Real Estate Business. Borrower is not classified under Major Group 65 (Real Estate) or Industry No. 1531 (Operative Builders) of the SIC Manual. The proceeds of the Loan will not be used to acquire or refinance real property unless Borrower (x) is acquiring an existing property and will use at least 51 percent of the usable square footage for its business purposes; (y) is building or renovating a building and will use at least 67 percent of the usable square footage for its business purposes; or (z) occupies the subject property and uses at least 67 percent of the usable square footage for its business purposes.
(e) Not Project Finance. Borrowers assets are not intended to be reduced or consumed, generally without replacement, as the life of its business progresses, and the nature of Borrowers business does not require that a stream of cash payments be made to the businesss financing sources, on a basis associated with the continuing sale of assets (e.g., real estate development projects and oil and gas wells). The primary purpose of the Loans is not to fund production of a single item or defined limited number of items, generally over a defined production period, where such production will constitute the majority of the activities of Borrower (e.g., motion pictures and electric generating plants).
(f) Not Farm Land Purchases. Borrower will not use the proceeds of the Loan to acquire farm land which is or is intended to be used for agricultural or forestry purposes, such as the production of food, fiber, or wood, or is so taxed or zoned.
(g) Public Interest. Borrower will not use the proceeds of the Loan for purposes contrary to the public interest, including but not limited to activities which are in violation of law, or inconsistent with free competitive enterprise.
(h) Not Foreign Investment. The proceeds of the Loan will not be used substantially for a foreign operation.
(i) Financing SBICs. The proceeds of the Loan will not be used to purchase stock in or provide capital to an entity that is licensed as an SBIC by the SBA or to repay indebtedness incurred for the purpose of investing in an SBIC.
(j) Small Business Administration Documentation. SLW Fund acknowledges that Borrower completed, executed and delivered to SLW Fund SBA Forms 480, 652 and 1031 (Parts A and B) together with a business plan showing Borrowers financial projections (including balance sheets and income and cash flows statements) for the period described therein and the written statement in Section 1.02 hereof regarding its intended use of proceeds from the Loans made by SLW Fund (the Use of Proceeds Statement). Borrower represents and warrants to SLW Fund that the information regarding Borrower and its affiliates set forth in the SBA Form 480, Form 652 and Form 1031 and the Use of Proceeds Statement delivered as of the Closing Date is accurate and complete as of such date.
2
(k) Inspection. The following covenants are intended to supplement and not to restrict the other covenants set forth in this Agreement.
(i) Borrower will permit, for so long as SLW Fund holds any Loans or equity securities of Borrower, SLW Fund or its representative, at SLW Fund expense, and examiners of the SBA to visit and inspect the properties and assets of Borrower, to examine its books of account and records, and to discuss Borrowers affairs, finances and accounts with Borrowers officers, senior management and accountants, all at such reasonable times as may be requested by SLW Fund or the SBA.
(ii) Promptly after the end of each calendar year (but in any event prior to February 28 of each year) and at such other times as may be reasonably requested by SLW Fund, Borrower will deliver to SLW Fund a written assessment of the economic impact of SLW Funds investment in Borrower, specifying the full-time equivalent jobs created or retained in connection with the investment, the impact of the investment on the businesses of Borrower in terms of expanded revenue and taxes, other economic benefits resulting from the investment (such as technology development or commercialization, minority business development, or expansion of exports), Borrowers Federal, state and local income taxes paid, after-tax profit or loss, Federal, state and local income tax withholding. At Borrowers request, SLW Fund will assist Borrower with preparing such assessment. In addition to any other rights granted hereunder, Borrower will grant SLW Fund and the SBA access to Borrowers books and records for the purpose of verifying the use of such proceeds. Borrower also will furnish or cause to be furnished to SLW Fund such other information regarding the business, affairs and condition of Borrower as SLW Fund may from time to time reasonably request.
(iii) Borrower will use the proceeds from the Loan only for general corporate purposes. Borrower will deliver to SLW Fund from time to time promptly following SLW Funds request, a written report, certified as correct by Borrowers Chief Financial Officer, verifying the purposes and amounts for which proceeds from the Loan have been disbursed. Borrower will supply to SLW Fund such additional information and documents as SLW Fund reasonably requests with respect to its use of proceeds and will permit SLW Fund and the SBA to have access to any and all Borrower records and information and personnel as SLW Fund deems necessary to verify how such proceeds have been or are being used, and to assure that the proceeds have been used for the purposes specified in this Agreement.
