Delaware
(State or other jurisdiction of
incorporation or organization)
3674
(Primary Standard Industrial
Classification Code Number)
50 Old Webster Road
Oxford, Massachusetts 01540
(508) 373-1100
04-3444218
(I.R.S. employer identification
number)
Robert W. Ericson, Esq.
David A. Sakowitz, Esq. Winston & Strawn LLP 200 Park Avenue New York, New York 10166- 4193 (212) 294-6700 |
Robert G. Day, Esq.
Wilson Sonsini Goodrich & Rosati Professional Corporation 650 Page Mill Road Palo Alto, California 94304- 1050 (650) 493-9300 Adam M. Dinow, Esq. Wilson Sonsini Goodrich & Rosati Professional Corporation 1301 Avenue of the Americas New York, New York 10019 (212) 999-5800 |
Proposed Maximum | ||||||
Aggregate Offering | Amount of | |||||
Title of Each Class of Securities to be Registered | Price(a)(b) | Registration Fee | ||||
Common Stock, par value $0.0001 per share
|
$130,000,000 | $13,910 | ||||
(a) | Includes shares of Common Stock which may be purchased by the underwriters to cover overallotments, if any. |
(b) | Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) promulgated under the Securities Act. |
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. |
Per Share | Total | |||
Public offering price
|
$ | $ | ||
Underwriting discount
|
$ | $ | ||
Proceeds, before expenses, to IPG Photonics
|
$ | $ | ||
Proceeds, before expenses, to selling stockholders
|
$ | $ |
Merrill Lynch & Co. | Lehman Brothers |
Jefferies & Company |
Thomas Weisel Partners LLC |
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F-1
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-9
F-10
F-11
F-12
F-13
F-14
F-15
F-16
F-17
F-18
F-19
F-20
F-21
F-22
F-23
F-24
F-25
F-26
F-27
F-28
II-1
II-2
II-3
II-4
II-5
II-6
This summary highlights information contained elsewhere in
this prospectus. Because it is a summary, it does not contain
all of the information that you should consider before investing
in our common stock. You should read the entire prospectus
carefully, including our financial statements and the related
notes and the risks of investing in our common stock discussed
under Risk Factors before making an investment
decision.
Superior Performance.
Fiber lasers provide high
beam quality over the entire power range.
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Lower Total Cost of Ownership.
Fiber lasers offer
strong value to customers because of their lower total operating
costs due to their lower maintenance costs, high reliability and
energy efficiency.
Ease of Use.
The all solid-state design and
integrated fiber delivery of fiber lasers make them easy to
operate, maintain and integrate into laser-based systems.
Compact Size and Portability.
Fiber lasers are
typically smaller and lighter than traditional lasers, and their
portability and versatility allow them to be used in new laser
applications.
Choice of Wavelengths and Precise Control of Beam.
The design of fiber lasers generally provides a broad range of
wavelength choices and increased beam control, allowing users to
select the precise wavelength and beam parameter that best match
their application and materials.
Differentiated Proprietary Technology Platform.
Our proprietary technology platform allows our products to have
higher output powers and superior beam quality than are
achievable through traditional techniques. In addition, we have
developed a wide range of advanced proprietary optical
components that contribute to the superior performance and
reliability of our products.
Leading Market Position.
As a pioneer and
technology leader in fiber lasers and amplifiers, we have built
leading positions in our various end markets with a large and
diverse customer base.
Breadth and Depth of Expertise.
We have extensive
know-how in materials sciences, which enables us to make our
specialty optical fibers, semiconductor diodes and other
critical components. We also have expertise in optical,
electrical, mechanical and semiconductor engineering which we
use to develop and manufacture our products.
Vertically Integrated Development and
Manufacturing.
We believe that we are the only fiber
laser manufacturer that is vertically integrated. We develop and
manufacture all of the key components of our fiber lasers,
including semiconductor diodes, specialty optical fibers and
other advanced optical components. We believe our vertical
integration enhances our ability to meet customer requirements,
accelerate development, manage costs and improve component
yields, while maintaining high performance and quality standards.
Diverse Customer Base, End Markets and
Applications.
Our diverse customer base, end markets and
applications provide us with many growth opportunities. We have
shipped more than 21,000 units and, in 2005, we shipped to
more than 300 customers worldwide.
Broad Product Portfolio and Ability to Meet Customer
Requirements.
We offer a broad range of standard and
custom fiber lasers and amplifiers ranging in power from one
watt to 50 kilowatts. As a result of our modular, scalable
technology platform, we are able to easily customize and upgrade
our products to meet customer requirements.
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Leverage Our Technology to Gain Market Share.
We
plan to leverage our brand and position as the leader in
developing and commercializing fiber lasers and amplifiers to
increase our market share in the broader market. We believe that
our fiber lasers will continue to displace traditional lasers in
many existing applications due to their superior performance and
value.
Target New Applications for Lasers.
We intend to
continue to enable and penetrate additional applications where
lasers have not traditionally been used. We believe that fiber
laser technology can overcome many of the limitations that have
slowed the adoption of traditional lasers.
Expand Our Product Portfolio.
We plan to continue
to invest in research and development to add additional
wavelengths, power levels and other parameters, improve beam
quality and develop new products.
Optimize Our Manufacturing Capabilities.
We plan
to seek further increases in the automation of our component
manufacturing processes and device assembly to improve component
yields and increase the power outputs and capacities of the
various components that we make.
Expand Global Reach to Attract Customers
Worldwide.
We intend to capitalize on and grow our
global customer base by opening new application development
centers as well as sales and service offices in Asia, Europe and
the United States.
our future growth depends upon our ability to penetrate new
applications for fiber lasers and to increase our market share
in existing applications;
if fiber lasers do not achieve broader market acceptance or if
market penetration occurs more slowly than we expect, prospects
for our growth and profitability may be negatively impacted;
we may not be able to effectively manage our growth, which may
harm our business and operating results;
our vertical integration strategy results in high levels of
fixed costs, and our manufacturing capacity may not be at the
appropriate size for future levels of demand; and
we are currently subject to claims that we are infringing
third-party intellectual property rights and other claims may
arise in the future, which could result in costly and lengthy
litigation, the outcome of which is unknown.
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Common stock offered by IPG Photonics
shares
Common stock offered by the selling stockholders
shares
Common stock to be outstanding after the offering
shares
Use of proceeds
We expect to receive net proceeds from the offering of
approximately
$ million.
We expect to use the net proceeds from the offering to
repurchase our series B warrants, to repay certain of our
outstanding indebtedness and for general corporate purposes,
including working capital, expansion of our manufacturing
facilities, purchases of equipment and expansion of our
applications development and service capabilities. See Use
of Proceeds. We will not receive any proceeds from the
shares sold by the selling stockholders. The selling
stockholders include our chairman and chief executive officer
and two other members of our board of directors. See
Principal and Selling Stockholders. Entities that
may be deemed to be affiliates of Merrill Lynch & Co.,
one of the underwriters in this offering, will receive a portion
of the proceeds of this offering as a result of our repurchase
of series B warrants held by them. See
Underwriting Certain Relationships.
Nasdaq Global Market Symbol
IPGP
6,655,960 shares issuable upon exercise of stock options
outstanding as of June 30, 2006, which have a weighted
average exercise price of $1.71 per share;
4,790,034 additional shares reserved as of June 30, 2006
for future issuance under our stock-based compensation plans;
warrants to purchase shares of our common stock that will be
repurchased at the closing of this offering; and
2,684,211 shares of our series D preferred stock that
were issuable upon conversion of a convertible note. We repaid
the convertible note in August 2006 and therefore the
series D preferred stock underlying the convertible note
will not be issued.
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Year Ended December 31,
Six Months Ended June 30,
2001
2002
2003
2004
2005
2005
2006
(unaudited)
(in thousands, except per share data)
$
26,490
$
22,180
$
33,740
$
60,707
$
96,385
$
41,630
$
64,927
26,223
23,277
38,583
42,274
62,481
28,437
39,119
267
(1,097
)
(4,843
)
18,433
33,904
13,193
25,808
21,240
19,910
2,110
2,363
3,236
1,538
2,343
8,407
8,383
10,063
4,831
5,788
2,873
2,622
18,875
13,354
9,998
8,179
10,598
4,352
5,813
15,042
9,474
63,564
51,121
22,171
15,373
19,622
8,763
10,778
(63,297
)
(52,218
)
(27,014
)
3,060
14,282
4,430
15,030
1,857
(1,089
)
(1,505
)
(2,150
)
(1,840
)
(969
)
(709
)
6,862
2,518
(3,664
)
(615
)
(745
)
(314
)
(2,219
)
975
2,414
1,647
196
236
141
12
(53,603
)
(48,375
)
(30,536
)
491
11,933
3,288
12,114
3,985
(1,175
)
2,205
1,601
(4,080
)
(1,219
)
(5,598
)
(4
)
165
121
(80
)
(426
)
81
(398
)
$
(49,622
)
$
(49,385
)
$
(28,210
)
$
2,012
$
7,427
$
2,150
$
6,118
$
(1.45
)
$
(1.42
)
$
(0.93
)
$
(0.01
)
$
0.11
$
0.02
$
0.11
$
(1.45
)
$
(1.42
)
$
(0.93
)
$
(0.01
)
$
0.11
$
0.02
$
0.10
35,959
36,476
38,302
38,547
39,348
39,008
40,385
35,959
36,476
38,302
38,547
45,252
44,912
49,584
$
$
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(1)
Stock-based compensation is included in the following financial
statement captions as follows:
Six Months Ended
Year Ended December 31,
June 30,
2001
2002
2003
2004
2005
2005
2006
(unaudited)
(in thousands)
$
2,574
$
789
$
577
$
218
$
4
$
$
37
19,148
17,260
18
6
1
11
1,608
314
1,062
669
1
3
9,403
3,326
546
10
1
75
$
32,733
$
21,689
$
2,203
$
903
$
7
$
$
126
Due primarily to certain stock-based compensation awarded
primarily in 2000 and 2001, we have recorded significant
stock-based compensation during the years ended
December 31, 2001, 2002 and 2003. Those awards became fully
vested during the year ended December 31, 2004.
(2)
The change in value of the series B warrants is a non-cash
charge related to recording the increase or decrease in the fair
value of the warrants. The change in fair value for this
derivative instrument is directly related to the probability
that the warrants will be exercised prior to their expiration in
April 2008. We intend to use a portion of the net proceeds from
this offering to repurchase the series B warrants. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations Factors and
Trends That Affect our Operations and Financial
Results Effect of Preferred Stock On Net Income and
Net Income Per Share.
(3)
The supplemental pro forma disclosures are intended to
demonstrate the effects on net income per share of the
completion of this offering and the related impacts of the
conversion of our preferred stock and the repurchase of the
series B warrants with a portion of the net proceeds of
this offering. The number of shares used in the calculation of
supplementary pro forma net income per common share includes
(a) the basic weighted average common stock outstanding,
(b) shares
of common stock, which will be issued upon completion of this
offering upon the conversion of our preferred stock, and
(c) shares
related to the additional dilutive impact of existing options
assuming that the fair value of the common stock increases to
the midpoint of the range set forth on the cover page of this
prospectus. Supplementary pro forma net income used in the
calculation of supplementary pro forma net income per share
reflects the elimination of the increase in value of the
series B warrants, which will be repurchased upon the
completion of this offering, totaling $745,000 for the year
ended December 31, 2005 and $2.2 million for the six
months ended June 30, 2006. In addition, all accretion of
preferred stock has been eliminated in the determination of net
income attributable to common stockholders. See Use of
Proceeds, Managements Discussion and Analysis
of Financial Condition and Results of Operations
Critical Accounting Policies and Estimates Fair
Value Adjustment of Warrants and Certain
Relationships and Related Party Transactions.
As of June 30, 2006
Actual
Pro Forma
Pro Forma as Adjusted
(unaudited)
(in thousands)
$
11,282
$
11,282
22,721
22,721
131,996
131,996
24,268
44,268
16,863
16,863
97,385
4,880
(38,545
)
38,840
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Our future growth depends upon our ability to penetrate
new applications for fiber lasers and increase our market share
in existing applications.
demonstrate the effectiveness of fiber lasers in new
applications;
increase our direct and indirect sales efforts;
extend our product line to address new applications for our
products;
continue to reduce our manufacturing costs and enhance our
competitive position; and
effectively service and support our installed product base.
If fiber lasers do not achieve broader market acceptance
or if market penetration occurs more slowly than we expect,
prospects for our growth and profitability may be negatively
impacted.
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We may not be able to effectively manage our growth and we
may need to incur significant costs to address the operational
requirements related to our growth, either of which could harm
our business and operating results.
Our vertically integrated business results in high levels
of fixed costs that may adversely impact our gross profits and
our operating results in the event of a reduction in demand for
our products.
We are subject to lawsuits alleging that we are infringing
third-party intellectual property rights. Intellectual property
claims could result in costly litigation and harm our
business.
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stop selling our products or using the technology that contains
the allegedly infringing intellectual property;
pay actual monetary damages, royalties, lost profits or
increased damages and the plaintiffs attorneys fees;
attempt to obtain a license to use the relevant intellectual
property, which may not be available on reasonable terms or at
all; and
attempt to redesign the products that allegedly infringed upon
intellectual property of others.
Our inability to protect our intellectual property and
proprietary technologies could result in the unauthorized use of
our technologies by third parties, hurt our competitive position
and adversely affect our operating results.
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We depend upon internal production and on outside single
or limited-source suppliers for many of our key components and
raw materials. Any interruption in the supply of these key
components and raw materials could adversely affect our results
of operations.
We rely on the significant experience and specialized
expertise of our senior management and scientific staff and if
we are unable to retain these key employees and attract other
highly skilled personnel necessary to grow our business
successfully, our business and results of operations could
suffer.
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Failure to effectively build and expand our direct field
service and support organization could have an adverse effect on
our business.
The laser and amplifier industries may experience
declining average selling prices, which could cause our gross
margins to decline and harm our operating results.
A few customers account for a significant portion of our
sales, and if we lose any of these customers or they
significantly curtail their purchases of our products, our
results of operations could be adversely affected.
We have experienced, and expect to experience in the
future, fluctuations in our quarterly operating results. These
fluctuations may increase the volatility of our stock
price.
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the increase, decrease, cancellation or rescheduling of
significant customer orders;
the timing of revenue recognition based on the installation or
acceptance of certain products shipped to our customers;
the timing of customer qualification of our products and
commencement of volume sales of systems that include our
products;
the rate at which our present and future customers and end users
adopt our technologies;
the gain or loss of a key customer;
product or customer mix;
competitive pricing pressures;
the relative proportions of our U.S. and international sales;
our ability to design, manufacture and introduce new products on
a cost-effective and timely basis;
the incurrence of expenses to develop and improve application
and support capabilities, the benefits of which may not be
realized until future periods, if at all;
different capital expenditure and budget cycles for our
customers, which affect the timing of their spending;
foreign currency fluctuations; and
our ability to control expenses.
Our manufacturing capacity may not be at the appropriate
size for future levels of demand.
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Future downturns in the economy, particularly in the
materials processing and communications markets, could have a
material adverse effect on our sales and profitability.
We depend on our OEM customers and system integrators and
their ability to incorporate our products into their
systems.
Because we lack long-term purchase commitments from our
customers, our sales can be difficult to predict, which could
adversely affect our operating results.
The markets for our products are highly competitive and
increased competition could increase our costs, reduce our sales
or cause us to lose market share.
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Our inability to manage risks associated with our
international customers and operations could adversely affect
our business.
longer accounts receivable collection periods;
changes in the values of foreign currencies;
changes in a specific countrys or regions economic
conditions, such as recession;
compliance with a wide variety of domestic and foreign laws and
regulations and unexpected changes in those laws and regulatory
requirements, including uncertainties regarding taxes, tariffs,
quotas, export controls, export licenses and other trade
barriers;
certification requirements;
environmental regulations;
less effective protection of intellectual property rights in
some countries;
potentially adverse tax consequences;
different capital expenditure and budget cycles for our
customers, which affect the timing of their spending;
political, legal and economic instability, foreign conflicts,
and the impact of regional and global infectious illnesses in
the countries in which we and our customers, suppliers,
manufacturers and subcontractors are located;
preference for locally produced products;
difficulties and costs of staffing and managing international
operations across different geographic areas and cultures;
seasonal reductions in business activities; and
fluctuations in freight rates and transportation disruptions.
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Foreign currency transaction risk may negatively affect
our net sales, cost of sales and operating margins and could
result in exchange losses.
Our products could contain defects, which may reduce sales
of those products, harm market acceptance of our fiber laser
products or result in claims against us.
We may pursue acquisitions and investments in new
businesses, products or technologies. These may involve risks
which could disrupt our business and may harm our financial
condition.
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We are subject to various environmental laws and
regulations that could impose substantial costs upon us and may
adversely affect our business, operating results and financial
condition.
We are subject to export control regulations that could
restrict our ability to increase our international sales and may
adversely affect our business.
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The market price of our common stock may be volatile,
which could result in substantial losses for investors
purchasing shares in this offering.
general market conditions;
U.S. and international economic factors;
actual or anticipated fluctuations in our quarterly operating
results;
changes in or failure to meet publicly disclosed expectations as
to our future financial performance;
changes in securities analysts estimates of our financial
performance or lack of research and reports by industry analysts;
changes in market valuations or earnings of similar companies;
announcements by us or our competitors of significant products,
contracts, acquisitions or strategic partnerships;
developments or disputes concerning intellectual property or
proprietary rights, including increases or decreases in
litigation expenses associated with intellectual property
lawsuits we may initiate, or in which we may be named as
defendants;
failure to complete significant sales;
any future sales of our common stock or other securities; and
additions or departures of key personnel.
We could be the subject of securities class action
litigation due to future stock price volatility, which could
divert managements attention and adversely affect our
operating results.
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Dr. Valentin P. Gapontsev, our chairman, chief
executive officer and principal stockholder, will control more
than % of our voting power after
the completion of this offering, and will have a significant
influence on the outcome of director elections and other matters
requiring stockholder approval, including a change in corporate
control.
election of our directors;
amendment of our certificate of incorporation or by-laws; and
approval of mergers, consolidations or the sale of all or
substantially all of our assets.
Dr. Valentin P. Gapontsev, our chairman, chief
executive officer and principal stockholder, owns a material
portion of one of our operating subsidiaries, which creates the
possibility of a conflict of interest.
Anti-takeover provisions in our charter documents and
Delaware law could prevent or delay a change in control of our
company, even if a change in control would be beneficial to our
stockholders.
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authorizing the issuance of blank check preferred
stock;
establishing a classified board;
providing that directors may only be removed for cause;
prohibiting stockholder action by written consent;
limiting the persons who may call a special meeting of
stockholders;
establishing advance notice requirements for nominations for
election to the board of directors and for proposing matters to
be submitted to a stockholder vote; and
supermajority stockholder approval to change these provisions.
Substantial sales of our common stock could cause our
stock price to decline.
We will incur increased costs and demands upon management
as a result of complying with the laws and regulations affecting
public companies, which could adversely affect our operating
results.
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We will be required to evaluate our internal control over
financial reporting under Section 404 of the Sarbanes-Oxley
Act of 2002, and any adverse results from such evaluation could
result in a loss of investor confidence in our financial reports
and have an adverse effect on our stock price.
Investors in this offering will experience immediate and
substantial dilution.
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approximately $22.1 million to repurchase the warrants to
purchase shares of our common stock that are owned by holders of
the series B preferred stock;
approximately $4.7 million to repay Euro-denominated
construction loans due from 2006 to 2010 that bear annual
interest at 5.25%;
approximately $5.7 million to repay a
U.S. construction loan due January 2007 that bears annual
interest at 7.9%;
approximately $5.5 million to repay other Euro-denominated
term debt with various maturities ranging from 2006 to 2019 with
fixed and variable interest rates ranging from 4.2% to 6.5%; and
the balance of the net proceeds for general corporate purposes,
including working capital, expansion of our manufacturing
facilities, purchases of equipment and expansion of our
applications development and service capabilities.