(iv) Neither Borrower nor any of its affiliates (if any) will engage in any activities or use directly or indirectly the proceeds from the Loan for any purpose for which a small business investment company is prohibited from providing funds by the SBIC Act, including 13 C.F.R. §107.720. Without obtaining the prior written approval of SLW Fund, Borrower will not change within 1 year of the date hereof, Borrowers current business activity to a business activity which a licensee under the SBIC Act is prohibited from providing funds by the SBIC Act.
(1) Compliance and Resolution. Borrower agrees that a failure to comply with Borrowers obligations under this Side Letter Agreement, or any other set of facts or circumstances where it has been asserted by any governmental regulatory agency (or SLW Fund believes that there is a substantial risk of such assertion) that SLW Fund and its affiliates are not entitled to hold, or exercise any significant right with respect to, any Loans or securities issued to SLW Fund by Borrower, will constitute a breach of the obligations of Borrower under the financing agreements between Borrower and SLW Fund. In the event of (i) a failure to comply with Borrowers obligations under this Side Letter Agreement; or (ii) an assertion by any governmental regulatory agency (or SLW Fund believes that there is a substantial risk of such assertion) of a failure to comply with Borrowers obligations under this Side Letter Agreement, then (i) SLW Fund and Borrower will meet and resolve any such issue in good faith to the satisfaction of Borrower, SLW Fund, and any governmental regulatory agency, and (ii) upon request of SLW Fund,
3
Borrower will cooperate and assist with any assignment of the financing agreements from SLW Fund to any of SLW Funds affiliates.
Section 1.02. Use of Proceeds. Borrower hereby reaffirms that the proceeds of Advances under the Agreement will be used for salaries, rent, acquisition of materials used to produce the companys products, and other similar working capital needs in the United States. The Borrower is entering into this Side Letter Agreement with SLW Fund in consideration of SLW Funds investment and agrees that this letter is a condition to SLW Fund making such investment.
Sincerely,
MAVENIR SYSTEMS, INC. | ||
By: |
||
Name: |
Terry Hungle | |
Title: |
Chief Financial Officer |
Agreed and accepted as of the date first set forth above.
SILVERLAKE WATERMAN FUND, L.P. | ||
By: Silver Lake Technology Associates Waterman, L.L.C., Its General Partner | ||
By: |
||
Name: |
||
Title: |
Managing Director |
4
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OMB Approval No. 3245-0009 Expiration Date 01/31/2014 |
U.S. SMALL BUSINESS ADMINISTRATION | ||
This form must be completed by a business concern (Applicant) before it can receive financing or consulting and advisory services from a small business investment company licensed by SBA (Licensee). The Applicant should complete Part A and Part B (if necessary), sign the Applicants certification, and return the form to the Licensee from whom it is seeking assistance. The Licensee should sign the Licensees certification and retain the form in its files. Please do not send forms to SBA or to the Office of Management and Budget.
| ||
Name and address of Licensee | Name and address of Applicant | |
Silver Lake Waterman Fund, L.P. | Mavenir Systems, Inc. | |
2775 Sand Hill Road, Suite 100 | 1700 International Parkway, Suite 200 | |
Menlo Park, CA 94025
|
Richardson, TX 75081
| |
Applicants Form of Organization: x Corporation ¨ Partnership ¨ Limited Liability Company ¨ Proprietorship
|
PART A
Yes | No | |||||
1. | Does the Applicant business have any Affiliates? If yes, attach a list to this form. | x | ¨ | |||
Affiliation exists when one individual or entity controls or has the power to control another or a third party or parties controls or has the power to control both. SBA considers factors such as ownership, management, previous relationships with or ties to another entity, and contractual relationships when determining whether affiliation exists. The complete definition of affiliation is found at 13 CFR 121.103. (See also, 13 CFR 121.107 and 121.301.) Examples of Affiliates include: (1) a parent company; (2) subsidiaries and other companies that are owned or controlled by the Applicant; (3) companies under common management with the Applicant; and (4) companies that have entered into agreements to merge with the Applicant. | ||||||
2. | Does Applicant (including affiliates) have tangible net worth in excess of $18,000,000? (Tangible net worth = total net worth minus goodwill) |
¨ | x | |||
3. | Does Applicant (including affiliates) have average net income after Federal income taxes (excluding any carry-over losses) for the preceding 2 completed fiscal years in excess of $6,000,000?
|
¨ | x | |||
PART B
| ||||||
Applicant must complete this part only if the answer to question (2) or (3) in Part A was Yes. Applicant must not exceed the size standard for (1) the industry in which the Applicant combined with its affiliates is primarily engaged, and (2) the industry in which the Applicant alone is primarily engaged. Find the appropriate industry size standard under the NAICS code for your primary industry in 13 CFR 121.201. | ||||||
1. | Primary industry (include NAICS code): | |||||
Applicant combined with affiliates Applicant alone | ||||||
2. | Total annual receipts of Applicant (excluding affiliates) for each of its 3 most recently completed fiscal years (see 13 CFR 121.104): |
Year ended |
$ |
|||||
Year ended | $ | |||||
Year ended
|
$ |
3. |
Applicants average number of employees (excluding affiliates) based on the number of persons employed on a full-time, part-time, temporary, or other basis during each of the pay periods of the preceding 12 calendar months (see 13 CFR 121.106):
|
SBA Form 480 (11-10) Previous Editions Obsolete | 1 |
4. Affiliates of Applicant (domestic and foreign) Names and full addresses |
Total annual receipts of affiliates (excluding Applicant) for past 3 completed fiscal years | Average no. of persons employed by affiliates (excluding Applicant) on full-time, part-time, temporary or other basis during each of the pay periods of the preceding 12 calendar months | ||||
a. | a. | |||||
Yr. | $ | a. | ||||
Yr. | $ | |||||
Yr. | $ | |||||
3-year average |
$ | |||||
b. | b. | |||||
Yr. | $ | b. | ||||
Yr. | $ | |||||
Yr. | $ | |||||
3-year average |
$ | |||||
c. | c. | |||||
Yr. | $ | c. | ||||
Yr. | $ | |||||
Yr. | $ | |||||
3-year average |
$ | |||||
Applicants Certification: Applicant, through its duly authorized officer, hereby certifies that all information herein and in attachments hereto is true and complete to the best of its knowledge and belief. Applicant further certifies that it intends to conduct, for a period of not less than 1 year from the date of the final disbursement of the funds involved in the subject financing and for a period of not less than 1 year from the date of the commencement of the consulting or advisory services, as a regular and continuous business operation, the business operation for which the application for financing or consulting or advisory services is being made.
| ||||||
Mavenir Systems, Inc. | ||||||
Name of Applicant
| ||||||
CAUTION: Knowingly making a false statement on this form is a violation of federal criminal statutes, including 18 U.S.C. § 1001, and can be punishable by imprisonment of up to five years and/or a fine of up to $250,000.
| ||||||
Date: | By: (Signature of Officer) | Title: | ||||
Licensees Certification: Based upon all the information available to us, including all information and facts obtained through our own investigation, the Licensee has concluded that the Applicant is a small business concern within the requirements of the Small Business Investment Act of 1958, as amended, and the Regulations of SBA thereunder.
CAUTION: Knowingly making a false statement on this form is a violation of federal criminal statutes, including 18 U.S.C. § 1001, and can be punishable by imprisonment of up to five years and/or a fine of up to $250,000. | ||||||
Date: | By: (Signature of Authorized Official) | Title: | ||||
Managing Director
| ||||||
PLEASE NOTE: The estimated burden for completing this form is 10 minutes per response. You will not be required to respond to this information collection if a valid OMB approval number is not displayed. If you have questions or comments concerning this estimate or other aspects of this information collection, please contact the U.S. Small Business Administration, Chief, Administrative Information Branch, Washington, D.C. 20416, and/or SBA Desk Officer, Office of Management and Budget, New Executive Office Building, Room 10202, Washington, DC 20503. |
SBA Form 480 (11-10) Previous Editions Obsolete | 2 |
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U.S. SMALL BUSINESS ADMINISTRATION ASSURANCE OF COMPLIANCE FOR NONDISCRIMINATION |
Mavenir Systems, Inc. Applicant/Licensee/Recipient/Subrecipient, (hereinafter referred to as applicant) in consideration of Federal financial assistance from the Small Business Administration, herewith agrees that it will comply with the nondiscrimination requirements of 13 CFR parts 112, 113, and 117, of the Regulations issued by the Small Business Administration (SBA).
13 CFR Parts 112, 113 and 117 require that no person shall on the grounds of age, color, handicap, marital status, national origin, race, religion or sex, be excluded from participation in, be denied the benefits of or otherwise be subjected to discrimination under any program or activity for which the applicant received Federal financial assistance from SBA.