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on an actual basis;
on a pro forma basis to give effect to the conversion of all
outstanding shares of preferred stock upon the closing of this
offering
into shares
of common stock and the issuance of subordinated notes totaling
$20.0 million to the holders of our series B preferred
stock; and
on a pro forma as adjusted basis to give effect to the
transactions described above as well as our sale
of shares
of our common stock in this offering and the application of the
estimated net proceeds therefrom as described in Use of
Proceeds.
As of June 30, 2006
Pro Forma As
Actual
Pro Forma
Adjusted
(unaudited)
(in thousands, except share and per share data)
$
11,282
$
11,282
$
11,011
11,011
20,000
24,268
24,268
35,279
55,279
16,863
16,863
92,285
5,100
4,880
4
4
94,912
177,177
(463
)
(463
)
(143,507
)
(143,507
)
5,629
5,629
$
(38,545
)
$
38,840
$
$
110,982
$
110,982
$
we repaid a $4.6 million credit line through an exchange
with our chief executive officer;
we repaid a $5.1 million subordinated note; and
two of our directors repaid $681,000 owed to us.
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$
$
(
)
$
Shares Purchased
Total Consideration
Average
Price Per
Number
Percent
Amount
Percent
Share
%
$
%
$
100.0
%
$
$
100.0
%
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Year Ended December 31,
Six Months Ended June 30,
2001
2002
2003
2004
2005
2005
2006
(unaudited)
(in thousands, except per share data)
Consolidated Statement of
Operations Data:(1)
$
26,490
$
22,180
$
33,740
$
60,707
$
96,385
$
41,630
$
64,927
26,223
23,277
38,583
42,274
62,481
28,437
39,119
267
(1,097
)
(4,843
)
18,433
33,904
13,193
25,808
21,240
19,910
2,110
2,363
3,236
1,538
2,343
8,407
8,383
10,063
4,831
5,788
2,873
2,622
18,875
13,354
9,998
8,179
10,598
4,352
5,813
2,156
900
9,474
11,986
63,564
51,121
22,171
15,373
19,622
8,763
10,778
(63,297
)
(52,218
)
(27,014
)
3,060
14,282
4,430
15,030
1,857
(1,089
)
(1,505
)
(2,150
)
(1,840
)
(969
)
(709
)
6,862
2,518
(3,664
)
(615
)
(745
)
(314
)
(2,219
)
975
2,414
1,647
196
236
141
12
(53,603
)
(48,375
)
(30,536
)
491
11,933
3,288
12,114
3,985
(1,175
)
2,205
1,601
(4,080
)
(1,219
)
(5,598
)
(4
)
165
121
(80
)
(426
)
81
(398
)
$
(49,622
)
$
(49,385
)
$
(28,210
)
$
2,012
$
7,427
$
2,150
$
6,118
$
(1.45
)
$
(1.42
)
$
(0.93
)
$
(0.01
)
$
0.11
$
0.02
$
0.11
$
(1.45
)
$
(1.42
)
$
(0.93
)
$
(0.01
)
$
0.11
$
0.02
$
0.10
35,959
36,476
38,302
38,547
39,348
39,008
40,385
35,959
36,476
38,302
38,547
45,252
44,912
49,584
$
$
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As of December 31,
As of June 30,
2001
2002
2003
2004
2005
2006
(unaudited)
(in thousands)
$
8,851
$
1,379
$
536
$
2,548
$
8,361
$
11,282
44,711
35,669
16,303
20,934
23,550
22,721
128,230
117,166
105,481
110,545
115,481
131,996
21,668
38,143
34,268
31,454
26,081
24,268
12,138
9,620
13,284
13,899
14,644
16,863
81,842
84,194
91,646
93,997
96,348
97,385
18,660
5,000
5,000
4,880
4,880
4,880
12,090
(19,516
)
(51,947
)
(49,038
)
(46,504
)
(38,545
)
(1)
Stock-based compensation is included in the following financial
statement captions as follows:
Six Months Ended
Year Ended December 31,
June 30,
2001
2002
2003
2004
2005
2005
2006
(unaudited)
(in thousands)
$
2,574
$
789
$
577
$
218
$
4
$
$
37
19,148
17,260
18
6
1
11
1,608
314
1,062
669
1
3
9,403
3,326
546
10
1
75
$
32,733
$
21,689
$
2,203
$
903
$
7
$
$
126
Due primarily to certain stock-based compensation awarded
primarily in 2000 and 2001, we have recorded significant
stock-based compensation during the years ended
December 31, 2001, 2002 and 2003. Those awards became fully
vested during the year ended December 31, 2004.
(2)
The change in value of the series B warrants is a non-cash
charge related to recording the increase or decrease in the fair
value of the warrants. The change in fair value for this
derivative instrument is directly related to the probability
that the warrants will be exercised prior to their expiration in
April 2008. We intend to use a portion of the net proceeds from
this offering to repurchase the series B warrants. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations Factors and
Trends That Affect our Operations and Financial
Results Effect of Preferred Stock On Net Income and
Net Income Per Share.
(3)
The supplemental pro forma disclosures are intended to
demonstrate the effects on net income per share of the
completion of this offering and the related impacts of the
conversion of our preferred stock and the repurchase of the
series B warrants with a portion of the net proceeds of
this offering. The number of shares used in the calculation of
supplementary pro forma net income per common share includes
(a) the basic weighted average common stock outstanding,
(b) shares
of common stock, which will be issued upon completion of this
offering upon the conversion of our preferred stock, and
(c) shares
related to the additional dilutive impact of existing options
assuming that the fair value of the common stock increases to
the midpoint of the range set forth on the cover page of this
prospectus. Supplementary pro forma net income used in the
calculation of supplementary pro forma net income per share
reflects the elimination of the increase in value of the
series B warrants, which will be repurchased upon the
completion of this offering, totaling $745,000 for the year
ended December 31, 2005 and $2.2 million for the six
months ended June 30, 2006. In addition, all accretion of
preferred stock has been eliminated in the determination of net
income attributable to common stockholders. See Use of
Proceeds, Managements Discussion and Analysis
of Financial Condition and Results of Operations
Critical Accounting Policies and Estimates Fair
Value Adjustment of Warrants and Certain
Relationships and Related Party Transactions.
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factors that affect the prices we can charge, including the
features and performance of our products, their output power,
the nature of the end user and application, and competitive
pressures;
factors that affect the cost of our net sales, including the
cost of raw materials and components, manufacturing costs and
shipping costs;
production volumes of specific product lines; and
in the case of our OEM customers, the type of market that they
serve and the competitive pricing pressures faced by our OEM
customers.
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independent valuation reports that we received;
the agreed-upon consideration paid in arms-length transactions
in the form of convertible preferred stock and common stock;
the superior rights and preferences of securities senior to our
common stock at the time of each grant;
historical and anticipated fluctuations in our net sales and
results of operations, which reflect our dependence on certain
key customers, the cyclical nature of certain of our end markets
and market acceptance of our products; and
the risk of owning our common stock and its non-liquid nature.
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Year Ended December 31,
Six Months Ended June 30,
2003
2004
2005
2005
2006
(in thousands, except percentages)
$
33,740
100.0
%
$
60,707
100.0
%
$
96,385
100.0
%
$
41,630
100.0
%
$
64,927
100.0
%
38,583
114.4
42,274
69.6
62,481
64.8
28,437
68.3
39,119
60.3
(4,843
)
(14.4
)
18,433
30.4
33,904
35.2
13,193
31.7
25,808
39.7
2,110
6.3
2,363
3.9
3,236
3.4
1,538
3.7
2,343
3.6
10,063
29.8
4,831
8.0
5,788
6.0
2,873
6.9
2,622
4.0
9,998
29.6
8,179
13.5
10,598
11.0
4,352
10.5
5,813
9.0
22,171
65.7
15,373
25.4
19,622
20.4
8,763
21.1
10,778
16.6
(27,014
)
(80.1
)
3,060
5.0
14,282
14.8
4,430
10.6
15,030
23.1
(1,505
)
(4.5
)
(2,150
)
(3.5
)
(1,840
)
(1.9
)
(969
)
(2.3
)
(709
)
(1.1
)
(3,664
)
(10.9
)
(615
)
(1.0
)
(745
)
(0.8
)
(314
)
(0.8
)
(2,219
)
(3.4
)
1,647
4.9
196
0.3
236
0.2
141
0.3
12
0.0
(30,536
)
(90.6
)
491
0.8
11,933
12.3
3,288
7.8
12,114
18.6
2,205
6.5
1,601
2.6
(4,080
)
(4.2
)
(1,219
)
(2.9
)
(5,598
)
(8.6
)
121
0.4
(80
)
(0.1
)
(426
)
(0.4
)
81
0.2
(398
)
(0.6
)
$
(28,210
)
(83.7
)%
$
2,012
3.3
%
$
7,427
7.7
%
$
2,150
5.1
%
$
6,118
9.4
%
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Three Months Ended
Mar. 31,
June 30,
Sep. 30,
Dec. 31,
Mar. 31,
June 30,
2005
2005
2005
2005
2006
2006
(in thousands)
$
18,788
$
22,843
$
20,607
$
34,147
$
32,743
$
32,184
12,937
15,501
13,325
20,718
20,278
18,841
5,851
7,342
7,282
13,429
12,465
13,343
650
887
817
882
1,080
1,263
1,370
1,504
1,303
1,611
1,235
1,387
1,793
2,559
2,337
3,909
2,659
3,154
3,813
4,950
4,457
6,402
4,974
5,804
2,038
2,392
2,825
7,027
7,491
7,539
(514
)
(454
)
(442
)
(430
)
(355
)
(354
)
(155
)
(159
)
(163
)
(268
)
(1,862
)
(357
)
(2
)
143
55
40
8
4
1,367
1,922
2,275
6,369
5,282
6,832
(468
)
(751
)
(818
)
(2,043
)
(2,833
)
(2,765
)
77
5
(107
)
(401
)
(288
)
(110
)
$
976
$
1,176
$
1,350
$
3,925
$
2,161
$
3,957
Three Months Ended
Mar. 31,
June 30,
Sep. 30,
Dec. 31,
Mar. 31,
June 30,
2005
2005
2005
2005
2006
2006
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
68.9
67.9
64.7
60.7
61.9
58.5
31.1
32.1
35.3
39.3
38.1
41.5
3.5
3.9
4.0
2.6
3.3
3.9
7.3
6.6
6.3
4.7
3.8
4.3
9.5
11.2
11.3
11.4
8.1
9.8
20.3
21.7
21.6
18.7
15.2
18.0
10.8
10.4
13.7
20.6
22.9
23.5
(2.7
)
(2.0
)
(2.1
)
(1.3
)
(1.1
)
(1.1
)
(0.8
)
(0.7
)
(0.8
)
(0.8
)
(5.7
)
(1.1
)
(0.0
)
0.6
0.3
0.1
0.0
0.0
7.3
8.3
11.1
18.6
16.1
21.3
(2.5
)
(3.3
)
(4.0
)
(6.0
)
(8.7
)
(8.6
)
0.4
0.0
(0.5
)
(1.2
)
(0.9
)
(0.3
)
5.2
%
5.0
%
6.6
%
11.4
%
6.5
%
12.4
%
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Description
Available Principal
Interest Rate
Maturity
Security
Euro 4.4 million ($5.5 million)
7.5%-8.0%, depending upon principal outstanding
Euro 2.0 million ($2.5 million) available through
September 2006
Euro 2.4 million ($3.0 million) available through
March 2010
Common pool of assets of German subsidiary
80% of eligible receivables, up to $7,000,000
LIBOR plus 3.0%
June 2008
All assets held by our U.S. parent company (IPG Photonics
Corporation)
100% of eligible receivables, up to JPY700,000,000
($6.0 million)
1.88%
September 2006
Pool of assets of Japanese subsidiary
(1)
This loan has a minimum debt service coverage covenant.
Description
Principal
Interest Rate
Maturity
Security
$5.8 million
7.9%
January 2007
Property and plant in United States
$7.1 million
5.25%
September 2006 to December 2010
Property and plant in Germany
$6.3 million
4.2-6.5%
December 2006 to December 2019
Property, plant and equipment, receivables and other assets in
Germany
(1)
The construction loan has a minimum debt service coverage
covenant.
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Payments Due in
Less Than
More Than
Total
1 Year
1-3 Years
3-5 Years
5 Years
$
3,386
$
1,094
$
1,679
$
613
$
28,573
11,845
12,900
1,346
2,482
$
31,959
$
12,939
$
14,579
$
1,959
$
2,482
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Materials Processing.
Our fiber lasers are used in a
diverse range of materials processing applications: marking,
engraving and printing; welding, cutting, drilling, soldering
and hardening; and high precision machining. Examples of such
processes using our low and mid-power fiber lasers include
razorblade, stent and pacemaker manufacturing, integrated
circuit marking and trimming; semiconductor memory repair and
trimming; and computer disk manufacturing and texturing.
Examples of such processes using our high-power fiber lasers
include cutting and welding metal blanks, sheets, frames and
transmissions in the automotive industry; welding aluminum and
titanium air frames in the aerospace industry; hardening,
cutting and welding in heavy industries such as nuclear power,
pipelines, ships and rail cars; and drilling and cutting
concrete and rock.
Communications.
Our fiber amplifiers are used in the
deployment of interactive and advanced triple-play
broadband services that include video, high-speed internet and
telephony services, as well as in wireline transport networks.
We also sell integrated transport systems for ultra-long-haul
optical dense wavelength multiplexing networks.
Medical.
Our lasers are used for applications as
components in medical laser systems, driven by aesthetic
applications such as skin resurfacing and rejuvenation. Other
soft-tissue applications include dentistry, urology, surgery and
vision correction.
Advanced Applications.
Our fiber lasers and amplifiers
are utilized by commercial firms and by academic, government and
other institutions worldwide for commercial products and for
research in advanced technologies and products. Our products are
used in the aerospace, research, scientific and test and
measurement markets.
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Traditional Laser Technologies
Introduction of Fiber Lasers
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Advantages of Fiber Lasers over Traditional Lasers
Superior Performance.
Fiber lasers provide high
beam quality over the entire power range. In most traditional
laser solutions, the beam quality is sensitive to output power,
while in fiber lasers, the output beam is virtually
non-divergent over a wide power range, meaning the beam can be
highly focused to achieve high levels of precision, increased
power densities and greater distances over which processing can
be completed. The superior beam quality and greater intensity of
a fiber lasers beam allow tasks to be accomplished rapidly
and with lower-power units than comparable traditional lasers.
Lower Total Cost of Ownership.
Fiber lasers offer
strong value to customers because of their lower total operating
costs due to their lower maintenance costs, high reliability and
energy efficiency. The initial purchase price for fiber lasers
is generally below that of YAG lasers and comparable to that of
CO
2
lasers. Fiber lasers convert electrical energy to optical energy
2 to 3 times more efficiently than diode-pumped YAG lasers, 3
times more efficiently than
CO
2
lasers and 15 to 30 times more efficiently than lamp-pumped YAG
lasers. Because fiber lasers are much more energy-efficient and
place lower levels of thermal stress on their internal
components, they have substantially lower cooling requirements
compared to conventional lasers and lower or no maintenance
costs. For example, single-emitter diodes used in fiber lasers
have estimated lives of over 200,000 hours. In contrast,
diode bars used in YAG lasers are typically replaced every
10,000 to 20,000 hours and lamps are typically replaced
every 1,000 hours, involving substantial costs and lost
production time.
CO
2
lasers also utilize components that require frequent
replacement, such as resonator mirrors, fluids and filters.
Ease of Use.
Many features of fiber lasers make
them easy to operate, maintain and integrate into laser-based
systems, providing a turnkey solution. Unlike traditional
solutions that require frequent adjustments, fiber lasers have a
monolithic solid-state design that does not require fine
mechanical alignment or adjustment of mirrors or other
components. An additional benefit is that fiber lasers deliver
their energy through an integrated flexible optical fiber that
can be up to 100 meters long.
Compact Size and Portability.
Fiber lasers are
typically smaller and lighter in weight than traditional lasers,
saving valuable floor space. While conventional lasers are
delicate due to the precise alignment of mirrors, fiber lasers
are more durable and able to perform in variable working
environments. These qualities permit fiber laser systems to be
transported easily. The portability and versatility of fiber
lasers also allow them to be used in new laser applications,
such as nuclear facility pipe welding and welding on ships.
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Choice of Wavelengths and Precise Control of Beam.
The design of fiber lasers generally provides a broad range of
wavelength choices, allowing users to select the precise
wavelength that best matches their application and materials.
Conventional lasers generally have limited wavelength options.
In addition, the greater stability of the output and improved
control of output beam parameters in fiber lasers, such as beam
shape, allow users to more effectively use lasers in their
applications.
Adoption of Fiber Lasers and Amplifiers
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Lasers
Amplifiers
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Materials Processing
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Communications
Medical
Advanced Applications
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Specialty Optical Fibers
Semiconductor Diode Laser Processing and Packaging
Technologies
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Specialty Components and Combining Techniques
Side Pumping of Fibers and Fiber Block Technologies
High-Stress Testing
BAE Systems
Daihen Corporation
EO TECHNICS
Esko-Graphics
German Institute for
Materials Processing
The Gillette Company
Harmonic Inc.
HM Laser Machinery Co.,
Ltd.
Mitsubishi Heavy Industries,
Ltd.
Nippon Steel Corporation
Reliant Technologies Inc.
Sahajanand Laser
Technology
SUNX Limited
Telesis Technologies
TEM Incorporated
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Six Months
Year Ended December 31,
Ended June 30,
2003
2004
2005
2006
(unaudited)
$
23,685
70.2
%
$
41,990
69.2
%
$
60,399
62.7
%
$
47,168
72.6
%
$
5,250
15.6
%
$
9,697
16.0
%
$
15,751
16.3
%
$
8,281
12.8
%
$
181
0.5
%
$
1,544
2.5
%
$
7,422
7.7
%
$
4,949
7.6
%
$
4,624
13.7
%
$
7,476
12.3
%
$
12,813
13.3
%
$
4,529
7.0
%
$
33,740
100.0
%
$
60,707
100.0
%
$
96,385
100.0
%
$
64,927
100.0
%
Six Months
Year Ended December 31,
Ended June 30,
2003
2004
2005
2006
(unaudited)
$
10,365
30.7
%
$
20,911
34.4
%
$
38,512
40.0
%
$
23,044
35.5
%
$
12,963
38.4
%
$
19,339
31.9
%
$
23,882
24.8
%
$
18,585
28.6
%
$
10,412
30.9
%
$
20,232
33.3
%
$
33,569
34.8
%
$
23,298
35.9
%
$
0.0
%
$
225
0.4
%
$
422
0.4
%
$
0.0
%
$
33,740
100.0
%
$
60,707
100.0
%
$
96,385
100.0
%
$
64,927
100.0
%
maintaining a technological lead over competitors;
reducing component and final product costs as volumes increase;
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ensuring access to critical components, enabling us to better
meet customer demands;
controlling performance, quality and consistency; and
enabling rapid development and deployment of new products and
technologies.
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product performance and reliability;
quality and service support;
price and value to the customer;
ability to manufacture and deliver products on a timely basis;
ability to achieve qualification for and integration into OEM
systems;
ability to meet customer specifications; and
ability to respond quickly to market demand and technological
developments.
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Owned or
Lease
Approximate
Location
Leased
Expiration
Size (sq. ft.)