Applicant agrees to comply with the record keeping requirements of 13 CFR 112.9, 113.5, and 117.9 as set forth in SBA Form 793, Notice to New SBA Borrowers, to permit effective enforcement of 13 CFR 112, 113 and 117. Such record keeping requirements have been approved under OMB Number 3245-0076. Applicant further agrees to obtain or require similar Assurance of Compliance for Nondiscrimination from subrecipients, contractors/subcontractors, successors, transferees and assignees as long as it/they receive or retain possession of any Federal financial assistance from SBA. In the event the applicant fails to comply with any provision or requirements of 13 CFR Parts 112, 113 and 117, SBA may call, cancel, terminate, accelerate repayment or suspend any or all Federal financial assistance provided by SBA.
Executed the day of May 2013 | ||||
Mavenir Systems, Inc. | ||||
1700 International Parkway, Suite 200 | ||||
Richardson. TX 75081 | ||||
Name Address & Phone No. of Applicant | ||||
By | ||||
Typed Name & Title of Authorized Official | ||||
Corporate Seal | Signature of Authorized Official | |||
Name Address & Phone No. of Subrecipient | ||||
By | ||||
Typed Name & Title of Authorized Official | ||||
Corporate Seal | ||||
Signature of Authorized Official |
SBA Form 652 (11-91) REF SOP: 90 30 PREVIOUS EDITIONS OBSC | ||
This form was electronically produced by Elite Federal Forms, Inc. |
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OMB No. 3245-0078 Expiration Date 03/31/2014 |
U.S. Small Business Administration
Portfolio Financing Report
Name of Licensee SILVER LAKE WATERMAN FUND, L.P. | License Number 09/09-0466 |
Part A - Small Business Concern Data
1. Name of Small Business Mavenir Systems, lnc. | 2. Employer Identification Number 61 - 1489105 |
3. Street Address 1700 International Parkway, Suite 200
4. City Richardson 5. State 98000 6. ZIP Code 75081 7. County
8. Small Business FAX 469-916-4397 9. Contact Person for FAX Stacy Priddy
10. Date Business Established 11. Form of Business x 1) Corporation 2) Partnership 3) Proprietor 4) LLC
12a. NAICS Code 334210 Industry Telephone Apparatus Manufacturing
12b. Energy Saving Qualified Investment? NO If checked, was Energy Saving debenture used to finance investment?
13. Percentage of Small Concern (if any) Owned by: American Indian or Alaska Native: % Asian: %
Black or African American: % Hispanic or Latino: % Native Hawaiian or Other Pacific Islander: % White: %
14a. Percentage of Small Concern Owned by Women (if any) % 14b. Percentage Owned by Veterans (if any) %
15. CEO or President (may select one or more): Woman: ¨ American Indian or Alaska Native: ¨ Asian: ¨
Black or African American: ¨ Hispanic or Latino: ¨ Native Hawaiian or Other Pacific Islander: ¨ White: ¨
Part B - Prefinancing Information
16. Prefinancing Status: (1) New Information (2) Previously 17. Stage of Company at Financing: Expansion
Submitted (3) Acquired Business (4) New Business
18. Small Business Concerns Pre-Money Valuation: 198,000,000
19. Fiscal Year End Immediately Prior to Date of Financing (Month/Day/Year) 12/31/2012
20. Gross Revenue for Prior Fiscal Year $73,840,000 21. After-Tax Profit or (Loss) for Prior Fiscal Year $ (15,569,000)
22. Income Taxes for Prior Fiscal Year: Federal $-0- State $98000 Local $-0-
23. Net Worth $11,763,000 24. Number of Employees 650
Part C - Financing Information
25. a. Date of Financing b. Date of Disbursement 26. Did Licensee lead this investment?
27. Purpose of Financing (Percentage of Financing that will be used to support each category below. Percentages should total to 100%.)