Primary Activity
Owned
123,000
Diodes, components, complete device manufacturing, administration
Owned
137,000
Optical fiber, components, final assembly, complete device
manufacturing, administration
Leased
April 2007
55,000
Components, complete device manufacturing, administration
Leased
March 2012
12,000
Complete device manufacturing, administration
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Name
Age
Position(s)
67
Chief Executive Officer and Chairman of the Board
59
Managing Director of IPG Laser and Director
36
Chief Financial Officer and Vice President
42
General Counsel, Secretary and Vice President
34
Vice President-Research & Development
51
Vice President-Telecommunications Products
43
Vice President-Components
43
Acting General Manager of NTO IRE-Polus and Director
60
Director
51
Director
64
Director
65
Director
62
Director
69
Director
(1)
Member of the compensation committee.
(2)
Member of the nominating and corporate governance committee.
(3)
Member of the audit committee.
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appoints, approves the compensation of, and assesses the
independence of our independent registered public accounting
firm;
reviews the audit committee charter periodically and recommends
any necessary amendments to such charter to our board of
directors;
oversees the work of our independent auditor, which includes the
receipt and consideration of certain reports from the
independent registered public accounting firm;
resolves disagreements between management and our independent
registered public accounting firm;
pre-approves auditing and permissible non-audit services, and
the terms of such services, to be provided by our independent
registered public accounting firm;
reviews and discusses with management and the independent
registered public accounting firm our annual and quarterly
financial statements and related disclosures;
coordinates the oversight of our internal and external controls
over financial reporting, disclosure controls and procedures and
code of business conduct and ethics;
establishes, reviews and updates our code of business conduct
and ethics;
reviews and approves all related-party transactions;
establishes procedures for the receipt of accounting-related
complaints and concerns;
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meets independently with our independent registered public
accounting firm and management; and
will prepare the audit committee report required by SEC rules to
be included in our proxy statements.
annually reviews base salary and incentive compensation for our
chief executive officer and other executive officers;
approves corporate goals and objectives relevant to compensation
of our chief executive officer and other executive officers;
evaluates the performance of our chief executive officer in
light of our corporate goals and objectives and determines the
compensation of our chief executive officer;
reviews and makes recommendations to the board of directors with
respect to the compensation of our other executive officers; and
periodically reviews our incentive-based compensation plans and
stock-based plans and makes recommendations to the board of
directors with respect to such plans.
develops and recommends to the board of directors criteria for
board membership;
recommends to the board of directors changes that the committee
believes to be desirable with regard to the appropriate size,
functions and needs of the board of directors;
identifies and evaluates director candidates, including nominees
recommended by our stockholders;
identifies individuals qualified to fill vacancies on any
committee of the board of directors;
reviews procedures for stockholders to submit recommendations
for director candidates;
recommends to the board of directors the persons to be nominated
for election as directors and to each of the boards
committees;
reviews the performance of the committee and evaluates its
charter periodically; and
develops and recommends to the board of directors a set of
corporate governance guidelines.
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We granted options to purchase 30,000 shares of common
stock to each of Messrs. Blair, Child and Dalton and
Dr. Krupke on June 12, 2005, at an exercise price of
$1.00 per share;
We granted options to purchase 30,000 shares of common
stock to each of Messrs. Gauthier and Hurley on
April 18, 2006, at an exercise price of $3.58 per
share; and
We granted options to purchase 10,000 shares of common
stock to each of Messrs. Blair, Child and Dalton and
Dr. Krupke on June 21, 2006, at an exercise price of
$4.30 per share.
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Long-Term
Compensation
Annual Compensation
Awards
Other Annual
Securities
All Other
Name and Principal
Compensation
Underlying
Compensation
Position
Salary($)
Bonus ($)(1)
($)(2)
Options(#)
($)(3)
$
383,284
$
604,243
$
2,945
Chief Executive Officer and
Chairman of the Board(4)(5)
256,515
138,935
Managing Director and
Director(4)(5)
254,248
147,567
20,000
8,913
(6)
Vice President, General
Counsel and Secretary
200,000
142,500
20,000
8,550
(7)
Vice President and
Chief Financial Officer
227,479
94,250
470
Vice President,
Research and Development(5)
(1)
The bonuses paid in 2005 include an annual performance bonus for
the achievement of certain performance objectives which were met
during 2005. Bonuses paid in 2005 also include a one-time,
non-recurring loyalty bonus intended to reward officers for
their long-term contributions to us in the following amounts:
Dr. V. Gapontsev, $368,823; Dr. Shcherbakov, $72,236;
Mr. Lopresti, $68,750; Mr. Mammen, $82,500; and
Dr. D. Gapontsev, $29,750.
(2)
We have concluded that the aggregate amount of perquisites and
other personal benefits paid to each of the named executive
officers for fiscal year 2005 did not exceed the lesser of 10%
of such named executive officers total annual salary and
bonus for 2005 or $50,000; such amounts are not included in the
table.
(3)
All Other Compensation consists of our matching contributions to
retirement accounts under our 401(k) plan and our payment of
premiums on group term life insurance on behalf of our
employees. The group term life insurance does not have a cash
surrender value and premiums paid are not refunded upon
termination.
(4)
A portion of the amounts paid to Dr. Shcherbakov and
Dr. V. Gapontsev were denominated in Euros. These amounts
are translated into U.S. dollars at the exchange rate as of
December 30, 2005.
(5)
A portion of the amounts paid to Dr. Shcherbakov,
Dr. V. Gapontsev and Dr. D. Gapontsev were denominated
in Rubles. These amounts are translated into U.S. dollars
at the exchange rate as of December 30, 2005.
(6)
Reflects our contribution of $8,430 to Mr. Loprestis
retirement account under our 401(k) plan and payment of $483 of
premiums on Mr. Loprestis group term life insurance.
(7)
Reflects our contribution of $8,294 to Mr. Mammens
retirement account under our 401(k) plan and payment of $256 of
premiums on Mr. Mammens group term life insurance.
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Value at Assumed
Annual Rates of
Securities
% of Total
Stock Price
Underlying
Options
Appreciation for
Options
Granted to
Exercise
Option Term (1)
Granted
Employees in
Price Per
Name
(#)
Fiscal Year
Share
Expiration Date
5%
10%
20,000
1.60
$
1.25
September 22, 2015
20,000
1.60
$
1.25
September 22, 2015
(1)
Potential realizable values are net of exercise price, but
before any taxes associated with exercise. The assumed rates of
stock price appreciation are provided in accordance with SEC
rules based upon an assumed initial public offering price of
$ per
share, and do not represent our estimate of our future stock
price.
Number of Securities
Value at Assumed Annual
Underlying Unexercised
Rates of Stock Price
Options at Fiscal
Appreciation for
Shares
Year-End (#)
Option Term (1)
Acquired on
Value
Name
Exercise (#)
Realized ($)
Exercisable
Unexercisable
Exercisable
Unexercisable
355,876
55,215
34,776
75,000
283,708
36,666
50,000
271,259
36,666
70,019
16,666
(1)
There was no public trading market for our common stock as of
December 31, 2005. Accordingly, the value of unexercised
in-the
-money options is
based on an assumed initial public offering price of
$ per
share, minus the per share exercise price, multiplied by the
number of shares underlying the option.
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2000 Incentive Compensation Plan, 2006 Incentive
Compensation Plan and Non-Employee Directors Stock Plan
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accelerate the time for exercise or payout of all outstanding
awards;
cancel the award after notice to the holder of an outstanding
award as long as the holder receives a payment equal to the
difference between the fair market value of the award on the
date of the change of control and the exercise price per share,
if any, of such award; or
provide that all outstanding awards will be assumed by the
entity that acquires control or substituted for similar awards
by such entity.
any person becomes a beneficial owner of our securities
representing at least 50% of the combined voting power of our
then-outstanding securities;
persons who, at the beginning of any period of two consecutive
years, were members of the board of directors cease to
constitute a majority of the board of directors unless the
election or nomination for election by the stockholders of each
new director during that two-year period is approved by at least
two-thirds of the incumbent directors then still in office;
the occurrence of a merger, sale of all or substantially all of
our assets, cash tender or exchange offer, contested election or
other business combination under circumstances in which our
stockholders immediately prior to such merger or other such
transaction do not, after such transaction, own shares
representing at least a majority of our voting power or the
surviving or resulting corporation, as the case may be; or
our stockholders approve a complete liquidation.
401(k) Plan
Senior Executive Short-Term Incentive Plan
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any person becomes a beneficial owner of our securities
representing at least 50% of the combined voting power of our
then-outstanding securities; or
our stockholders approve a reorganization, merger or
consolidation, or a sale or other disposition of all or
substantially all of the assets of our company.
Employment Agreements
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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 unlawful payments related to dividends or unlawful stock
repurchases, redemptions or other distributions; or
any transaction from which the director or officer derived an
improper personal benefit.
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each person or group of affiliated persons known by us to own
beneficially more than 5% of our common stock;
each of our named executive officers;
each of our directors;
all of our executive officers and directors as a group; and
each selling stockholder.
Pro Forma Beneficial
Beneficial Ownership Prior
Ownership Prior to
Beneficial Ownership
to Offering
Offering
Shares
After Offering
Being
Name of Beneficial Owner
Number
Percentage
Number
Percentage
Offered
Number
Percentage
30,398,876
62.6
%
11,150,000
23.0
%
0
2,352,941
4.8
%
0
2,684,211
5.5
%
0
2,578,352
5.3
%
0
547,500
1.1
%
496,933
1.0
%
503,445
1.0
%
0
389,991
*
0
417,592
*
0
417,042
*
0
157,500
*
0
2,460,441
5.1
%
0
0
0
0
0
38,367,672
77.8
%
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*
Less than 1.0%.
(1)
Includes shares beneficially owned by IPFD, of which
Dr. Valentin Gapontsev is the managing director.
Dr. Valentin Gapontsev has voting and investment power with
respect to the shares held of record by IPFD and is the father
of Dr. Denis Gapontsev. Dr. Valentin Gapontsev has a
53% economic interest in IPFD.
(2)
Amounts shown reflect the aggregate number of shares of common
stock held by TA IX L.P., TA/Atlantic and Pacific IV L.P.,
TA/Advent VIII L.P., TA Executives Fund LLC, and TA
Investors LLC (collectively, the TA Associates
Funds), assuming the conversion of 2,000,000 shares
of our series B preferred stock. Investment and voting
control of the TA Associates Funds is held by TA Associates,
Inc. No stockholder, director or officer of TA Associates, Inc.
has voting or investment power with respect to our shares of
common stock held by the TA Associates Funds. Voting and
investment power with respect to such shares is vested in a
four-person investment committee consisting of the following
employees of TA Associates: Messrs. Michael C. Child,
Jonathan M. Goldstein, C. Kevin Landry and Kenneth T. Schiciano.
Mr. Child is a Managing Director of TA Associates, Inc.,
the manager of the general partner of TA IX L.P. and TA/Advent
VIII L.P.; the manager of TA Investors LLC and TA Executives
Fund LLC; and the general partner of the general partner of
TA/Atlantic and Pacific IV L.P. Mr. Child has been a
member of our board of directors since November 2000. See
note 11 below. The address of TA Associates, Inc. is John
Hancock Tower, 56th Floor, 200 Clarendon Street,
Boston, Massachusetts 02116.
(3)
Amounts shown reflect the aggregate number of shares of common
stock held by JDS Uniphase Corporation, assuming the conversion
of 2,684,211 shares of our series D preferred stock.
Does not include a convertible note that was convertible into an
aggregate of 2,684,211 shares of our series D
preferred stock at our option, which note was repaid in August
2006. The address of JDS Uniphase is 1768 Automation Parkway,
San Jose, California 95131.
(4)
Includes 78,352 shares of common stock issuable upon exercise of
options. Does not include shares held by IPFD. Dr. Denis
Gapontsev has a 15% economic interest in IPFD but does not
possess voting or investment power with respect to such interest.
(5)
Includes 7,500 shares of common stock issuable upon
exercise of options.
(6)
Includes 3,445 shares of common stock issuable upon exercise of
options. Does not include shares held by IPFD.
Mr. Samartsev has an 8% economic interest in IPFD but does
not possess voting or investment power with respect to such
interest.
(7)
Does not include shares held by IPFD. Dr. Shcherbakov has
an 8% economic interest in IPFD but does not possess voting or
investment power.
(8)
Includes 279,592 shares of common stock issuable upon exercise
of options.
(9)
Includes 267,042 shares of common stock issuable upon exercise
of options.
(10)
Includes 7,500 shares of common stock issuable upon exercise of
options.
(11)
Includes 107,500 shares of common stock issuable upon exercise
of options. Mr. Child is a managing director of TA
Associates, Inc. and may be considered to have beneficial
ownership of TA Associates, Inc.s interest in us.
Mr. Child disclaims beneficial ownership of all such
shares. Mr. Child has been a member of our board of
directors since September 2000. See note 2 above.
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we intend to adopt a board policy that the audit committee of
our board of directors will review and approve any distributions
and dividends to stockholders of NTO IRE-Polus;
Dr. Valentin P. Gapontsev and Mr. Samartsev intend to
grant a proxy to us to vote their shares with respect to NTO
IRE-Polus, giving us the ability to vote 82.6% of its total
shares and allowing us to have sufficient votes to elect the
general manager of NTO IRE-Polus and approve other changes that
require the approval of
66
2
/
3
%
of NTO IRE-Poluss stockholders; and
Dr. Valentin P. Gapontsev and Mr. Samartsev intend to
grant a right of first refusal to us on any sale of their shares
of NTO IRE-Polus to existing stockholders of
NTO
IRE-Polus
at a
price equal to the lesser of the per-share fair value or book
value of NTO IRE-Polus as of June 30, 2006. The charter
documents of NTO IRE-Polus and applicable Russian law also
provide that existing stockholders, including us, have a right
of first refusal up to their respective pro rata interests with
respect to transfers of shares of NTO IRE-Polus to third
parties.
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before the stockholder became an interested stockholder, the
board of directors approved either the business combination or
the transaction that resulted in the stockholder becoming an
interested stockholder;
upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced,
excluding, for purposes of determining the voting stock
outstanding, shares owned by persons who are directors and also
officers and some employee stock plans; or
at or after the time the stockholder became an interested
stockholder, the business combination was approved by the board
of directors of the corporation and authorized at an annual or
special meeting of the stockholders by the affirmative vote of
at least two-thirds of the outstanding voting stock that is not
owned by the interested stockholder.
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Number of
Shares Eligible
for Future Sale
Date
Immediately after the date of
this prospectus
After 90 days from the
date of this prospectus
After 180 days from the
date of this prospectus
one percent of the then-outstanding shares of common stock
(approximately shares
immediately after this offering); or
the average weekly trading volume on the Nasdaq Global Market
during the four calendar weeks before the date on which the
seller files a notice of the proposed sale with the SEC.
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a citizen or resident of the United States;
a corporation, or other entity treated as a corporation for U.S.
federal income tax purposes, created or organized in or under
the laws of the United States, any state thereof or the District
of Columbia;
an estate the income of which is subject to U.S. federal income
taxation regardless of its source; or
a trust (i) which is subject to primary supervision by a
court situated within the United States and as to which one or
more U.S. persons have the authority to control all substantial
decisions of the trust, or (ii) that has a valid election
in effect under applicable U.S. Treasury regulations to be
treated as a U.S. person.
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the gain is effectively connected with a trade or business of
the
Non-U.S.
Holder in the United States and, where a tax treaty applies, is
attributable to a United States permanent establishment or fixed
base of the
Non-U.S.
Holder;
the
Non-U.S.
Holder is
an individual who is present in the United States for 183 or
more days during the taxable year of disposition and meets
certain other requirements; or
we are or have been a U.S. real property holding
corporation within the meaning of Section 897(c)(2)
of the Code, also referred to as a USRPHC, for United States
federal income tax purposes at any time within the five-year
period preceding the disposition (or, if shorter, the
Non-U.S.
Holders
holding period for the common stock).
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Number of
Underwriter
Shares
Incorporated
Per Share
Without Option
With Option
$
$
$
$
$
$
$
$
$
$
$
$
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offer, pledge, sell or contract to sell any common stock;
sell any option or contract to purchase any common stock;
purchase any option or contract to sell any common stock;
grant any option, right or warrant for the sale of any common
stock;
lend or otherwise dispose of or transfer any common stock;
enter into any swap or other agreement that transfers, in whole
or in part, the economic consequences of ownership of any common
stock whether any such swap or transaction is to be settled by
delivery of shares or other securities, in cash or otherwise; or
publicly announce any of the foregoing.
during the last 17 days of the
180-day
restricted
period, we issue an earnings release or material news or a
material event relating to us occurs; or
prior to the expiration of the
180-day
restricted
period, we announce that we will release earnings results during
the
16-day
period
beginning on the last day of the
180-day
period,
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the valuation multiples of publicly traded companies that the
underwriters believe to be comparable to us;
our financial information;
the history of, and the prospects for, our company and the
industry in which we compete;
an assessment of our management, its past and present
operations, and the prospects for, and timing of, our future
revenues;
the present state of our development; and
the above factors in relation to market values and various
valuation measures of other companies engaged in activities
similar to ours.
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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 Financial Services and Markets Act
2000, or FSMA) received by it in connection with the issue or
sale of the shares in circumstances in which Section 21(1)
of the FSMA does not apply to us; and
it has complied with, and will comply with, all applicable
provisions of the FSMA with respect to anything done by it in
relation to the shares in, from or otherwise involving the
United Kingdom.
to legal entities which are authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
to any legal entity which has two or more of (1) an average
of at least 250 employees during the last financial year,
(2) a total balance sheet of more than
43,000,000 and
(3) an annual net turnover of more than
50,000,000, as
shown in its last annual or consolidated accounts; or
in any other circumstances which do not require the publication
by us of a prospectus pursuant to Article 3 of the
Prospectus Directive.