a. Working Capital or Inventory Purchase | 100 | f. Acquisition of Machinery and Equipment | ||||||
|
||||||||
b. Plant Modernization or Leasehold Improvement | g. Land Acquisition or Dwelling Construction | |||||||
|
|
|||||||
c. Acquisition of All or Part of an Existing Business | h. Marketing Activities | |||||||
|
|
|||||||
d. Consolidation of Obligations or Non-SBIC Debt Refunding | i. Research and Development | |||||||
|
|
|||||||
e. New Building or Plant Construction | j. Other | |||||||
|
|
28. Is this is the first Financing of this Small Business by the Licensee?
29. Financing Instruments and Applicable Amounts (for participations, include Licensees portion only):
Instrument |
Amount | Initial Interest Rate(s) | % Actual Ownership | |||||||||
Loan Only |
$ | 15,000,000 | 12 | % | ||||||||
Debt with Equity Features |
$ | % | ||||||||||
Equity Only |
$ | % | ||||||||||
Total Licensee Financing |
$ |
30. Total Size of Financing Round for Small Business Concern: $15,000,000
31. Comments:
Part D - Transmission Verification | Transmission Date |
SBA Form 1031 (3/11) Previous Editions Obsolete
OMB No. 3245-0078
Expiration Date 03/31/2014
U.S. Small Business Administration
Portfolio Financing Report
If you have leverage or a leverage commitment, file Form 1031 A (Portfolio Financing Report Certification) semiannually with your semi-annual valuation report and your year-end Form 468 (Annual Financial Report). If you do not have leverage or a leverage commitment, file Form 1031A annually with your year-end Form 468.
PLEASE NOTE: The estimated burden for completing this form is 12 minutes per response. You will not be required to respond to this information collection if a valid OMB approval number is not displayed. If you have questions or comments concerning this estimate or other aspects of this information collection, please contact the U.S. Small Business Administration, Chief, Administrative Information Branch, Washington, DC 20416 and/or SBA Desk Officer, Office of Management and Budget, New Executive Office Building, Room 10202, Washington, DC 20503. PLEASE DO NOT SEND FORMS TO OMB.
SBA Form 1031 (12/10) Previous Editions Obsolete
Exhibit 10.31
MAVENIR SYSTEMS, INC.
EXECUTIVE BONUS PLAN
Effective May 8, 2013
TABLE OF CONTENTS
Page | ||||
1. PURPOSE |
1 | |||
1.1 Purpose |
1 | |||
2. DEFINITIONS |
1 | |||
2.1 Administrator |
1 | |||
2.2 Award |
1 | |||
2.3 Board |
1 | |||
2.4 Company |
1 | |||
2.5 Compensation Committee |
1 | |||
2.6 ERISA |
1 | |||
2.7 Participant |
1 | |||
2.8 Performance Metrics |
2 | |||
2.9 Plan |
2 | |||
2.10 Weighting Factors |
2 | |||
3. PARTICIPATION AND AWARD OPPORTUNITIES |
2 | |||
3.1 Award Opportunities |
2 | |||
3.2 Eligibility |
2 | |||
3.3 Employee Termination |
2 | |||
3.4 New Employees; Partial-Year Employment |
2 | |||
3.5 Base Salary Rate |
3 | |||
3.6 Payout |
3 | |||
4. PERFORMANCE MEASURES |
3 | |||
4.1 Setting Performance Measures |
3 | |||
5. FORM AND TIMING OF THE AWARDS |
3 | |||
5.1 Form of Awards |
3 | |||
5.2 Award Obligations |
4 | |||
6. ADMINISTRATION |
4 | |||
6.1 Administrator |
4 | |||
6.2 Authority |
4 | |||
7. CONFIDENTIALITY OBLIGATION |
4 | |||
8. GENERAL PROVISIONS |
5 | |||
8.1 Rights of Participants |
5 | |||
8.2 Non-assignability of Benefits |
5 | |||
8.3 Prerequisites to Benefits |
5 | |||
8.4 Bonus Arrangement |
5 | |||
8.5 Powers of the Company |
6 |
8.6 Waiver |
6 | |||
8.7 Severability |
6 | |||
8.8 Gender, Tense and Headings |
6 | |||
8.9 Governing Law |
6 | |||
8.10 Notice |
6 | |||
8.11 Entire Agreement |
6 | |||
8.12 No Individual Liability |
7 | |||
8.13 Amendment and Termination |
7 | |||
8.14 No Guarantee of Tax Consequence |
7 |
MAVENIR SYSTEMS, INC.
EXECUTIVE BONUS PLAN
1.
PURPOSE
1.1 Purpose. The overall executive compensation strategy of the Company is to provide key executives the economic incentive to remain with, and devote their best efforts to the business of, the Company and, in doing so, advance the interests of the Company and its stockholders. This Executive Bonus Plan (the Plan) rewards annual performance and is described in detail in this document. The Plan provides discretionary annual incentive compensation opportunities for key executives for achieving goals of the Company.
2.