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F-2
F-3
F-4
F-5
F-6
F-7
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Years Ended December 31,
Six Months Ended June 30,
2003
2004
2005
2005
2006
(unaudited)
(unaudited)
(in thousands except per share data)
$
33,740
$
60,707
$
96,385
$
41,630
$
64,927
38,583
42,274
62,481
28,437
39,119
(4,843
)
18,433
33,904
13,193
25,808
2,110
2,363
3,236
1,538
2,343
10,063
4,831
5,788
2,873
2,622
9,998
8,179
10,598
4,352
5,813
22,171
15,373
19,622
8,763
10,778
(27,014
)
3,060
14,282
4,430
15,030
(1,505
)
(2,150
)
(1,840
)
(969
)
(709
)
(3,664
)
(615
)
(745
)
(314
)
(2,219
)
1,647
196
236
141
12
(3,522
)
(2,569
)
(2,349
)
(1,142
)
(2,916
)
(30,536
)
491
11,933
3,288
12,114
2,205
1,601
(4,080
)
(1,219
)
(5,598
)
121
(80
)
(426
)
81
(398
)
$
(28,210
)
$
2,012
$
7,427
$
2,150
$
6,118
$
(0.93
)
$
(0.01
)
$
0.11
$
0.02
$
0.11
$
(0.93
)
$
(0.01
)
$
0.11
$
0.02
$
0.10
38,302
38,547
39,348
39,008
40,385
38,302
38,547
45,252
44,912
49,584
Six Months
Ended
June 30,
2003
2004
2005
2005
2006
$
577
$
218
$
4
$
$
37
18
6
1
11
1,062
669
1
3
546
10
1
75
$
2,203
$
903
$
7
$
$
126
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Convertible
Convertible Redeemable Preferred Stock
Preferred Stock
Series B
Series D
Series A
Common Stock
Note
Accumulated
Other
Additional
Receivable
Other
Comprehensive
Par
Paid-In
From
Deferred
Accumulated
Comprehensive
Income
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Value
Capital
Stockholders
Compensation
Deficit
Income
Total
(Loss)
(In thousands, except share and per-share data)
3,800,000
$
84,194
$
500,000
$
5,000
37,940,668
$
4
$
100,076
$
(463
)
$
(2,613
)
$
(130,854
)
$
747
$
(28,103
)
(28,210
)
(28,210
)
$
(28,210
)
4,508
4,508
4,508
$
(23,702
)
2,684,211
5,100
(4,991
)
(251
)
5,242
4,991
7,343
251
(7,594
)
(7,343
)
500,000
5
5
496
(496
)
2,203
2,203
2,375
2
2
3,800,000
86,546
2,684,211
5,100
500,000
5,000
38,443,043
4
98,227
(463
)
(906
)
(159,064
)
5,255
(51,947
)
2,012
2,012
$
2,012
2,077
2,077
2,077
$
4,089
2,351
(2,351
)
(2,351
)
99,000
(3
)
3
903
903
(12,000
)
(120
)
445,451
388
268
3,800,000
88,897
2,684,211
5,100
488,000
4,880
38,987,494
4
96,261
(463
)
(157,052
)
7,332
(49,038
)
7,427
7,427
$
7,427
(3,550
)
(3,550
)
(3,550
)
$
3,877
2,351
(2,351
)
(2,351
)
118
(118
)
7
7
1,001,454
1,001
1,001
3,800,000
91,248
2,684,211
5,100
488,000
4,880
39,988,948
4
95,029
(463
)
(111
)
(149,625
)
3,782
(46,504
)
6,118
6,118
$
6,118
1,847
1,847
1,847
$
7,965
(111
)
111
1,037
(1,037
)
(1,037
)
126
126
894,752
905
905
3,800,000
$
92,285
2,684,211
$
5,100
488,000
$
4,880
40,883,700
$
4
$
94,912
$
(463
)
$
$
(143,507
)
$
5,629
$
(38,545
)
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1.
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
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Category
Economic Useful Life
30 years
3-5 years
3-5 years
3-5 years
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$
278
172
(153
)
25
322
35
(185
)
172
43
(24
)
7
$
198
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2003
2004
2005
$
(28,210
)
$
2,012
$
7,427
2,203
903
7
(2,241
)
(915
)
(22
)
$
(28,248
)
$
2,000
$
7,412
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2.
STOCK-BASED COMPENSATION (UNAUDITED)
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Weighted-
Average
Weighted-
Remaining
Average
Contractual
Number of
Exercise
Term
Options
Price
(In Years)
5,879,578
$
1.06
7.52
1,696,425
3.60
894,752
1.01
25,291
1.72
6,655,960
1.71
7.76
3,248,762
$
1.03
6.19
3.
INVENTORIES
December 31,
June 30,
2004
2005
2006
(unaudited)
$
15,473
$
9,985
$
14,637
5,900
10,010
8,872
8,204
8,593
11,250
$
29,577
$
28,588
$
34,759
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December 31,
June 30,
2004
2005
2006
(unaudited)
$
4,284
$
5,817
$
6,281
27,212
35,397
38,010
42,023
43,783
48,797
4,875
5,625
6,664
4,182
1,084
3,350
82,576
91,706
103,102
(36,594
)
(40,711
)
(45,557
)
$
45,982
$
50,995
$
57,545
December 31,
June 30,
2004
2005
2006
(unaudited)
$
2,562
$
4,248
$
3,666
2,166
2,078
3,899
593
1,065
1,149
1,853
2,516
2,534
$
7,174
$
9,907
$
11,248
6.
FINANCING ARRANGEMENTS
December 31,
June 30,
2004
2005
2006
(unaudited)
$
3,259
$
3,060
$
4,870
400
1,000
1,500
4,600
4,686
4,641
$
8,259
$
8,746
$
11,011
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December 31,
June 30,
2004
2005
2006
(unaudited)
$
6,347
$
5,983
$
5,790
3,350
4,695
4,942
5,069
10,232
7,588
6,274
651
595
6,179
6,973
7,135
31,454
26,081
24,268
(5,995
)
(10,438
)
(15,301
)
$
25,459
$
15,643
$
8,967
$
10,438
8,306
1,994
1,866
1,134
2,343
$
26,081
Revolving
Line-of
-Credit
Facilities:
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Table of Contents
7.
CONVERTIBLE REDEEMABLE PREFERRED STOCK, PREFERRED STOCK AND
WARRANTS
Table of Contents
Table of Contents
Table of Contents
8.
RELATED-PARTY TRANSACTIONS
Table of Contents
9.
NET INCOME (LOSS) PER SHARE
Six Months Ended
Year Ended December 31,
June 30,
2003
2004
2005
2005
2006
(unaudited)
38,302
38,547
39,348
39,008
40,385
3,295
536
536
536
2,684
2,684
2,684
2,684
2,684
2,684
38,302
38,547
45,252
44,912
49,584
Table of Contents
Six Months
Year Ended December 31,
Ended June 30,
2003
2004
2005
2005
2006
(unaudited)
4,324
5,730
5,880
5,606
964
549
549
4,336
4,336
4,336
4,336
4,377
2,684
2,684
2,684
2,684
Six Months Ended
Year Ended December 31,
June 30,
2003
2004
2005
2005
2006
(unaudited)
$
(28,210
)
$
2,012
$
7,427
$
2,150
$
6,118
(2,352
)
(2,351
)
(2,351
)
(1,176
)
(1,037
)
(5,242
)
$
(35,804
)
$
(339
)
$
5,076
$
974
$
5,081
100
%
100
%
84
%
84
%
84
%
(35,804
)
(339
)
4,258
816
4,277
38,302
38,547
39,348
39,008
40,385
$
(0.93
)
$
(0.01
)
$
0.11
$
0.02
$
0.11
$
(35,804
)
$
(339
)
$
4,258
$
816
$
4,277
247
121
127
349
67
341
(35,804
)
(339
)
4,854
1,004
4,745
38,302
38,547
45,252
44,912
49,584
$
(0.93
)
$
(0.01
)
$
0.11
$
0.02
$
0.10
Table of Contents
Six Months Ended
Year Ended December 31,
June 30,
2003
2004
2005
2005
2006
(unaudited)
38,302
38,547
39,348
39,008
40,385
3,220
3,220
3,220
5,589
7,569
4,336
4,336
4,377
43,891
46,116
46,904
46,564
47,982
87
%
84
%
84
%
84
%
84
%
0
%
0
%
7
%
7
%
7
%
10.
COMMITMENTS AND CONTINGENCIES
Years Ending December 31
Facilities
Equipment
Total
$
406
$
688
$
1,094
373
414
787
370
132
502
367
23
390
321
17
338
275
275
$
2,112
$
1,274
$
3,386
Table of Contents
11.
LEGAL PROCEEDINGS
12.
EMPLOYEE BENEFIT PLANS
Table of Contents
Number of
Weighted-Average
Options
Exercise Price
3,311,996
$
1.03
2,148,976
1.00
(2,375
)
1.07
(1,134,925
)
1.01
4,323,672
1.02
2,036,949
1.00
(445,451
)
0.87
(184,755
)
1.00
5,730,415
1.02
1,252,000
1.19
(1,001,454
)
1.00
(101,383
)
1.00
5,879,578
$
1.06
Weighted-Average
Remaining
Number Exercisable at December 31,
Exercise
Number
Contractual Life
Price
Outstanding
(Years)
2005
2004
2003
4,876,148
7.11
3,594,278
4,018,628
48,526
947,000
9.74
2,359,849
5,830
5.28
5,830
5,830
4,373
25,700
5.85
25,700
19,800
13,750
24,900
4.60
24,900
24,900
23,675
5,879,578
3,650,708
4,069,158
2,450,173
13.
INCOME TAXES
2003
2004
2005
$
(21,040
)
$
(1,637
)
$
1,211
(9,496
)
2,128
10,722
$
(30,536
)
$
491
$
11,933
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2003
2004
2005
$
$
1,569
$
(331
)
(430
)
(1,348
)
(331
)
1,139
(1,348
)
5,280
(189
)
(682
)
337
(97
)
(56
)
2,536
586
(2,992
)
(5,617
)
162
998
2,536
462
(2,732
)
$
2,205
$
1,601
$
(4,080
)
2003
2004
2005
$
10,517
$
(167
)
$
(4,057
)
(1,010
)
492
(658
)
337
97
(18
)
1,569
(1,246
)
(209
)
(253
)
(749
)
(307
)
(5,617
)
162
998
(27
)
(36
)
(92
)
$
2,205
$
1,601
$
(4,080
)
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2004
2005
$
(918
)
$
(790
)
6,779
4,961
2,832
3,433
1,055
1,056
17,050
13,654
(20,389
)
(19,391
)
$
6,409
$
2,923
14.
GEOGRAPHIC AND PRODUCT INFORMATION
2003
2004
2005
$
10,349
$
20,911
$
38,512
16
7,583
11,898
13,137
5,380
7,441
10,745
10,412
16,022
25,354
4,210
8,215
225
422
$
33,740
$
60,707
$
96,385
Table of Contents
2003
2004
2005
$
23,685
$
41,990
$
60,399
5,250
9,697
15,751
181
1,544
7,422
4,624
7,476
12,813
$
33,740
$
60,707
$
96,385
2004
2005
$
23,391
$
27,071
21,024
22,107
1,344
1,438
223
379
$
45,982
$
50,995
Table of Contents
Table of Contents
Merrill Lynch & Co.
Lehman Brothers
Table of Contents
ITEM 13.
Other Expenses of Issuance and Distribution.
Amount to be Paid
$
13,910
13,500
5,000
150,000
700,000
$
ITEM 14.
Indemnification of Directors and Officers.
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Table of Contents
ITEM 15.
Recent Sales of Unregistered Securities.
(1) On December 15, 2004, we sold 99,000 shares
of our common stock to Sujay Shetty, an individual, in exchange
for 277,000 shares of IPG Photonics (India) Private Limited;
(2) On August 13, 2003, in connection with the
settlement of a litigation between us and JDS Uniphase
Corporation (JDSU), we issued to JDSU 2,684,211 shares of
our series D preferred stock having an aggregate
liquidation value of $5,100,000, which shares are convertible
into up to 2,684,211 shares of our common stock, and we
issued to JDSU a subordinated convertible note in the principal
amount of $5,100,000, which note was convertible into
2,684,211 shares of our series D preferred stock and
was repaid in August 2006;
(3) On April 4, 2003, we sold 500,000 shares of
our common stock to TEM Incorporated for $1,000,000; and
(4) Since January 1, 2003, we have granted options to
purchase 7,134,350 shares of our common stock at
exercise prices ranging from $1.00 to $4.30 per share to
employees, consultants and directors under our 2000 Incentive
Compensation Plan, our 2006 Incentive Compensation Plan and our
Non-Employee Directors Stock Plan. Since January 1, 2003,
we have issued 2,344,032 shares of our common stock
pursuant to the exercise of stock options for aggregate
consideration of $2.3 million.
ITEM 16.
Exhibits.
ITEM 17.
Undertakings.
Table of Contents
(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.
Table of Contents
IPG Photonics Corporation
By:
/s/
Valentin P. Gapontsev
Valentin P. Gapontsev
Chief Executive Officer and
Chairman of the Board
Signature
Title
/s/
Valentin P.
Gapontsev
Chief Executive Officer, Chairman of the Board and Director
(Principal Executive Officer)
/s/
Timothy P.V. Mammen
Chief Financial Officer (Principal Financial Officer and
Principal Accounting Officer)
/s/
Robert A. Blair
Director
/s/
Michael C. Child
Director
/s/
John H. Dalton
Director
/s/
Henry E. Gauthier
Director
Table of Contents
Signature
Title
/s/
William S. Hurley
Director
/s/
William F. Krupke
Director
/s/
Eugene Shcherbakov
Director
/s/
Igor Samartsev
Director
Table of Contents
Number
Description
1
.1
Form of Underwriting Agreement*
3
.1
Amended and Restated Certificate of Incorporation of the
Registrant
3
.2
Form of Second Amended and Restated Certificate of Incorporation
of the Registrant, to be effective at the completion of this
offering
3
.3
By-laws of the Registrant
3
.4
Form of Amended and Restated By-laws of the Registrant, to be
effective at the completion of this offering
4
.1
Specimen Stock Certificate*
4
.2
Registration Rights Agreement by and among the Registrant and
the Investors named therein, dated as of August 30, 2000,
as amended
4
.3
Registration Rights Agreement by and among the Registrant and
JDS Uniphase Corporation, dated as of August 13, 2003,
as amended
5
.1
Opinion of Winston & Strawn LLP*
10
.1
2000 Incentive Compensation Plan
10
.2
2006 Incentive Compensation Plan
10
.3
Non-Employee Directors Compensation Plan
10
.4
Non-Employee Directors Stock Plan
10
.5
Senior Executive Short-Term Incentive Plan
10
.6
Form of Subordinated Note of the Registrant to be issued to
holders of series B preferred stock
10
.7
Form of Warrant to Purchase Common Stock of the Registrant
issued to holders of series B preferred stock, as amended
10
.8
Employment Agreement by and between the Registrant and Valentin
P. Gapontsev, dated as of March 1, 2006
10
.9
Service Agreement by and between the Registrant and Eugene
Shcherbakov, dated as of March 1, 2006
10
.10
Employment Agreement by and between the Registrant and Tim
Mammen, dated as of March 1, 2006
10
.11
Employment Agreement by and between the Registrant and Angelo P.
Lopresti, dated as of March 1, 2006
10
.12
Employment Agreement by and between the Registrant and Denis
Gapontsev, dated as of March 1, 2006
10
.13
Form of Indemnification Agreement between the Registrant and
each of its Directors and Executive Officers
10
.14
Form of Stock Option Agreement under the 2000 Incentive
Compensation Plan
10
.15
Form of Stock Option Agreement under the 2006 Incentive
Compensation Plan
10
.16
Form of Stock Option Agreement under the 2006 Non-Employee
Directors Stock Plan
10
.17
Form of Confidentiality, Non-Competition and Confirmatory
Assignment Agreement
10
.18
Construction Loan Agreement, dated as of April 28, 2000,
between the Registrant and Family Bank, FSB, as amended
10
.19
Loan and Security Agreement, dated as of November 15, 2004,
between the Registrant and BankNorth, N.A. as Lender, as amended
21
.1
List of Subsidiaries
23
.1
Consent of Deloitte & Touche LLP
23
.2
Consent of Winston & Strawn LLP (included in
Exhibit 5.1)*
24
.1
Power of Attorney (included on signature page)
*
To be filed by amendment.
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
IPG PHOTONICS CORPORATION
Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware
The undersigned, IPG Photonics Corporation (the "Corporation"), a corporation existing under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the Corporation is IPG PHOTONICS CORPORATION.
2. The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on December 2, 1998 and a Certificate of Amendment was filed on March 30, 2000.
3. The Amended and Restated Certificate of Incorporation as hereinafter set forth has been duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware.
4. The text of the Certificate of Incorporation is amended and restated in full to read as follows:
FIRST: The name of the corporation (the "Corporation") is "IPG Photonics Corporation."
SECOND: The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, Wilmington, Delaware, County of New Castle, and the name of its registered agent at such address is The Corporation Trust Company.
THIRD: The purpose for which the Corporation is organized is to engage in any lawful act or activity for which corporation may be organized under the General Corporation Law of the State of Delaware.
FOURTH: Total number of shares of capital stock which the Corporation shall have authority to issue is 55,000,000 shares of which 50,000,000 shares shall be designated Common Stock, par value of $.0001 per share ("Common Stock"), and 5,000,000 shares shall be designated Preferred Stock, par value of $.0001 per share ("Preferred Stock").
The Board of Directors is authorized, subject to limitations prescribed by law and the terms of this Certificate, to provide for the issuance of shares of Preferred Stock in one or more series, to establish the number of shares to be included in each such series, and to fix the designations, powers, preferences, and rights of the shares of each such series and any qualifications, limitations or restrictions thereof.
A. Series A Preferred Stock.
Any capitalized terms not otherwise defined in this Section A are defined in Section A.7.1 hereof.
Section 1. Designation and Amount
1.1 There shall be a series of the Preferred Stock which shall be designated as the "Series A Preferred Stock," par value $.0001 per share, and the number of shares constituting such series shall be Five Hundred Thousand (500,000). Subject to Section A.5.3, such number of shares may be decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than that of the shares then outstanding plus the number of shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Corporation with respect to shares of Series A Preferred Stock.
1.2 The Corporation shall not reissue any shares of the Series A Preferred Stock and shall from time to time in accordance with applicable law increase the authorized amount of its Common Stock in the event that the number of authorized shares of Common Stock remaining available for issuance shall not be sufficient to permit conversion of the Series A Preferred Stock.
Section 2. Dividends and Distributions. If any cash dividends or non-cash dividends or other distributions (other than distributions of Common Stock) are declared by the Board of Directors to be paid on any shares of Common Stock, then a dividend shall be paid at the same time to the holders of the outstanding shares of the Series A Preferred Stock at a rate per share equal to the product of (i) such per share dividend or other distribution declared by the Board of Directors on the Common Stock multiplied by (ii) the Conversion Ratio (as defined in Section A.5.3 below) then in effect.
Section 3. Liquidation. Upon any liquidation, dissolution or winding up of
the Corporation, or upon any Liquidating Merger, each holder of shares of Series
A Preferred Stock shall be entitled to be paid, before any distribution or
payment is made upon any Common Stock, from the assets of the Corporation
available for distribution to its Stockholders, whether from capital, surplus or
earnings, an amount in cash equal to the sum of the aggregate Liquidation Value
of all shares of Series A Preferred Stock held by such holder. Prior to the
liquidation, dissolution or winding up of the Corporation or to any Liquidating
Merger, the Corporation shall declare for payment all accrued and unpaid
dividends, if any, with respect to the Series A Preferred Stock as set forth in
Section A.2. If upon any such liquidation, dissolution or winding up of the
Corporation or any such Liquidating Merger, the Corporation's assets to be
distributed among the holders of the Series A Preferred Stock are insufficient
to permit payment to such holders of the aggregate amount that they are entitled
to be paid, then the entire assets to be distributed shall be distributed
ratably among such holders based upon the aggregate Liquidation Value of the
Series A Preferred Stock held by each such holder. The Corporation shall give
written notice of such liquidation, dissolution or winding up or of such
Liquidating Merger, not less than 30 days prior to the payment date stated
therein, to each record holder of shares of Series A Preferred Stock. Neither
the consolidation or merger of the Corporation into or with any other entity or
entities that is a wholly-owned subsidiary of the Corporation, nor the sale or
transfer by the Corporation of all or any part of its assets to any such
wholly-owned subsidiary, nor the reduction of the capital stock of the
Corporation, shall be deemed to be a liquidation, dissolution winding up or
Liquidating Merger of the Corporation within the meaning of
this Section 3. After distribution of the holders of Series A Preferred Stock of the full preferential amount set forth above, the remaining assets of the Corporation available for distribution, if any, to the stockholders of the Corporation shall be distributed to the holders of shares of Common Stock pro rata based on their respective shareholdings on a fully diluted basis.
Section 4. Voting Rights. The holders of the Series A Preferred Stock, voting as a class, shall be entitled to vote as provided by applicable law and as herein provided.
4.1 Protective Voting Provisions. So long as shares of the Series A Preferred Stock shall be outstanding, without first obtaining the approval (by vote or written consent, as provided by law or by the Certificate of Incorporation or the bylaws of the Corporation, each as amended from time to time) of the holders of more than fifty percent of the outstanding shares of Series A Preferred Stock, voting separately as a class, the Corporation shall not:
(i) increase the authorized number of shares of Series A Preferred Stock; or
(ii) affect, alter, amend, repeal or waive the rights, preferences or privileges of the holders of the Series A Preferred Stock as set forth herein.