DEFINITIONS
The following words and phrases shall have the following meanings:
2.1 Administrator means the Board or the Compensation Committee, to the extent that the Board authorizes the Compensation Committee to administer or make recommendations under the Plan. Any action taken by the Administrator regarding the Plan must include the approval of a majority of the members of the Board or the Compensation Committee, as applicable, who are not Participants.
2.2 Award means any grant to a Participant pursuant to the Plan.
2.3 Board means the Board of Directors of the Company.
2.4 Company means Mavenir Systems, Inc., a Delaware corporation.
2.5 Compensation Committee means the compensation committee of the Board.
2.6 ERISA means the Employee Retirement Income Security Act of 1974, as amended.
2.7 Participant means an employee of the Company who is designated as a participant in the Plan by the Administrator.
2.8 Performance Metrics means those performance metrics determined by the Administrator for any given measurement period and as revised from time to time by the Administrator pursuant to the Plan.
2.9 Plan shall have the meaning set forth in Section 1.1.
2.10 Weighting Factors means those weighting factors determined by the Administrator for any given measurement period and as revised from time to time by the Administrator pursuant to the Plan.
3.
PARTICIPATION AND AWARD OPPORTUNITIES
3.1 Award Opportunities. Each Participant may be assigned a targeted Award, expressed as a percent of salary, that can decrease to zero, based on performance achievement. Award opportunities under the Plan may be redefined from time to time, as modifications are made to the Companys executive compensation strategy. The Administrator may determine at any time not to even have target Awards or an incentive program under the Plan and may cancel Award opportunities at any time.
3.2 Eligibility. The Administrator shall determine who may be Participants in the Plan and additional Participants may be added by the Administrator at any time. The number of eligible Participants is expected to vary from year to year, as the Company expands and the compensation strategy and programs are refined.
3.3 Employee Termination. A Participant must be an employee of the Company in good standing on the date payment is made to be eligible for an Award. A Participants eligibility for compensation under the Plan will terminate on such Participants last day of employment, regardless of whether such termination is voluntary or involuntary, and regardless of the date of termination. For example, if a Participant was an employee on the last day of the measurement period but such Participants employment terminates prior to the date that payment is made for the measurement period, such Participant will not be eligible for payment under the Plan. Participants whose employment is terminated and are rehired, or who are on leave part of the year, may earn Awards on a pro-rata basis at the sole discretion of the Administrator.
3.4 New Employees; Partial-Year Employment. Newly hired Participants may earn Awards under this Plan on a pro-rata basis for complete months worked during the measurement period based on the Participants start date of employment, unless the Administrator determines otherwise. For example, a Participant whose employment commences on March 10 would be eligible for up to nine (9) months of credit under the Plan if the fiscal year is a calendar year.
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3.5 Base Salary Rate. Base salary for Award calculations shall be the annualized base rate in effect at the end of the performance cycle for which the Award is paid.
3.6 Payout. Awards will be paid in a lump sum amount at a time determined in the sole discretion of the Administrator and will be paid only when, as and if the Administrator determines to distribute Awards. Awards under the Plan are entirely discretionary and the Administrator may determine not to pay any Awards at any time, even if all Performance Metrics are achieved or exceeded, and for any reason, including but not limited to, if the Administrator determines that the Company does not have sufficient cash to pay Awards.
4.
PERFORMANCE MEASURES
4.1 Setting Performance Measures. Awards shall be tied to achievement of the Performance Metrics.
The Administrator will determine the Performance Metrics and the Weighting Factors at the beginning of each fiscal year. Performance Metrics may be set for an individual Participant or may be tied to overall targets for the Company, or both. Performance Metrics and Weighting Factors may be adjusted by the Administrator at any time, in its sole discretion, based on changes to the Companys business strategy or performance and material events related to the Companys capital structure, such as an acquisition or capital raise by the Company.
In addition to the Performance Metrics, the Administrator will establish a minimum acceptable performance, or the performance level below which no Award will be paid. Awards may be payable in amounts less than or greater than targeted Award amounts based on partial achievement of Performance Metrics or achievement that exceeds the Performance Metrics, as determined by the Administrator in its sole discretion. The Performance Metrics and Weighting Factors for each measurement period will be communicated in writing to each Participant by the Company within sixty (60) days of the date the Performance Metrics and Weighting Factors are approved by the Administrator.
5.
FORM AND TIMING OF THE AWARDS
5.1 Form of Awards. In the event that the Administrator has determined to distribute Awards for a particular performance period, Awards will be paid in cash to Participants no later than one calendar month following the date that the determination was made by the Administrator; provided, however, the Company shall deduct from all Awards payable under this Plan any amounts owed to the Company, compensation for harm caused to the Company, and specific required or authorized payroll deductions (e.g., Court ordered child support, benefit plans, etc.), and any taxes
-3-
required to be withheld by the national or any state or local government in which a Participant is located. No Participant shall be permitted to elect to defer all or any portion of his/her Award relating to any relevant measurement period hereunder.
5.2 Award Obligations. All Awards payable under this Plan shall be the obligation of the Company. If the Administrator determines that any person entitled to payments under this Plan is physically or mentally incompetent to receive such payments, the Administrator shall make such payments to the legal guardian or other personal representative of such Participant for the use and benefit of such Participant. If the Administrator for any reason is unable to determine with reasonable certainty the proper person to pay pursuant to the terms of the immediately preceding sentence, the Administrator shall pay any amounts due hereunder into a court of competent jurisdiction in an interpleader proceeding for purposes of being directed by such court as to the proper disposition of any such amounts due hereunder. Any such payments so made by the Company, to the extent of the amounts thereof, shall fully discharge the Companys obligations hereunder. Should the Participant die prior to receiving all amounts due under this Plan, any unpaid amounts due hereunder shall be made to the Participants spouse, if such spouse survives the Participant, or, if there is no surviving spouse, to the legal representative of the Participants estate, or if no administration is had on the estate, to the person or persons to whom Participants property shall pass by applicable laws of descent and distribution.
6.
ADMINISTRATION
6.1 Administrator. The Plan shall be administered by the Administrator.
6.2 Authority. The Administrator shall have the sole discretionary authority to construe and interpret the terms of the Plan, to determine eligibility of Participants to participate in the Plan and to determine Award amounts available under the Plan, if any. The Administrators determination, decision or action with respect to the construction, interpretation, administration or application of the Plan and all Awards thereunder shall be final, conclusive and binding on all Participants, and shall be given maximum deference permitted by law. The validity of any such determination, decision or action shall not be given de novo review if challenged in court, by arbitration, or in any other forum, and shall be upheld unless clearly made in bad faith or materially affected by fraud.
7.
CONFIDENTIALITY OBLIGATION
This Plan is a special compensation program adopted by the Company solely for the benefit of those individuals who are designated as Participants in the Plan. Each Participant has an affirmative obligation to maintain the confidentiality of the terms and conditions of his or her
-4-
participation in the Plan, including his or her designation as a Participant in the Plan, except where disclosure to a party is necessary because of the particular relationship the Participant shares with that party. Such parties may include the Participants spouse, attorney, tax or financial advisor, who, in turn, shall be advised by such Participant that they may not disclose or communicate the terms and conditions of the Participants participation in the Plan.
8.
GENERAL PROVISIONS
8.1 Rights of Participants. Nothing in this Plan shall be construed to:
(a) Give the Participant any rights whatsoever with respect to any Award until such Award is actually paid to the Participant in accordance with the terms of this Plan;
(b) Limit in any way the right of the Company to terminate the Participants employment by the Company at any time;
(c) Give the Participant or any other person any interest in any fund or in any specific asset or assets of the Company;
(d) Give the Participant or any other person any interest or right other than those of any unsecured general creditor of the Company; or
(e) Be evidence of any agreement or understanding, express or implied, that the Company will employ the Participant in any particular position or at any particular rate of remuneration or for any particular period of time.
8.2 Non-assignability of Benefits. No right or benefit under this Plan shall be subject to anticipation, transfer, sale, assignment, pledge, encumbrance, or charge, and any attempt to anticipate, transfer, sell, assign, pledge, encumber, or charge the same will be void.
8.3 Prerequisites to Benefits. Neither the Participant, nor any person claiming through the Participant, shall have any right or interest in this Plan, or any Award hereunder, unless and until all the terms, conditions, and provisions of this Plan which affect the Participant or such other person shall have been complied with as specified herein.
8.4 Bonus Arrangement. This Plan is intended to be a discretionary bonus program that is designed to provide an on-going, pecuniary incentive for the Participant to produce the Participants best efforts to increase the value of the Company. This Plan is not intended to provide retirement income or to defer the receipt of payments hereunder to the termination of the Participants covered employment or beyond. This Plan is strictly an incentive bonus program (as described in U.S. Department of Labor Regulation Section 2510.3-2(c) or any successor thereto),
-5-
and not a pension or welfare benefit plan that is subject to ERISA. The Plan is intended to be exempt from Section 409A of the Code as a discretionary bonus program. All interpretations and determinations hereunder shall be made on a basis consistent with the status of the Plan as a discretionary bonus program.