4.2 Other Voting Provisions. The holders of the Series A Preferred Stock shall not be entitled to vote on any matter on which the holders of Common Stock shall be entitled to vote (including the election of directors), except as otherwise required by law.
Section 5 Conversion.
5.1 Elective Conversion. At any time after March 30, 2002, at his, her
or its absolute and sole discretion, any holder of shares of Series A Preferred
Stock may convert all or any portion of the Series A Preferred Stock (including
any fraction of a share) held by such holder, into a number of fully paid and
nonassessable shares of Conversion Stock equal to the Conversion Ratio then in
effect by delivery to the Corporation of a number of shares of Series A
Preferred Stock having a value equal to the Conversion Price to be converted,
and by surrendering such holder's certificate(s) in accordance with Section
A.5.6 hereof, and subject to Section A.5.7 hereof.
5.2 Automatic Conversion. Immediately following the closing of (i) a
Qualified IPO or (ii) the consummation of any merger or sale of a majority of
the Common Stock of the Corporation or of all or substantially all of its assets
(other than a merger with or sale to an Affiliate of the Corporation) in which
the holders of the Common Stock (assuming conversion of all convertible
securities of the Corporation) would be entitled to receive in a liquidation
consideration worth at least $500,000,000, then any and all outstanding shares
of Series A Preferred Stock shall automatically convert to Conversion Stock at
the then effective Conversion Ratio without any further action on the part of
any holder of the Series A Preferred Stock, subject to Sections A.5.8 and
Section A.5.9 hereof. Upon such automatic conversion, each share of Series A
Preferred Stock shall be canceled and not subject to reissuance as Series A
Preferred Stock, but shall rather be undesignated and unreserved Preferred Stock
of the Corporation.
5.3 Conversion Ratio. The "Conversion Ratio" shall be determined by
dividing the Original Liquidation Price by the Conversion Price (as defined in
Section A.5.4 hereof).
5.4 Conversion Price. The initial Conversion Price shall equal $10.00 per share. The Conversion Price shall be subject to adjustment from time to time as follows:
5.4.1 Definitions. For purposes of this Section A.5.4, the following definitions shall apply:
(i) "Additional Shares" shall mean all shares of Common Stock issued (or, with respect to options, rights or warrants, deemed to be issued in accordance with Section A.5.4.2) by the Corporation after the date that the original of the Series A Preferred Stock Certificate of Designation is filed with the Secretary of State of the State of Delaware, other than in any of the following transactions:
(a) in connection with the issuance to directors, officers, employees, or consultants of the Corporation or its Affiliates, in connection with their service to the Corporation, of options, rights, or warrants to subscribe for, purchase or otherwise acquire shares of Common Stock pursuant to stock purchase or stock options plans or agreements on terms from time to time approved by the Board of Directors;
(b) upon the issuance of securities in an underwritten offering of the Corporation's equity securities to the public pursuant to an effective registration statement under the Securities Act;
(c) upon conversion of Series A Preferred Stock;
(d) upon the issuance of a stock dividend declared by the Board of Directors to be paid on the Common Stock as a class, or upon any stock split or other subdivision or combination of Common Stock;
(e) upon the exercise of options, rights, or warrants to subscribe for, purchase or otherwise acquire Common Stock or Series A Preferred Stock outstanding or committed to be issued the date that the original of the Series A Preferred Stock Certificate of Designation is filed with the Secretary of State of the State of Delaware or described in (a) above;
(f) upon the exercise of warrants delivered in connection with borrowings, lines of credit or other credit facilities extended to the Corporation;
(g) in connection with a strategic alliance or partnership, or joint venture or development arrangement with any non-Affiliated Person;
(h) upon the issuance of shares issued in respect of the antidilution provisions of this Certificate of Incorporation or other antidilution provisions governing the Corporation's securities; or
(i) in connection with the issuance to an Affiliate of the Corporation of securities of the Corporation, provided that such issuance does not cause the Corporation's issued Common Stock to exceed 50,000,000 shares, taking into consideration reserves for stock options, warrants, Conversion Shares and other series of convertible preferred shares issued after the date that the original of the Series A Preferred Stock Certificate of Designation is filed with the Secretary of State of Delaware.
(ii) "Consideration" shall mean the following:
(a) In the case of the issuance of Common Stock for cash, the Consideration shall be deemed to be the aggregate 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 and excluding amounts paid or payable for accrued interest or accrued dividends thereon.
(b) In the case of the issuance of Common Stock for a consideration in whole or in part other than cash, the Consideration other than cash, including securities acquired in exchange therefor (other than securities by their terms so exchangeable), shall be deemed to be the fair value thereof as determined in good faith by the Board of Directors, irrespective of any accounting treatment; provided, however, that if, at the time of such determination, the Common Stock is traded in the over-the-counter market, the Nasdaq Stock Market, or on a national or regional securities exchange (or if other securities constituting such Consideration are traded in the over-the-counter market, the Nasdaq Stock Market or on a national or regional securities exchange), such fair value as determined by the Board of Directors shall not exceed the Current Market Value (as defined in Section A.5.4.1(iii)) of the Common Stock or of such other securities.
(c) In the case of the granting or issuance of options to purchase or rights to subscribe for Common Stock that are deemed to be Additional Shares under Section A.5.4.1(i) hereof, such Additional Shares shall be deemed to be issued at the time such options or rights were granted or issued and for a consideration equal to the Consideration (determined in the manner provided in Section A.5.4.1(ii)(a) and Section A.5.4.1(ii)(b) hereof), if any, received by the Corporation upon the issuance of such options or rights, plus the additional minimum aggregate amount (as set forth in the instruments relating thereto, without regard to any provision contained therein designed to protect against dilution), if any, to be received by the Corporation upon the exercise of such options or rights.
(d) In the case of the granting or issuance
of securities by their terms convertible into or exchangeable for Common Stock
that are deemed to be Additional Shares under Section A.5.4.1(i) hereof, such
Additional Shares shall be deemed to be issued at the time such securities were
granted or issued and for a consideration equal to the Consideration (determined
in the manner provided in Sections Section A.5.4.1(ii)(a) and Section
A.5.4.1(ii)(b) hereof), if any, received by the Corporation for such securities
(excluding any cash received on account of accrued interest or accrued
dividends), plus the additional minimum aggregate amount (as set forth in the
instruments relating thereto, without regard to any provision contained therein
designed to protect against dilution) of consideration (determined in the manner
provided in Sections Section A.5.4.1(ii)(a) and Section A.5.4.1(ii)(b) hereof),
if any, to be received by the Corporation upon the conversion or exchange of
such securities.
(e) In the case of the granting or issuance
of options to purchase or rights to subscribe for securities by their terms
convertible into or exchangeable for Common Stock that are deemed to be
Additional Shares under Section A.5.4.1(i) hereof, such Additional Shares shall
be deemed to be issued at the time such securities were issued or the options or
rights were granted or issued or for a consideration equal to the Consideration
(determined in the manner provided in Section A.5.4.1(ii)(a) and Section
A.5.4.1(ii)(b) hereof), if any, received by the Corporation for such options or
rights (excluding any cash received on account of accrued interest or accrued
dividends), plus the additional Consideration (determined
in the manner provided in Sections Section A.5.4.1(ii)(a) and Section
A.5.4.1(ii)(b) hereof), if any, to be received by the Corporation upon the
exercise of such options or rights.
(f) In the case of the issuance of Common Stock without consideration, the Consideration shall be deemed to be $0.0001 per share, or such lesser amount as shall be the then par value of the Common Stock.
(iii) "Current Market Value" of a given security on any given date shall be deemed to be the average of the daily closing prices per share of the security for 20 consecutive business days selected by the Corporation before such date. The closing price for each day shall be the last sale price regular way or, in case no sale takes place on such day, the average of the closing bid and asked prices regular way, in either case on the principal national or regional securities exchange on which the security is listed or admitted to trading or on the Nasdaq Stock Market or, if it is not listed or admitted to trading on any national or regional securities exchange or on the Nasdaq Stock Market, the average of the closing and asked prices as furnished by any member of the National Association of Securities Dealers, Inc., selected from time to time by the Corporation for that purpose, or if it is not a publicly traded company, as determined by the Board of Directors of the Corporation in a good faith resolution, based upon the best information available to it.
5.4.2 The maximum number of shares of Common Stock deliverable
upon the exercise, conversion or exchange of options, rights or warrants to
subscribe for, purchase or otherwise acquire Common Stock or Series A Preferred
Stock (as set forth in the instrument relating thereto without regard to any
provisions contained therein designed to protect against dilution) shall be
deemed to be exercised, converted or exchanged immediately upon any such grant
or issuance. In the case that options or rights granted or issued as set forth
in Section A.5.4.1 (i) (c) or Section A.5.4.1(i)(e) expire, or in the case that
all of the rights to exchange or convert securities issued as set forth in
Section A.5.4.1(i)(d) terminate, in each case having been issued by the
Corporation for Consideration (as determined pursuant to Section A.5.4.1(i)(c),
Section A.5.4.1(i)(d) and Section A.5.4.1(i)(e) above), the Conversion Price
shall forthwith be appropriately readjusted to such Conversion Price as would
have been in effect at the time of such expiration or termination had such
options or rights or securities, to the extent outstanding immediately prior to
such expiration or termination, never been granted or issued, and the Common
Stock issuable thereunder shall no longer be deemed to be outstanding.
5.4.3 If the Corporation shall issue any Additional Shares without Consideration or for consideration per share less than the Conversion Price in effect immediately prior to the issuance of such Additional Shares, the Conversion Price shall be adjusted according to the following formula:
CP = ((OS x OCP) + C) / (OS + NS)
where
CP = Adjusted Conversion Price;
OS = Shares of Common Stock or Common Stock Equivalents
outstanding or deemed outstanding (including those
shares deemed to be issued as a result of previous
adjustments of the Conversion Price pursuant to
Section A.5 hereof), on a fully diluted, as-converted
basis immediately prior to such issuance of Additional
Shares;
OCP = Conversion Price in effect immediately prior to such issuance of Additional Shares;
C = Consideration (as calculated in accordance with
Section A.5.4.1(ii) hereof), if any, received by the
Corporation in such issuance of Additional Shares; and
NS = Number of Additional Shares (but excluding the additional shares of Common Stock deemed issued only as a result of such adjustment of the Conversion Price).
5.4.4 No adjustment of the Conversion Price shall be made if such adjustment would result in a change in a Conversion Price in an amount less than 0.01 per share. Any Additional Shares issued or deemed issued (and any Consideration received or deemed received) shall be included in subsequent future adjustments, but only until such change in the Conversion Price as a result of such cumulative adjustments is equal to at least $0.01 per share.
5.4.5 No adjustment of the Conversion Price shall be made in respect of non-stock dividends on the Common Stock or the Series A Preferred Stock.
5.4.6 On any change in the number of shares of Common Stock
deliverable upon (i) the exercise of any options or rights deemed to be
Additional Shares under Section A.5.4.1(i) hereof, or (ii) the conversion of or
exchange for convertible or exchangeable securities deemed to be Additional
Shares under Section A.5.4.1(i) hereof, or (iii) the conversion of or exchange
for convertible or exchangeable securities issuable upon the exercise of any
options or rights deemed to be Additional Shares under Section A.5.4.1(i)
hereof, or on any change in the minimum purchase price of such options, rights
or securities, other than a change resulting from the antidilution provisions of
such options, rights or securities, then the Conversion Price for the Series A
Preferred Stock shall forthwith be readjusted to reflect such change with
respect to (x) such options or rights not exercised prior to such change, or
(y)such securities not converted or exchanged prior to such change, or (z) the
options or rights related to such securities not converted or exchanged prior to
such change, as the case may be.
5.4.7 If the number of shares of Common Stock outstanding at any time after the effective date hereof is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up of shares of Common Stock, then, following the record date fixed for the determination of holders of Common Stock entitled to receive such stock dividend, or the effective date of such subdivision or split-up, the Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each such share of Series A Preferred Stock shall be increased in proportion to such increase of outstanding shares of Common Stock.
5.4.8 If the number of shares of Common Stock outstanding at any time after the effective date hereof is decreased by a combination of the outstanding shares of Common Stock, then, following the effective date of such combination, the Conversion Price shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each such share of Series A Preferred Stock shall be decreased in proportion to such decrease in outstanding shares of Common Stock.
5.4.9 Notwithstanding anything seemingly to the contrary herein, in no event whatsoever shall the Conversion Price be adjusted to a number less than the par value of the Conversion Stock; such an adjustment shall be deemed not to be "appropriate" within the meaning of this Section A.5.
5.5 Reorganization or Reclassification. In the event of any capital reorganization, or any reclassification of the capital stock of the Corporation (other than a change in par value or as a result of a stock dividend or subdivision, split-up or combination of shares), or any related series of such transactions, the shares of Series A Preferred Stock shall, after such reorganization or reclassification, be convertible into the kind and number of shares of stock or other securities or property or cash of the Corporation or entity resulting from such reorganization or reclassification to which such holder would have been entitled, if immediately prior to such reorganization or reclassification, such holder had converted the shares of Series A Preferred Stock held by such holder to Common Stock immediately prior to such reorganization or reclassification.
5.6. Mechanics of Elective Conversion. Before any holder of shares of
Series A Preferred Stock shall be entitled to convert the same into shares of
Conversion Stock pursuant to Section A.5.1 hereof, such holder shall surrender
the certificate or certificates therefor, duly endorsed or in blank, at the
office of the Corporation or of any transfer agent for the Series A Preferred
Stock (or, in addition to the aforementioned places, at such other place as the
Board of Directors may reasonably designate), and shall give written notice to
the Corporation (in the manner described in Section A.7.3 hereof) at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Conversion Stock are to be issued. The Corporation shall use its commercially
reasonable efforts promptly to (subject to Section A.5.9), issue and deliver at
such office to such holder of shares of Series A Preferred Stock, or to the
nominee or nominees of such holder, (x) a certificate or certificates for the
number of shares of Conversion Stock to which such holder shall be entitled as
herein provided, (y) a certificate representing any shares of Series A Preferred
Stock not so converted and (z) an amount of cash equal to accrued but unpaid
dividends on the shares converted, calculated through the date of such
conversion and, if applicable, the payment required by Section A.5.7 and Section
A.5.8. Any conversion shall be deemed to have been made immediately prior to the
close of business on (i) the date such written notice is given (provided that
such holder's certificate or certificates are delivered to the Corporation
within two business days after such notice is given) or (ii) in any other case,
on the date of such surrender of the shares of Series A Preferred Stock to be
converted, and the person or persons entitled to receive the shares of
Conversion Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Conversion Stock on such date.
Notwithstanding the foregoing, no written notice of election to convert or
surrender of certificates shall be required in the event of an automatic
conversion pursuant to Section A.5.2.
5.7 Fractional Shares. No fractional shares shall be issued upon conversion of the Series A Preferred Stock into Conversion Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, in its reasonable discretion, the Board of Directors may cause the Corporation to pay cash to such holder equal to such fraction (calculated as to each conversion to the nearest 1/100th of a share) multiplied by the applicable Conversion Price or may round the number of shares of Conversion Stock to be issued to the nearest whole share as follows: (i) any fractional shares equal to at least one-half shall be rounded upward; and (ii) any fractional shares equal to less than one-half shall be rounded downward.
5.8 Declared, but Unpaid Dividends. Promptly upon conversion, the Corporation shall also pay to the former holders of shares of the Series A Preferred Stock so converted an amount in cash equal to any and all accrued but unpaid dividends on the shares of Series A Preferred Stock surrendered for conversion through the date of such conversion (whether or not declared) out of funds legally available for such payment; provided, however, that if the funds of the Corporation legally available for payment of such dividends are insufficient to pay all such dividends required to be paid on such date, those funds which are legally available and not subject to such restrictions shall be used to pay the maximum possible amount of such dividends and the remaining dividends shall be paid as soon as practicable when additional funds of the Corporation not subject to such restrictions become legally available therefor.
5.9 Transfer Taxes. The Corporation will pay any and all taxes that
may be payable in respect of the issue or delivery of shares of Conversion Stock
on conversion of shares of the Series A Preferred Stock pursuant to this Section
A.5. The Corporation shall not, however, be required to pay any tax that may be
payable in respect of any transfer involved in the issue or transfer and
delivery of shares of Conversion Stock in a name other than that in which the
shares of the Series A Preferred Stock so converted were registered, and no
issue or delivery shall be made unless and until the person requesting such
issue has paid to the Corporation the amount of any such tax or has established
to the satisfaction of the Corporation that such tax has been paid.
5.10 No Impairment; Cooperation. The Corporation will not, through any reorganization, transfer of assets, consolidation, merger, Liquidating 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 A.5 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 Series A Preferred Stock against impairment. Subject to Section A.4.1, this provision shall not restrict the Corporation from effecting an amendment to its Certificate of Incorporation in accordance with the General Company Law of the State of Delaware. The Corporation shall assist and cooperate with any holder of shares of Series A Preferred Stock required to make any filings or obtain any approvals, governmental or otherwise, prior to or in connection with any conversion of such shares hereunder (including, without limitation, making any filings required to be made by the Corporation).
5.11 Certificate as to Adjustments. Upon the occurrence of each event
requiring adjustment or readjustment of the Conversion Price pursuant to this
Section A.5, the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and shall prepare
and cause to be furnished to holders of Series A Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in reasonable detail
the facts upon which such adjustment or readjustment is based. The Corporation
also shall, upon written request of any holder of record of Series A Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (a) such adjustments and readjustments and (b) the Conversion
Price at the time in effect.
5.12 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 or to vote on any
matter upon which such stockholders may be entitled to vote, the Corporation shall give notice to each holder of shares of Series A Preferred Stock and to each holder of outstanding warrants, options or other rights to acquire Series A Preferred Stock at least 10 days prior to the date specified therein, specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or vote.
5.13 Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Conversion Stock solely for the purpose of effecting the conversion of the outstanding shares of Series A Preferred Stock and all shares of Series A Preferred Stock issuable upon exercise of outstanding warrants and options, such number of shares of Conversion Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series A Preferred Stock and all shares of Series A Preferred Stock issuable upon exercise of outstanding warrants and options. All shares of Conversion Stock that shall be so issued shall be duly and validly issued, fully paid, nonassessable and free from all taxes, liens and charges arising out of or by reason of the issue thereof.
Section 6. Replacement. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of Series A Preferred Stock, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation, or, in the case of any such mutilation, upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and dividends shall accrue on the Series A Preferred Stock represented by such new certificate from the date to which dividends have been fully paid on such lost, stolen, destroyed or mutilated certificate.
Section 7. Miscellaneous.
7.1 Definitions. For the purposes of Section A.1 through Section A.7 of this Article Fourth:
"Affiliate" means, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, twenty percent or more of the Stock (as defined
below) having ordinary voting power in the election of directors of such Person,
(b) each Person that controls, is controlled by or is under common control with
such Person and (c) in the case of individuals, the immediate family members,
spouses and lineal descendants of individuals who are Affiliates of the
Corporation. For purposes of this definition, "control" of a Person shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of voting
securities, by contract or understanding, by virtue of being an executive
officer or a director or otherwise. For purposes of this definition, "Stock"
means all shares, options, warrants, general or limited partnership or
membership interests or other equivalents (regardless of how designated) of or
in a Person, whether voting or nonvoting, including common stock preferred stock
or any other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended).
"Common Stock" means, collectively, the Corporation's common stock, par value $.0001 per share, and any capital stock of any class of the Corporation hereafter authorized which is not limited to a fixed sum or percentage of par or stated value with respect to the rights of the holders thereof to participate in dividends or in the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation.