8.5 Powers of the Company. The existence of outstanding and unpaid contingent interests under the Plan shall not affect in any way the right or power of the Company to make or authorize any adjustments, recapitalization, reorganization or other changes in the Companys capital structure or in its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, common or preferred stock, if applicable, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other act or proceeding, whether of a similar character or otherwise.
8.6 Waiver. A waiver by the Company, or the Participant, of any of the terms or conditions contained in the Plan shall not be construed as a general waiver by such party of any other terms or conditions contained in this Plan.
8.7 Severability. If any provision or provisions of this Plan shall be found to be invalid, illegal, or unenforceable in any respect, such invalid, illegal, or unenforceable provision shall be severed from this Plan and shall not affect the validity, legality and enforceability of the remainder of this Plan.
8.8 Gender, Tense and Headings. Whenever the context requires, words of the masculine gender used herein shall include the feminine and neuter, and words used in singular shall include plural. Headings of Articles and Sections, as used herein, are inserted solely for convenience and reference and constitute no part of this Plan.
8.9 Governing Law. This Plan shall be subject to and governed by the laws of the State of Texas (without regard to its conflict of law rules) and, to the extent applicable, the laws of the United States.
8.10 Notice. Any notice required or permitted to be given under this Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, to the Administrator, the Company, Participant or beneficiary, as applicable, at the address last furnished by such person. Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the dates shown on the postmark on the receipts for registration or certification.
8.11 Entire Agreement. This Plan, including any supplements, exhibits and schedules hereto, sets forth the entire agreement and understanding between the Company and each Participant relating to the subject matter hereof and supersedes and merges all prior discussions, agreements and understandings, both written and oral, between the Company and each Participant with respect to the subject matter hereof.
-6-
8.12 No Individual Liability. No member of the Board of Directors, any officer or employee of the Company, or the Administrator (or any person acting at their discretion in connection with the Plan) shall be liable for any determination, decision or action made in good faith with respect to the Plan or any payment under the Plan.
8.13 Amendment and Termination. The Administrator may at any time amend, alter, suspend, supersede or terminate the Plan for any reason, at any time, and in its sole discretion.
8.14 No Guarantee of Tax Consequence. The Participant shall be solely responsible for and liable for any tax consequences (including but not limited to any interest or penalties) as a result of participation in the Plan. Neither the Board nor the Company makes any commitment or guarantee that any federal, national, state or local tax treatment will apply or be available to any Participant and assumes no liability whatsoever for the tax consequences to any Participant.
-7-
Exhibit 21.1
LIST OF SUBSIDIARIES
The following are subsidiaries of Mavenir Systems, Inc. and the jurisdictions in which they are organized.
Entity Name |
Jurisdiction of Organization | |
Airwide Solutions India Private Limited |
India | |
Mavenir Holdings, Inc. |
USA (Delaware) | |
Mavenir Holdings (MA), LLC |
USA (Delaware) | |
Mavenir Systems (Malaysia) Sdn. Bhd. |
Malaysia | |
Mavenir Systems (Shanghai) Co., LTD. |
China | |
Mavenir Systems Australia Pty. Limited |
Australia | |
Mavenir Systems d.o.o. |
Croatia | |
Mavenir Systems GmBH |
Germany | |
Mavenir Systems Holdings Limited |
UK | |
Mavenir Systems IP Holdings, LLC |
USA (Delaware) | |
Mavenir Systems North America Ltd. |
Canada | |
Mavenir Systems Oy |
Finland | |
Mavenir Systems Private Limited (India) |
India | |
Mavenir Systems Pte. Ltd. |
Singapore | |
Mavenir Systems S.L. |
Spain | |
Mavenir Systems UK Limited |
UK |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in the Prospectus constituting a part of this Registration Statement of (i) our report dated April 9, 2013, relating to the consolidated financial statements of Mavenir Systems, Inc. and its subsidiaries and (ii) our report dated December 20, 2012, relating to the consolidated financial statements of Airwide Solutions, Inc. and its subsidiaries, which reports are contained in that Prospectus.
We also consent to the reference to us under the heading Experts in the Prospectus.
/s/ BDO USA, LLP |
BDO USA, LLP |
Dallas, Texas |
October 4, 2013 |
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