"Conversion Stock" means shares of the Common Stock issuable upon conversion of the Series A Preferred Stock, provided that if there is a change such that the securities issuable upon conversion of the Series A Preferred Stock are issued by a Person other than the Corporation or there is a change in the class of securities so issuable, then the term "Conversion Stock" shall mean the aggregate number of shares of the securities issuable upon conversion of the Series A Preferred Stock if such securities are issuable in shares, or the aggregate of the smallest units in which such securities are issuable if such securities are not issuable in shares.
"Liquidation Value" of any share of Series A Preferred Stock as of any particular date shall be equal to the Original Liquidation Price per share of Series A Preferred Stock, plus any and all accrued and unpaid dividends, including those dividends required to be paid thereon under Section A.2 hereof.
"Liquidating Merger" shall mean any merger, consolidation or sale or exchange of all or substantially all of the property and assets of the Corporation or any subsidiary thereof (other than with or to any Affiliate of the Corporation), otherwise than in the usual and regular course of its business, which will result in the stockholders of the Corporation immediately prior to such transaction not holding (by virtue of such shares or securities issued solely with respect thereto) at least 50% of the combined voting power of the surviving, continuing or purchasing entity.
"Original Liquidation Price" of any share of Series A Preferred Stock shall be equal to $10.00 per share.
"Person" means any individual, sole proprietorship, Company, partnership, unincorporated organization, association, limited liability Company, trust, joint venture or other business or not for profit entity or government.
"Qualified IPO" means the sale of the Common Stock to the public in a
firm commitment public offering, pursuant to an effective registration statement
under the Securities Act of 1933, as amended (together with any successor
thereto, the "Securities Act") that generates gross proceeds to the Corporation
(before deducting underwriting discounts and other customary offering expenses)
in an aggregate amount equal to at least $35,000,000 at a pre-money valuation of
at least $500,000,000.
7.2 Notices. Except as otherwise expressly provided hereunder, all notices referred to herein shall be in writing and shall be deemed given upon the earlier of delivery thereof if by hand, or upon receipt if sent by mail (registered or certified mail, return receipt requested and postage prepaid), or on the next business day after deposit if sent by reputable overnight courier service, charged prepaid, or upon transmission if sent by telecopy or facsimile transmission (with request of assurance of receipt in a manner customary for communication of such type), and shall be deemed to have been given when so
mailed or sent (i) to the Corporation, at its principal executive offices, and
(ii) to any holder of shares of Series A Preferred Stock or of Conversion Stock,
at such holder's address as it appears in the stock records of the Corporation
(unless otherwise indicated by any such holder).
7.3 Severability. If any right, preference or limitation of the Series A Preferred Stock set forth in this Certificate of Incorporation is finally adjudicated by a court of competent jurisdiction to be invalid, unlawful or incapable of being enforced by any rule of law or public policy, all other rights, preferences and limitations set forth in this Certificate of Incorporation which can be given effect without the invalid, unlawful or unenforceable right, preference or limitation, shall, nevertheless, remain in full force and effect, and no right, preference or limitation herein set forth shall be dependent upon any other such right, preference or limitation unless so expressed herein.
B. Series B Preferred Stock.
Designation and Amount. A total of 3,800,000 shares of the Corporation's Preferred Stock shall be designated as a series known as Series B Convertible Participating Preferred Stock, par value $0.0001 per share (the "Series B Preferred Stock").
Section 2. Dividends and Distributions. The holders of Series B Preferred Stock shall be entitled to receive dividends out of funds legally available therefor at such times and in such amounts as the Board of Directors may determine in its sole discretion; provided, however, that no such dividend may be declared or paid on any shares of Common Stock or Series A Preferred Stock unless at the same time a dividend is declared or paid on all outstanding shares of Series B Preferred Stock, with holders of Series A Preferred Stock, Series B Preferred Stock and Common Stock sharing in any such dividends as if they constituted a single class of stock and with each holder of shares of Series B Preferred Stock entitled to receive such dividends based on the number of shares of Common Stock into which such shares of Series B Preferred Stock are then convertible in accordance with Section B.6 hereof.
Section 3. Liquidation; Merger, etc.
3.1 Series B Liquidation Preference. Upon any liquidation, dissolution or winding up of the Corporation and its subsidiaries, whether voluntary or involuntary (a "Liquidation Event"), each holder of outstanding shares of Series B Preferred Stock shall be entitled to be paid, on a pari passu basis to the Series A Preferred, before any amount shall be paid or distributed to the holders of the Common Stock and any other capital stock ranking on liquidation junior to the Series B Preferred Stock (the Common Stock and such other capital stock being referred to collectively as, "Junior Stock"), an amount per share of Series B Preferred Stock, payable in cash, equal to the sum of (i) $25.00 plus any declared but unpaid dividends on such shares of Series B Preferred Stock (such amount to be adjusted appropriately for stock splits, stock dividends, recaptalizations and the like) (the "Series B Participation Amount") and (ii) such amount of the remaining assets of the Corporation as would have been payable per share of Series B Preferred Stock had each such share been converted to Common Stock immediately prior to such Liquidation Event pursuant to the provisions of Section B.6 hereof (the sum of (i) and (ii), the "Series B Preference Amount"); provided, however, that in the event that the Series B Preference Amount determined pursuant to the foregoing formula would result in amount equal to or greater than $100.00 per share (such amount to be adjusted appropriately for stock splits, stock dividends, recapitalizations and the like), the Series B
Participation Amount shall be adjusted in a linear fashion such that the adjusted Series B Participation Amount equals the product of (x) the Series B Participation Amount prior to the adjustment and (y) the Adjustment Factor (as defined below). The "Adjustment Factor" shall be a number not less than zero and not greater than one determined by the following formula:
where:
x = the Series B Preference Amount prior to any adjustment to the Series B Participation Amount (but adjusted appropriately for stock splits, stock dividends, recapitalizations and the like);
y = $100.00 per share (adjusted appropriately for stock splits, stock dividends, recapitalizations and the like);
z = $25.00 per share (adjusted appropriately for stock splits, stock dividends, recapitalizations and the like).
If the amounts available for distribution to holders of Series A Preferred Stock and Series B Preferred Stock upon a Liquidation Event are not sufficient to pay all amounts due, such holders shall share ratably in any distribution of assets in proportion to the full respective preferential amounts to which they are entitled.
3.2 Remaining Assets. After the payment of all preferential amounts required to be paid to the holders of the Series B Preferred Stock and any other class or series of stock of the Corporation ranking on liquidation on a parity with the Series B Preferred Stock, the holders of shares of Junior Stock then outstanding shall be entitled to receive the remaining assets and funds of the Corporation available for distribution to its stockholders.
3.3 Amount Payable in Mergers, etc. The holders of not less than a Majority Interest may elect to have treated as a Liquidation Event (i) any merger or consolidation of the Corporation into or with another corporation (except one in which the holders of capital stock of the Corporation immediately prior to such merger or consolidation continue to hold at least a majority of the voting power of the capital stock of the surviving corporation), (ii) any sale of all or substantially all of the assets of the Corporation, or (iii) any other transaction by or as a result of which a single person (or group of affiliated persons) newly acquires or holds stock representing a majority of the Corporation's outstanding voting power (a "Change of Control Transaction"). In such event, all consideration payable to the stockholders of the Corporation by the relevant purchaser or the Corporation in connection with a merger, consolidation or Change of Control Transaction, or all consideration payable to the Corporation and distributable to its stockholders, together with all other available assets of the Corporation (net of obligations owed by the Corporation), in the case of an asset sale, shall be paid by the purchaser or distributed by the Corporation in redemption of the Series B Preferred Stock, as applicable, to the holders of capital stock of the Corporation in accordance with the preferences and priorities set forth in Sections B.3.1 and B.3.2 above, with such preferences and priorities specifically intended to be applicable in any such merger, consolidation, asset sale or Change of Control Transaction as if the same were a Liquidation Event. The Corporation shall promptly provide to the holders of shares of Series B Preferred Stock such information concerning the
terms of such merger, consolidation, asset sale or Change of Control Transaction and the value of the assets of the Corporation as may reasonably be requested by the holders of Series B Preferred Stock. If applicable, the Corporation shall cause the agreement or plan of merger, consolidation or Change of Control Transaction agreement to provide for a rate at which the shares of capital stock of the Corporation are converted into or exchanged for cash, new securities or other property, or redeemed, on a basis which gives effect to the provisions of this Section B.3. The amount deemed distributed to the holders of Series B Preferred Stock upon any such transaction shall be the cash or the value of the property, rights or securities distributed to such holders by the Corporation or the acquiring person, firm or other entity, as applicable; provided, however, that in the event the amount per share to be paid in any such transaction is $25.00 or less (such amount to be adjusted appropriately for stock splits, stock dividends, recapitalizations and the like), such amount shall be paid in cash. The value of such property, rights or other securities shall be determined as provided below in good faith by agreement of the Board of Directors of the Corporation and a Majority Interest. Notwithstanding anything to the contrary contained herein, the holders of shares of Series B Preferred Stock shall have the right to elect by vote of a Majority Interest to give effect to the conversion rights contained in Section B.6 (or by vote of a Majority Interest to give effect to the rights contained in Section B.7.5, if applicable) instead of giving effect to the provisions contained in this Section B.3.3 with respect to the shares of Series B Preferred Stock owned by them. Any election pursuant to this Section B.3.3 shall be made by written notice to the Corporation at least 5 days prior to the closing of the relevant transaction, and any such election shall bind all holders of this Series B Preferred Stock.
For purposes of valuing any securities or other noncash or consideration to be delivered to the holders of the Series B Preferred Stock any transaction to which this Section B.3 is applicable, the following shall apply:
(i) If traded on a nationally recognized securities exchange or inter-dealer quotation system, the value shall be deemed to be the average of the closing prices of the securities on such exchange or system over the 30-day period ending three (3) business days prior to the closing;
(ii) If traded over-the-counter, the value shall be deemed to be the average of the closing bid prices over the 30-day period ending three (3) business days prior to the closing; and
(iii) If there is no active public market, the value shall be the fair market value thereof, as mutually determined by the Corporation and the holders of not less than a Majority Interest, provided that if the Corporation and the holders of a Majority Interest are unable to reach agreement, then by independent appraisal by a mutually agreed to investment banker, the fees of which shall be paid by the Corporation.
Section 4. Election of Directors; Voting.
4.1 Election of Directors. The holders of outstanding shares of Series B Preferred Stock shall, voting together as a separate class, be entitled to elect one (1) Director of the Corporation. Such Director shall be the candidate receiving the greatest number of affirmative votes (with each holder of Series B Preferred Stock entitled to cast one vote for or against each candidate with respect to each share of Series B Preferred Stock held by such holder) of the outstanding shares of Series B Preferred Stock (the "Series B Preferred Stock
Director Designee"), with votes cast against such candidate and votes withheld having no legal effect. The election of the Series B Preferred Stock Director Designee shall occur (i) at the annual meeting of holders of capital stock, (ii) at any special meeting of holders of capital stock, (iii) at any special meeting of holders of Series B Preferred Stock called by holders of not less than a majority interest of the outstanding shares of the Series B Preferred Stock (a "Majority Interest") or (iv) by the written consent of the holder or holders of not less than a Majority Interest. If at any time when any share of Series B Preferred Stock is outstanding any Series B Preferred Stock Director Designee should cease to be a Director for any reason, the vacancy shall only be filled by the vote or written consent of the holders of the outstanding shares of Series B Preferred Stock, voting together as a separate class, in the manner and on the basis specified above or as otherwise provided by law. The holders of outstanding shares of Series B Preferred Stock shall also be entitled to vote for all other Directors of the Corporation together with holders of all other shares of the Corporation's outstanding capital stock entitled to vote thereon, voting as a single class, with each outstanding share entitled to the same number of votes specified in Section B.4.2. Notwithstanding the foregoing, the holders of outstanding shares of Series B Preferred Stock, may, in their sole discretion, determine to elect no Series B Preferred Stock Director Designee from time to time, and during any such period the Board of Directors nonetheless shall be deemed duly constituted.
4.2 Voting Generally. Each outstanding share of Series B Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which such share of Series B Preferred Stock is then convertible pursuant to Section B.6 hereof as of the record date for the vote or written consent of stockholders, if applicable. Each holder of shares of Series B Preferred Stock shall be entitled to notice of any stockholder's meeting in accordance with the by-laws of the Corporation and shall vote with holders of the Common Stock, voting together as single class, upon all matters submitted to a vote of stockholders, excluding those matters required to be submitted to a class or series vote pursuant to the terms hereof (including, without limitation, Section B.8) or by law.
Section 5. Redemption.
5.1 Redemption.
5.1.1 At any time on or after August 25, 2006, upon the election of the holder or holders of not less a Majority Interest, the Corporation shall redeem, out of funds legally available therefor, up to thirty-three and one-third percent ("33 1/3%") of the originally issued and outstanding shares of Series B Convertible Preferred Stock held by each holder of Series B Convertible Preferred Stock at such time;
5.1.2 At any time on or after August 25, 2007, upon the election of the holder or holders of not less than a Majority Interest, the Corporation shall redeem, out of funds legally available therefor, up to that percentage of outstanding shares of Series B Convertible Preferred Stock that would, when combined with any prior redemptions pursuant to Section B.5.1.1 above, result in the redemption by the Corporation of up to sixty-six and two-thirds percent ("66 2/3%") of the originally issued and outstanding shares of Series B Convertible Preferred Stock held by each holder of Series B Convertible Preferred Stock at such time; and
5.1.3 At any time on or after August 25, 2008, upon the election of the holder or holders of not less than a Majority Interest, the Corporation
shall redeem, out of funds legally available therefor, up to that percentage of outstanding shares of Series B Convertible Preferred Stock that would, when combined with any prior redemptions pursuant to Section B.5.1.1 and Section B.5.1.2 above, result in the redemption by the Corporation of up to one hundred percent (100%) of the outstanding shares of Series B Convertible Preferred Stock held by each holder of Series B Convertible Preferred Stock at such time.
The foregoing elections shall be made by such holders giving the Corporation and each of the other holders of Series B Preferred Stock not less than sixty (60) business days prior written notice, which notice shall set forth the date for such redemption and the percentage of such shares of Series B Preferred Stock to be redeemed from each holder (which percentage so elected on each redemption date shall be the same for each holder). The price per share for Series B Preferred Stock in connection with any redemption made pursuant to Section B.5.1 shall equal the Series B Participation Amount (the "Series B Redemption Price").
5.2 Redemption Date and Price Determination. Upon the election of the
holders of not less than a Majority Interest to cause the Corporation to redeem
Series B Preferred Stock pursuant to Section B.5.1, each holder of Series B
Preferred Stock shall be deemed to have elected to cause the applicable
percentage of such shares held by such holder to be so redeemed or to so
participate. The date upon which a redemption is to occur in accordance with
Section B.5.1 shall be specified in the notice of redemption pursuant to Section
B.5.1 and shall be referred to as a "Redemption Date." Subject to Section B.5.3,
the aggregate Series B Redemption Price shall be payable in cash in immediately
available funds to the respective holders on the Redemption Date in the amount
specified in Section B.5.1.
5.3 Insufficient Funds. If the funds of the Corporation legally
available for the redemption of shares of Series B Preferred Stock on the
Redemption Date are insufficient to redeem the total number of such shares
required to be redeemed on such date, the Corporation shall (i) take such action
as shall be necessary or appropriate, to the extent reasonably within its
control, to remove promptly any impediments to its ability to redeem the total
number of shares of Series B Preferred Stock required to be so redeemed,
including, without limitation, (A) reducing the stated capital of the
Corporation or causing a revaluation of the assets of the Corporation under
Section 154 of the Delaware General Corporation Law, to the extent permissible
under applicable law, to create sufficient surplus to make such redemption and
(B) incurring any indebtedness necessary to make such redemption, and (ii) in
any event, use any funds that are legally available to redeem the maximum
possible number of such shares from the holders of such shares to be redeemed in
proportion to the respective number of such shares that otherwise would have
been redeemed if all such shares had been redeemed in full. At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of such shares of Series B Preferred Stock, such funds will
immediately be used to redeem the balance of the shares that the Corporation
became obligated to redeem on the Redemption Date (but which it has not yet
redeemed) at the Series B Redemption Price.
In the event that the Corporation fails for any reason to redeem shares for which redemption is required pursuant to this Section B.5, including without limitation due to a prohibition of such redemption under the Delaware General Corporation Law, then such shares shall continue to be outstanding and entitled to all of the rights and preferences provided herein, and during the period from the applicable Redemption Date through the date on which such shares are redeemed, the applicable redemption price shall increase at the rate per annum
equal to 3% in excess of the rate established from time to time by Citibank, N.A. as its prime rate (the "Prime Rate") provided, however, that in no event shall such interest exceed the maximum permitted rate of interest under applicable law (the "Maximum Permitted Rate"). In the event that fulfillment of any provision hereof results in such rate of interest being in excess of the Maximum Permitted Rate, the obligation to be fulfilled shall automatically be reduced to eliminate such excess; provided, however, that, to the extent permitted by law, any subsequent increase in the Maximum Permitted Rate shall be retroactively effective to the applicable Redemption Date.
5.4 Surrender of Certificates. Each holder of shares of Series B Preferred Stock to be redeemed shall surrender the certificate or certificates representing such shares to the Corporation, duly assigned or endorsed for transfer to the Corporation (or accompanied by duly executed stock powers relating thereto), or, in the event the certificate or certificates are lost, stolen or missing, shall deliver an affidavit or agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection therewith (an "Affidavit of Loss"), at the principal executive office of the Corporation or such other place as the Corporation may from time to time designate by notice to the holders of Series B Preferred Stock, and each surrendered certificate shall be canceled and retired and the Corporation shall thereafter make payment of the applicable Series B Redemption Price by certified check or wire transfer; provided, however, that if the Corporation has insufficient funds legally available to redeem all shares of Series B Preferred Stock required to be redeemed, each such holder shall, in addition to receiving the payment of the portion of the applicable Series B Redemption Price that the Corporation is not prohibited from paying by certified check or wire transfer, receive a new stock certificate for those shares of Series B Preferred Stock not so redeemed.
Section 6. Conversion. The holders of Series B Preferred Stock shall have the following conversion rights:
6.1 Right to Convert. Each share of Series B Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share and on or prior to the fifth (5th) day prior to a Redemption Date, if any, at the office of the Corporation or any transfer agent for such series, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing $25.00 by the Conversion Price at the time in effect for such series (the "Conversion Rate"). In addition, the holders of shares of Series B Preferred Stock shall be entitled at any time, upon the written election of the holder or holders of not less than a Majority Interest, without the payment of any additional consideration, to cause all (but not less than all) of the outstanding shares of Series B Preferred Stock to be converted into Common Stock on the basis that each outstanding share of Series B Preferred Stock shall be converted into the number of fully paid and nonassessable shares of Common Stock which results from dividing $25.00 by the Conversion Price in effect at the time of such conversion, and upon the election to so convert in the manner and on the basis specified in this sentence, all holders of the Series B Preferred Stock shall be deemed to have elected to voluntarily convert all outstanding shares of Series B Preferred Stock pursuant to this Section B.6.1. The initial "Conversion Price" per share for shares of Series B Preferred Stock shall be $25.00, subject to adjustment as set forth in Section B.7.
6.2 Automatic Conversion. Each share of Series B Preferred Stock shall automatically be converted, without the payment of any additional consideration, into fully paid and nonassessable shares of Common Stock at the Conversion Rate
as of, and in all cases subject to, the closing of the Corporation's first underwritten offering to the public pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"); covering the offer and sale of shares of the Corporation's common stock (i) in which proceeds received by the Corporation (after deduction of underwriter discounts and commissions) equal or exceed $100,000,000, (ii) with respect to which such Common Stock is listed for trading on either the New York Stock Exchange or the NASDAQ National Market,(iii) at an initial public offering price per share of Common Stock, after underwriter discounts and commissions, of not less than (A) $40.00 per share, in the case of an offering which closes on or prior to December 31, 2000, (B) $43.75 per share, in the case of an offering which closes from January 1, 2001 to March 31, 2001, (C) $50.00 per share in the case of an offering which closes from April 1, 2001 to December 31, 2001, (D) $56.25 per share, in the case of an offering which closes from January 1, 2002 to August 31, 2002 or (E) $62.50 per share in the case of an offering which closes after August 31, 2002 (in each case appropriately adjusted for any stock split, stock dividend, combination, recapitalization and the like) (a "QPO" or a "Qualified Public Offering"). If the Corporation's first underwritten offering of Common Stock would not otherwise be a QPO, then the Conversion Price shall be adjusted downward such that the adjusted Conversion Price is equal to the initial public offering price per share in such public offering divided by either 1.60, 1.75, 2.00, 2.25 or 2.50, as applicable (for each of the respective offerings described in (A) - (E) in the immediately preceding sentence); provided that in no event shall the Conversion Price be reduced by operation of this paragraph to an amount which is less than $10.00 and upon such adjustment such offering shall be deemed to be a QPO. If a closing of a QPO occurs, all outstanding shares of Series B Preferred Stock shall be deemed to have been converted into shares of Common Stock immediately prior to such closing.
6.3 Procedure for Conversion.
6.3.1 Voluntary Conversions. Upon election to convert pursuant to
Section B.6.1, the relevant holder of Series B Preferred Stock shall surrender
the certificate or certificates representing the Series B Preferred Stock being
converted to the Corporation, duly assigned or endorsed for transfer to the
Corporation (or accompanied by duly executed stock powers relating thereto) or
shall deliver an affidavit of loss to the Corporation, at its principal
executive office or such other place as the Corporation may from time to time
designate by notice to the holders of the Series B Preferred Stock. Upon
surrender of such certificate(s) or delivery of an affidavit of loss, the
Corporation shall issue and send by hand delivery, by courier or by first class
mail (postage prepaid) to the holder thereof or to such holder's designee, at
the address designated by such holder, certificates for the number of shares of
Common Stock to which such holder shall be entitled upon conversion. The
issuance of certificates for Common Stock upon conversion of Series B Preferred
Stock shall be deemed effective as of the date of surrender of such Series B
Preferred Stock certificates or delivery of such affidavit of loss and will be
made without charge to the holders of such shares for any issuance tax in
respect thereof or other costs incurred by the Corporation in connection with
such conversion and the related issuance of such stock.
6.3.2 Automatic Conversion. As of the closing of a QPO (the "Automatic Conversion Date"), all outstanding shares of Series B Preferred Stock shall be converted into shares of Common Stock without any further action by the holders of such shares and whether or not the certificates representing such shares of Series B Preferred Stock are surrendered to the Corporation or its transfer agent. On the Automatic Conversion Date, all rights with respect to the Series B Preferred Stock so converted shall terminate, except any of the rights of the holders thereof
upon surrender of their certificate or certificates therefor or delivery of an affidavit of loss thereof to receive certificates for the number of shares of Common Stock into which such Series B Preferred Stock has been converted. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. Upon surrender of such certificates or affidavit of loss, the Corporation shall issue and deliver to such holder, promptly (and in any event in such time as is sufficient to enable such holder to participate in such QPO) at such office and in its name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Common Stock into which the shares of the Series B Preferred Stock surrendered are convertible on the Automatic Conversion Date.
6.4 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 Series B 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 Series B 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 of the then outstanding shares of Series B Preferred Stock, the Corporation will take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose, and to reserve such shares for issuance upon such conversion.
6.5 No Closing of Transfer Books. The Corporation shall not close its books against the transfer of shares of Series B Preferred Stock in any manner that would interfere with the timely conversion of any shares of Series B Preferred Stock.
Section 7. Adjustments.
7.1 Adjustments to the Conversion Price. Except as provided in Section B.7.2 and except in the case of an event described in Section B.7.3, if and whenever after the date on which the Amended and Restated Certificate of Incorporation becomes effective (the "Closing Date") the Corporation shall issue or sell, or is, in accordance with this Section B.7.1, deemed to have issued or sold, any shares of Common Stock for a consideration per share less than the Conversion Price in effect immediately prior to the time of such issuance or sale (a "Dilutive Issuance"), then, upon such Dilutive issuance, the Conversion Price shall be reduced as follows:
(X) if such Dilutive Issuance occurs at any time on or prior to August 25, 2001 (except in connection with issuances of shares of Common Stock to strategic investors in a strategic alliance or other corporate partnering transaction approved by the Board of Directors of the Corporation, (a "Strategic Investment") which shall be subject to clause (Y) below), the Conversion Price shall be reduced to the price so as to be equal to the lowest consideration per share (determined as provided in Section B.7.1.1, Section B.7.1.2 or Section B.7.1.5, as applicable) received for each additional share upon such dilutive issuance.
(Y) if such Dilutive Issuance occurs in connection with a
Strategic Investment or at any time after August 25, 2001, the
Conversion Price shall be reduced to the price determined by dividing
(i) an amount equal to the sum of (1) the number of shares of Common
Stock outstanding immediately prior to such issue or sale multiplied
by the then existing Conversion Price and (2) the consideration, if any, received by the Corporation upon such issue or sale (determined as set forth below) by (ii) the total number of shares of Common Stock outstanding immediately prior to such issue or sale plus the number of shares of Common Stock so issued or sold.
For purposes of this Section B.7.1, the following shall also be applicable:
7.1.1 Issuance of Rights or Options. If the Corporation shall, at any time after the Closing Date, in any manner grant (whether directly or by assumption in a merger or otherwise) any warrants or other rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock (such warrants, rights or options being called "Options" and such convertible or exchangeable stock or securities being called "Convertible Securities"), in each case for consideration per share determined, as provided in this paragraph and in Section B.7.1.5 less than the Conversion Price, whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options, or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon exercise of such Options, shall be deemed to have been issued as of the date of granting of such Options (and thereafter shall be deemed to be outstanding), at a price per share equal to the amount determined by dividing (A) the total amount, if any, received or receivable by the Corporation as consideration for the granting of such Options, plus the minimum aggregate amount of additional consideration payable to the Corporation upon the exercise of all such Options, plus, in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (B) the total maximum number of shares of Common Stock deemed to have been so issued. Except as otherwise provided in Section B.7.1.3, no adjustment of the Conversion Price shall be made upon the actual issue of such Common Stock or of such Convertible Securities upon exercise of such Options or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities.
7.1.2 Issuance of Convertible Securities. If the Corporation shall, at any time after the Closing Date, in any manner issue or sell any Convertible Securities for consideration per share (determined as provided in this paragraph and in Section B.7.1.5 less than the Conversion Price, whether or not the rights to exchange or convert any such Convertible Securities are immediately exercisable, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed to have been issued, as of the date of the issue or sale of such Convertible Securities (and thereafter shall be deemed to be outstanding), at a price per share equal to the amount determined by dividing (A) the total amount received or receivable by the Corporation as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the conversion or exchange thereof, by (B) the total maximum number of shares of Common Stock deemed to have been so issued; provided, that (1) except as otherwise provided in Section B.7.1.3, no adjustment of the Conversion Price shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities and (2) if any such issue or sale of such Convertible Securities is made upon exercise of any Options to purchase any such Convertible Securities, no further adjustment of the Conversion Price shall be made by reason of such issue or sale.
7.1.3 Change in Option Price or Conversion Rate. If there shall occur a change in (A) the maximum number of shares of Common Stock issuable in connection with any Option referred to in Section B.7.1 or any Convertible Securities referred to in Section B.7.1 or 2, (B) the purchase price provided for in any Option referred to in Section B.7.1, (C) the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in Section B.7.1 or 2 or (D) the rate at which Convertible Securities referred to in Section B.7.1 or (2) are convertible into or exchangeable for Common Stock (in each case, other than in connection with an event described in Section B.7.2, then the Conversion Price in effect at the time of such event shall be readjusted to the Conversion Price that would have been in effect at such time had such Options or Convertible Securities that are still outstanding provided for such changed maximum number of shares, purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold, but only if as a result of such adjustment the Conversion Price then in effect is thereby reduced; and on the termination or repricing of any such Option or any such right to convert or exchange such Convertible Securities, the Conversion Price then in effect hereunder shall be increased to the Conversion Price that would have been in effect at the time of such termination or repricing had such Option or Convertible Securities, to the extent outstanding immediately prior to such termination (i.e., to the extent that fewer than the number of shares of Common Stock deemed to have been issued in connection with such Option or Convertible Securities were actually issued), never been issued or issued at such higher price, as the case may be.
7.1.4 Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities or other property of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of the Series B Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities or other property of the Corporation that they would have received had the Series B Preferred Stock been converted into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during such period under this paragraph with respect to the rights of the holders of the Series B Preferred Stock; and provided further, however, that no such adjustment shall be made if the holders of Series B Preferred simultaneously receive a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities as they would have received if all outstanding share of Series B Preferred Stock had been converted into Common Stock on the date of such event.
7.1.5 Consideration for Stock. In case any shares of Common Stock shall be issued or sold, or deemed issued or sold, for cash, the consideration received therefor shall be deemed to be the amount received or to be received by the Corporation therefor (determined with respect to deemed issuances and sales in connection with Options and Convertible Securities in accordance with clause (A) of Section B.7.1.1 or 2, as appropriate. In case any shares of Common Stock shall be issued or sold, or deemed issued or sold, for a consideration other than cash, the amount of the consideration other than cash received by the Corporation shall be deemed to be the fair value of such consideration received or to be received by the Corporation (determined with respect to deemed
issuances and sales in connection with Options and Convertible Securities in accordance with clause (A) of Section B.7.1.1 or 2 as appropriate) as determined in good faith by the Board of Directors of the Corporation. In case any Options shall be issued in connection with the issue and sale of other securities of the Corporation, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued for such consideration as determined in good faith by the Board of Directors of the Corporation and a Majority Interest.
7.1.6 Record Date. In case the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.
7.1.7 Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Corporation; provided, that the disposition of any such shares shall be considered an issue or sale of Common Stock for the purpose of this Section B.7.
7.2 Certain Issues of Common Stock Excepted. Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Conversion Price in the case of the issuance from and after
the Closing Date of (i) shares of Common Stock upon conversion of shares of
Series A Preferred Stock and Series B Preferred Stock or upon exercise of
warrants to purchase Common Stock outstanding as of August 25, 2000, (ii) shares
issued in exchange for the stock or assets of another company in connection with
the acquisition of or merger into such company; provided, that such actions
shall have been approved by a majority of the members of the Board of Directors,
which shall include the Series B Preferred Stock Director Designee, or (iii) up
to an aggregate of 7,500,000 shares of Common Stock (subject to appropriate
adjustment for any stock split, stock dividend or similar event) to directors,
officers, employees or consultants of the Corporation in connection with their
service as directors of the Corporation, their employment by the Corporation or
their retention as consultants by the Corporation or to the National Advisory
Board, in each case authorized by the Board of Directors and issued pursuant to
the Corporation's 2000 Incentive Compensation Plan or any other equity incentive
plan approved by a Majority Interest ("Excluded Shares"), plus such number of
Excluded Shares that are repurchased by the Corporation from such persons after
such Closing Date in accordance with this Amended and Restated Certificate of
Incorporation, pursuant to contractual rights held by the Corporation and at
repurchase prices not exceeding the respective original purchase prices
(appropriately adjusted to reflect the occurrence of any event described in
Section B.7.3 paid by such persons to the Corporation therefor.
7.3 Subdivision or Combination of Common Stock. In case the Corporation shall at any time after the Closing Date subdivide its outstanding shares of Common Stock into a greater number of shares (by any stock split, stock dividend or otherwise), the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced, and, conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased. In the case of any such subdivision, no further adjustment shall be made pursuant to Section B.7.1.4 by reason thereof.
7.4 Reorganization or Reclassification. If any capital reorganization or reclassification of the capital stock of the Corporation shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, as a condition of such reorganization or reclassification, lawful and adequate provisions shall be made whereby each holder of a share or shares of Series B Preferred Stock shall thereupon have the right to receive, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore receivable upon the conversion of such share or shares of Series B Preferred Stock, as the case may be, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such Common Stock immediately theretofore receivable upon such conversion had such reorganization or reclassification not taken place, and in any such case appropriate provisions shall be made with respect to the rights and interests of such holder to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Conversion Price) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise of such conversion rights.
7.5 Adjustment for Merger or Reorganization, etc. In case of any consolidation or merger of the Corporation with or into another corporation or the sale of all or substantially all of the assets of the Corporation to another corporation, each share of Series B Preferred Stock shall thereafter be convertible into the kind and amount of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such Series B Preferred Stock would have been entitled upon such consolidation, merger or sale; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions in Section B.7 set forth with respect to the rights and interests thereafter of the holders of the Series B Preferred Stock, to the end that the provisions set forth in Section B.7 (including provisions with respect to changes in and other adjustments of the Series B Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Series B Preferred Stock. Notwithstanding anything to the contrary contained herein, each holder of shares of Series B Preferred Stock shall have the right to elect to give effect to the conversion rights contained in Section B.6 (or the rights contained in Section B.3.3, if applicable) instead of giving effect to the provisions contained in this Section B.7.3 with respect to the shares of Series B Preferred Stock owned by such holder.
Section 8. Covenants. The Corporation shall not, without first having provided written notice of such proposed action to each holder of outstanding shares of Series B Preferred Stock and having obtained the affirmative vote or written consent of the holders of a Majority Interest:
8.1 declare or pay any dividends or make any distributions of cash, property or securities of the Corporation in respect of its capital stock (other than (i) with respect to the Series A Preferred Stock or (ii) dividends that are paid pro rata to the holders of the Series B Preferred Stock), or apply any of its assets to the redemption, retirement, purchase or other acquisition of its capital stock or stock appreciation, phantom stock or similar rights, directly
or indirectly, through subsidiaries or otherwise, except for (i) the redemption of Series B Preferred Stock pursuant to and as provided in this Amended and Restated Certificate of Incorporation, (ii) the repurchase of Excluded Shares pursuant to rights held contractual by the Corporation and at repurchase prices not exceeding the respective original purchase price (appropriately adjusted to reflect the occurrence of any event described in Section B.7.3, or (iii) dividends or distributions payable solely in shares of Common Stock;
8.2 authorize or issue, or obligate itself to issue, any convertible debt or other debt with any equity participation or any other equity security ranking senior to the Series B Preferred Stock as to liquidation, sale or merger preferences, conversion, redemption or dividend rights or with any special voting rights;
8.3 amend, alter or repeal any provision of, or add any provision to,
Section B of this Amended and Restated Certificate of Incorporation or otherwise
alter or change the rights, preferences, privileges or powers of, or
restrictions provided for the benefit or, the Series B Preferred Stock;
8.4 otherwise adopt any amendment to this Amended and Restated Certificate of Incorporation or the Company's By-laws that adversely affects the powers, preferences or material rights of the Series B Preferred Stock;
8.5 increase the number of authorized shares of Series B Preferred Stock or reclassify any capital stock;
8.6 change the nature of the business now conducted by the Company;
8.7 effect a recapitalization or reorganization in a form which results in the termination of the Corporation's status as a Corporation under the Internal Revenue Code of 1986, as amended (including without limitation, any reorganization into a limited liability company, a partnership or any other non-corporate entity which is treated as a partnership for federal income tax purposes);
8.8 enter into any agreement to do any of the foregoing that is not expressly made conditional on obtaining the affirmative vote or written consent of a Majority Interest.
Further, the Corporation shall not, by amendment of this Amended and Restated Certificate of Incorporation or through any Liquidation Event or other reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, agreement 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 and shall at all times in good faith assist in the carrying out of all the provisions of this Article IV and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holders of the Series B Preferred Stock against impairment. Any successor to the Corporation shall agree in writing, as a condition to such succession, to carry out and observe the obligations of the Corporation hereunder with respect to the Series B Preferred Stock.
Section 9. Notice; Adjustments.
9.1 Liquidation Events, Extraordinary Transactions, Etc. In the event
(i) the Corporation establishes a record date to determine the holders of any
class of securities who are entitled to receive any dividend or other
distribution or who are entitled to vote at a meeting (or by written consent) in
connection with any of the transactions identified in clause (ii) hereof, or
(ii) any Liquidation Event, event deemed a Liquidation Event pursuant to Section
B.3.3 hereof, QPO or any other public offering becomes reasonably likely to
occur, the Corporation shall mail or cause to be mailed by first class mail
(postage prepaid) to each holder of Series B Preferred Stock at least thirty
(30) days prior to such record date specified therein or the expected effective
date of any such transaction, whichever is earlier, a notice specifying (A) the
date of such record date for the purpose of such dividend or distribution or
meeting or consent and a description of such dividend or distribution or the
action to be taken at such meeting or by such consent, (B) the date on which any
such Liquidation Event, event deemed a Liquidation Event pursuant to Section
B.3.3 hereof, QPO or other public offering is expected to become effective, and
(C) the date on which the books of the Corporation shall close or a record shall
be taken with respect to any such event. Such notice shall be accompanied by a
certificate prepared by the chief financial officer of the Corporation
describing in detail (1) the facts of such transaction, (2) the amount(s) per
share of Series B Preferred Stock each holder of Series B Preferred Stock would
receive pursuant to the applicable provisions of this Amended and Restated
Certificate of Incorporation, and (3) the facts upon which such amounts were
determined.
9.2 Adjustments; Calculations. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to Section B.7, 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 Series B Preferred Stock a certificate setting forth in detail (i) such adjustment or readjustment, (ii) the Conversion Price before and after such adjustment or readjustment, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of such holder's shares of Series B Preferred Stock. All such calculations shall be made to the nearest cent or to the nearest one hundredth (1/100) of a share as the case may be.
9.3 Waiver of Notice. The holder or holders of a Majority Interest may, at any time upon written notice to the Corporation, waive any notice or certificate delivery provisions specified herein for the benefit of such holders, and any such waiver shall be binding upon all holders of such securities.
Section 10. No Reissuance of Series B Preferred Stock. No share or shares of Series B Preferred Stock acquired by the Corporation by reason of redemption, purchase, conversion or otherwise shall be reissued, and all such shares shall be canceled, retired and eliminated from the shares which the Corporation shall be authorized to issue.
Section 11. Contractual Rights of Holders. The various provisions set forth herein for the benefit of the holders of the Series B Preferred Stock shall be deemed contract rights enforceable by them, including, without limitation, one or more actions for specific performance.
C. Ranking.
(a) Liquidation. The Series A Preferred Stock and the Series B Preferred Stock shall rank on a parity with each other as to liquidation rights. Except as otherwise stated in this Amended and Restated Certificate of Incorporation, the Preferred Stock shall be senior to all other classes of the Corporation's capital stock as to liquidation rights.
(b) Dividends. No dividend shall be declared, paid or set apart on any Common Stock (other than a dividend payable in stock ranking junior to the Series A Preferred Stock or Series B Preferred Stock as to dividends and liquidation rights) at a time at which any dividend on any Series A Preferred Stock or Series B Preferred Stock then outstanding shall be past due unless all past due dividends on the Series A Preferred Stock and Series B Preferred Stock shall be paid or properly made available not later than the time such dividend shall be paid on such junior stock. The Series A Preferred Stock and the Series B Preferred Stock shall rank pari passu as to the declaration and payment of dividends.
In the case of dividends or other distributions payable in stock of the Corporation other than Series A Preferred Stock or Series B Preferred Stock, including distributions pursuant to stock splits or divisions of stock of the Corporation other than Series A Preferred Stock or Series B Preferred Stock, which occur after the initial issuance of shares of Series B Preferred Stock by the Corporation, only shares of Common Stock shall be distributed with respect to Common Stock, only shares of Series A Preferred Stock shall be distributed with respect to Series A Preferred Stock and only shares of Series B Preferred Stock shall be distributed with respect to Series B Preferred Stock.
D. Common Stock.
(a) Dividends. Subject to the preferential rights, if any, of the Preferred Stock, the holders of shares of Common Stock shall be entitled to receive, when and if declared by the Board of Directors, out of the assets of the Corporation which are by law available therefor, dividends payable either in cash, in property, or in shares of Common Stock.
(b) Voting Rights. At every annual or special meeting of stockholders of the Corporation, every holder of Common Stock shall be entitled to one vote, in person or by proxy, for each share Common Stock outstanding in his name on the books of the Corporation.
(c) Liquidation. In the event of any liquidation, after payment or provision for payment of the debts and other liabilities of the Corporation and of the preferential amounts, if any, to which the holders of Preferred Stock shall be entitled, the holders of all outstanding shares of Common Stock shall be entitled to share ratably in the remaining net assets of the Corporation.
FIFTH: In furtherance of and not in limitation of powers conferred by statute, it is further provided that:
(a) Subject to the limitations and exceptions, if any, contained in the by-laws of the Corporation, such by-laws may be adopted, amended or repealed by the board of directors of the Corporation.
(b) Elections of directors need not be by written ballot unless, and only to the extent, otherwise provided in the by-laws of the Corporation.
(c) Subject to any applicable requirements of law, the books of the Corporation may be kept outside the State of Delaware at such location or locations as may be designated by the board of directors of the Corporation or in the by-laws of the Corporation.
(d) Except as provided to the contrary in the provisions establishing a class of stock, the number of authorized shares of such class may be increased or decreased (but not below the number of shares thereof then outstanding)by the affirmative vote of the holders of a majority of stock of the Corporation entitled to vote, voting as a single class.
SIXTH: The Corporation shall indemnify each person who at any time is, or shall have been, a director or officer of the Corporation and was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was a director of 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, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement incurred in connection with any such action, suit or proceeding, to the maximum extent permitted by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended. The foregoing right of indemnification shall in no way be exclusive of any other rights of indemnification to which any such director or officer may be entitled, under any by-law, agreement, vote of directors or stockholders or otherwise. No amendment to or repeal of the provisions of this Article SIXTH shall deprive a director or officer of the benefit hereof with respect to any act or failure to act occurring prior to such amendment or repeal.
SEVENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them or between the Corporation
and its stockholders or any class of them, any court of equitable jurisdiction
within the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as said court directs. If a majority in number representing three-fourths
in value of the creditors or class of creditors, or of the stockholders or class
of stockholders of the Corporation, as the case may be, agree to any compromise
or arrangement and to any reorganization of the Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, or on all
the stockholders or class of stockholders, of the Corporation, as the case may
be, and also on the Corporation.
EIGHTH: No director of the Corporation shall be personally liable to the Corporation or to any of its stockholders for monetary damages arising out of such director's breach of fiduciary duty as a director of the Corporation, except to the extent that the elimination or limitation of such liability is not permitted by
the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended. No amendment to or repeal of the provisions of this Article EIGHTH shall deprive any director of the Corporation of the benefit hereof with respect to any act or failure to act of such director occurring prior to such amendment or repeal.
NINTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation in the manner now or hereafter prescribed by the General Corporation Law of the State of Delaware and this Certificate of Incorporation, and all rights conferred upon stockholders herein are granted subject to this reservation.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, IPG Photonics Corporation has caused this Amended and Restated Certificate of Incorporation to be signed by Valentin P. Gapontsev, its President, this 25th day of August, 2000.
IPG PHOTONICS CORPORATION
By: /s/ Valentin P. Gapontsev ------------------------------------ Valentin P. Gapontsev, Chairman of the Board |
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IPG PHOTONICS CORPORATION
IPG PHOTONICS CORPORATION (the "Corporation", a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation (the "Board of Directors") duly adopted resolutions to amend the Certificate of Incorporation of the Corporation, as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation be amended by deleting Article FOURTH, B, Section 1 in its entirety and substituting therefor the following new Article FOURTH, B, Section 1:
Designation and Amount. A total of 3,600,000 shares of the Corporation's Preferred Stock shall be designated as a series known as Series B Convertible Participating Preferred Stock, par value $0.000l per share (the "Series B Preferred Stock").
RESOLVED, that the Certificate of Incorporation of the Corporation be amended by deleting Article FOURTH, B, Section 7.2 in its entirety and substituting therefor the following new Article FOURTH, B, Section 7.2:
Certain Issues of Common Stock Excepted, Anything herein to the contrary notwithstanding, the Corporation shall not be required to make any adjustment of the Conversion Price in the case of the issuance from and after the Closing Date of (i) shares of Common Stock upon conversion of shares of Series A Preferred Stock and Series B Preferred Stock or upon exercise of warrants to purchase Common Stock outstanding as of August 25, 2000, (ii) shares issued in exchange for the stock or assets of another company in connection with the acquisition of or merger into such company; provided, that such actions shall have been approved by a majority of the members of the Board of Directors, which shall include the Series B Preferred Stock Director Designee, or (iii) up to an aggregate of 3,750,000 (subject to appropriate adjustment for any stock split, stock dividend or similar event) to directors, officers, employees or consultants of the Corporation in connection with their service as directors of the Corporation, their employment by the Corporation or their retention as consultants by the Corporation or to the National Advisory Board, in each case authorized by the Board of Directors and issued pursuant to the Corporation's 2000 Incentive Compensation Plan or any other equity incentive plan approved by a Majority Interest ("Excluded Shares"), plus such number of Excluded Shares that are repurchased by the Corporation from such persons after such Closing Date in accordance with this Amended and Restated Certificate of Incorporation, pursuant to
contractual rights held by the Corporation and at repurchase prices not exceeding the respective original purchase prices (appropriately adjusted to reflect the occurrence of any event described in Section B.7.3 paid by such persons to the Corporation therefor.
SECOND: That as of the date hereof the Corporation has received approval of a majority of stockholders of the Corporation.
THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provision of Section 242 of the General Corporation Law of the State of Delaware.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, I have hereunto set my hand the 6th day of October, 2000.
IPG PHOTONICS CORPORATION
By: /s/ Valentin P. Gapontsev ------------------------------------ Name: Valentin P. Gapontsev Title: Chairman of the Board and Chief Executive Officer |
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IPG PHOTONICS CORPORATION
IPG PHOTONICS CORPORATION (the "Corporation") a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware. DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation (the "Board of Directors") duly adopted resolutions to amend the Certificate of incorporation of the Corporation as follows;
RESOLVED, that the Certificate of Incorporation of the Corporation be amended by deleting Article FOURTH, B, Section 1 in its entirety and substituting thereby the following new Article FOURTH. B, Section 1:
Designation and Amount. A total of 3,800,000 shares of the Corporation's Preferred Stock shall be designated as a series known as Series B Convertible Participating Preferred Stock, par value $.0001 per share (the "Series B Preferred Stock")
RESOLVED, that the Certificate of Incorporation of the Corporation be amended by deleting Article FOURTH, B, Section 7.2 in its entirety and substituting therefor the following new Article FOURTH, B, Section 7.2:
Certain Issues of Common Stock Excepted, Anything herein to the contrary notwithstanding, the Corporation shall not be requited to make any adjustment of the Conversion Price in the case of the Issuance from and after the Closing Date of (i) shares of Common Stock upon conversion of shares of Series A Preferred Stock and Series B Preferred Stock or upon exercise of warrants to purchase Common Stock outstanding as of August 25, 2000, (ii) shares issued in exchange for the stock or assets of another company in connection with the acquisition of or merger into such company; provided, that such actions shall have been approved by a majority of the members of the Board of Directors, which shall include the Series B Preferred Stock Director Designee, or (iii) up to an aggregate of 7,500,000 shares of Common Stock (subject to appropriate adjustment for any stock split, stock dividend or similar event) to directors, officers, employees or consultants of the Corporation in connection with their service as directors of the Corporation, their employment by the Corporation or their retention as consultants by the Corporation or to the National Advisory Board, in each ease authorized by the Board of Directors and issued pursuant to the Corporation's 2000 Incentive Compensation Plan or any other equity Incentive plan approved by a Majority Interest ("Excluded Shares"), plus such number of Excluded Shares that are
repurchased by the Corporation from such persons after such Closing Date in accordance with this Amended and Restated Certificate of Incorporation, pursuant to contractual rights held by the Corporation and at repurchase prices not exceeding the respective original purchase prices (appropriately adjusted to reflect the occurrence of any event described in Section B.7.3 paid by such persons to the Corporation therefor.
SECOND: That as of the date hereof the Corporation has received approval of a majority of stockholders of the Corporation.
THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provision of Section 242 of the General Corporation Law of the State of Delaware.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, I have hereunto set my hand the 4th day of December, 2000.
IPG PHOTONICS CORPORATION
By: /s/ Valentin P Gapontsev ------------------------------------ Name: Valentin P. Gapontsev Title: Chairman of the Board and Chief Executive Officer |
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IPG PHOTONICS CORPORATION
IPG PHOTONICS CORPORATION (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation (the "Board of Directors") duly adopted resolutions to amend the Certificate of Incorporation of the Corporation, as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation he amended by deleting the first paragraph of Article FOURTH in its entirety and substituting therefor the following new paragraph:
FOURTH: Total number of shares of capital stock which the Corporation shall have authority to issue is 67,000,000 shares of which 60,000,000 shares shall be designated Common Stock par value of $.0001 per share ("Common Stock"), and 7,000,000 shares shall be designated Preferred Stock, par value of $.0001 per share ("Preferred Stock").
SECOND: That as of the date hereof the Corporation has received approval of a majority of stockholders of the Corporation.
THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provision of Section 242 of the General Corporation Law of the State of Delaware
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, I have hereunto set my hand the 11th day of April, 2001
IPG PHOTONICS CORPORATION
By: /S/ Valentin P. Gapontsev ------------------------------------ Name: Valentin P. Gapontsev Title: Chairman of the Board and Chief Executive Officer |
CERTIFICATE OF DESIGNATION
OF
SERIES C PREFERRED STOCK
OF
IPG PHOTONICS CORPORATION
(Pursuant to Section 151(g) of The General Corporation Law of the State of Delaware)
IPG PHOTONICS CORPORATION, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Company"), hereby certifies, in accordance with Section 151(g) thereof, that the Company, by unanimous written consent dated as of March 30, 2001 in lieu of a meeting, pursuant to the authority expressly vested in the Company's board of directors (the "Board of Directors") by the Certificate of Incorporation of the Company (the "Certificate of Incorporation"), adopted the following resolutions creating a series of Two Million (2,000,000) shares of the Company's preferred stock, par value $.0001 per share (the "Preferred Stock"), designated as Series C Preferred Stock:
RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors by the Certificate of Incorporation, the Board of Directors hereby creates a series of the Preferred Stock, par value $.0001 per share, of the Company (the "Series C Preferred Stock") and hereby states that the powers, designations and number of shares thereof, and the relative, participating, optional and other rights of the shares of such Series C Preferred Stock and the qualifications, limitations or restrictions thereof, are as follows (capitalized terms not immediately defined or referenced shall have the meanings provided for such terms in Section 10.1 of this Certificate of Designation or in the Certificate of Incorporation):
Section 1. Designation and Amount.
1.1 There shall be a series of the Preferred Stock which shall be designated as the "Series C Preferred Stock", par value $.0001 per share, and the number of shares constituting such series shall be Two Million (2,000,000). Subject to Section 5.3 of this Certificate of Designation, such number of shares may be decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series C Preferred Stock to a number less than that of the shares then outstanding plus the number of shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Company with respect to shares of Series C Preferred Stock. The issuance price of the Series C Preferred Stock shall be $30.00 per share (the "Series C Issue Price").
1.2 The Company shall not reissue any shares of the Series C Preferred Stock and shall from time to time in accordance with applicable law increase the authorized amount of its Common Stock in the event that the number of authorized shares of Common Stock remaining available for issuance shall not be sufficient to permit conversion of the Series C Preferred Stock.
Section 2. Dividends and Distributions.
2.1 The holders of the Series C Preferred Stock shall be entitled to receive, out of funds legally available therefor only on outstanding shares of Series C Preferred Stock, when, as and if declared by the Board of Directors or upon a Liquidation Event (as defined in Section 3.1), cash dividends at a rate per annum of 6% of the Series C Issue Price per share (the "Series C Dividends"). Series C Dividends shall cumulate from day to day, whether or not declared by the Board of Directors. Notwithstanding the foregoing, no dividends may be paid with respect to the Series C Preferred Stock unless, prior thereto, an equivalent dividend is declared and paid on all outstanding shares of Series A Preferred Stock and the Series B Preferred Stock, with each holder of shares of Series A Preferred Stock or the Series B Preferred Stock entitled to receive such dividends based on the number of shares of Common Stock into which such shares of Series A Preferred Stock or Series B Preferred Stock are then convertible in accordance with their terms. No cumulated dividends shall be paid upon any conversion of the Series C Preferred Stock (except and only to the extent declared before the date of conversion), notwithstanding anything herein to the contrary.
2.2 If any cash dividends or non-cash dividends or other then convertible.
distributions (other than distributions of Common Stock) are declared by the
Board of Directors to be paid on any shares of Common Stock, then the cumulative
dividends set forth in Section 2.1 shall first be paid with respect to the
Series C Preferred Stock, but after dividends or distributions are made upon the
Series A Preferred Stock and the Series B Preferred Stock in accordance with
Section 2.1, and thereafter the dividend or other distribution declared with
respect to the Common Stock shall be paid at the same time to the holders of the
outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock and Common Stock, as if they constituted a single class of
stock based upon the number of shares of Common Stock into which the holders of
the Preferred Stock are
Section 3. Liquidation.
3.1 Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary (a "Liquidation Event"), each holder of shares of Series C Preferred Stock shall be entitled to be paid, before any distribution or payment is made upon any Common Stock, but after distributions or payments are made upon the Series A Preferred Stock and the Series B Preferred Stock, from the assets of the Company available for distribution to its stockholders, whether from capital, surplus or earnings, an amount in cash equal to the sum of the aggregate Liquidation Value of all shares of Series C Preferred Stock held by such holder. In connection with the Liquidation Event, the Company shall declare for payment on the payment date for the Liquidation Event all cumulative and unpaid dividends, if any, with respect to the Series C Preferred Stock as set forth in Section 2. If upon any such Liquidation Event, the Company's assets to be distributed among the holders of the Series C Preferred Stock are insufficient to permit payment to such holders of the aggregate amount that they are entitled to be paid, then the entire assets to be distributed shall be distributed ratably among such holders based upon the aggregate Liquidation Value of the Series C Preferred Stock held by each such holder. The Company shall give written notice of such Liquidation Event, not less than 30 days prior to the payment
date stated therein, to each record holder of shares of Series C Preferred Stock. Prior to the last day of such 30-day period, each holder of the Series C Preferred Stock may convert all but not less than all of the Series C Preferred Stock (including any fraction of a share) held by such holder, into a number of fully paid and nonassessable shares of Conversion Stock equal to, with respect to each share of Series C Preferred Stock, the Conversion Ratio then in effect subject to the proviso in Section 5.1 and by surrendering such holder's certificate(s) in accordance with Section 5.9 hereof, and subject to Section 5.10 hereof. A merger, reorganization, consolidation or other similar transaction of the Company (including a merger or consolidation of the Company into or with any other entity or entities that is a wholly-owned subsidiary of the Company), the sale or transfer by the Company of all or any part of its assets (including to any wholly-owned subsidiary), and the reduction of the capital stock of the Company, shall not be deemed to be a Liquidation Event.
Section 4. Voting Rights. Each outstanding share of Series C Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which such share of Series C Preferred Stock is then convertible as of the record date for the vote or written consent of stockholders, if applicable. Each holder of shares of Series C Preferred Stock shall be entitled to notice of any stockholder's meetings in accordance with the by-laws of the Company and shall vote with holders of the Common Stock, voting together as single class, upon all matters submitted to a vote of stockholders, excluding those matters required to be submitted to a class or series vote pursuant to the terms hereof or the Certificate of Incorporation or by law.
4.1 Protective Voting Provisions. So long as shares of the Series C Preferred Stock shall be outstanding, without first obtaining the approval (by vote or written consent, as provided by law or by the Certificate of Incorporation or the bylaws of the Company, each as amended from time to time) of the holders of more than fifty percent of the outstanding shares of Series C Preferred Stock, voting separately as a class, the Company shall not:
(i) increase the authorized number of shares of Series C Preferred Stock; or
(ii) affect, alter, amend, repeal or waive the rights, preferences or privileges of the holders of the Series C Preferred Stock as set forth herein.
Otherwise and except as required by the General Corporation Law of the State of Delaware, the holders of the Series C Preferred Stock shall not vote separately as a class of stock.
Section 5. Conversion.
5.1 Elective Conversion. At any time after the 12-month anniversary of the original issuance of the Series C Preferred Stock (the "Series C Issuance Date"), at his, her or its absolute and sole discretion, any holder of shares of Series C Preferred Stock may convert all or any portion of the Series C Preferred Stock (including any fraction of a share) held by such holder, into a number of fully paid and nonassessable shares of Conversion
Stock equal to, with respect to each share of Series C Preferred Stock, the
Conversion Ratio then in effect by delivery to the Company of the number of
shares of Series C Preferred Stock to be so converted, and by surrendering such
holder's certificate(s) in accordance with Section 5.9 hereof, and subject to
Section 5.10 hereof; provided, that, (i) if a conversion is effected after 18
months following the Series C Issuance Date but prior to the second anniversary
of the Series C Issuance Date, the Conversion Price (as defined in Section 5.4)
shall be adjusted, immediately prior to such conversion, to equal 120% of the
Conversion Price then in effect; and (ii) if a conversion is effected on or
after the second anniversary of the Series C Issuance Date, the Conversion Price
shall be adjusted, immediately prior to such conversion, to equal 140% of the
Conversion Price then in effect.
5.2 Mandatory Conversion. The Company may elect to convert all, but not
less than all, of the Series C Preferred Stock, (i) with such conversion to be
effective at any time after the second anniversary of the Series C Issuance
Date, by providing written notice to the holders of Series C Preferred Stock no
less than 30 days prior to the proposed date of conversion (which notice may be
delivered prior to such second-year anniversary) or (ii) in connection with any
merger or consolidation of the Company into or with another corporation (except
one in which the holders of capital stock of the Company immediately prior to
such merger or consolidation continue to hold at least a majority of the voting
power of the capital stock of the surviving corporation). The written notice
shall state the proposed date of conversion. The number of shares of Conversion
Stock deliverable upon conversion hereunder shall be determined as set forth in
Section 5.1 above. Upon such mandatory conversion, each share of Series C
Preferred Stock shall be canceled and not subject to reissuance as Series C
Preferred Stock, but shall rather be undesignated and unreserved Preferred Stock
of the Company.
5.3 Conversion Ratio. The "Conversion Ratio" shall be determined by dividing $30.00 by the Conversion Price (as defined in Section 5.4 hereof).
5.4 Conversion Price. The initial Conversion Price shall equal $30.00 per share.
5.5 Subdivision or Combination of Common Stock. In case the Company shall subdivide its outstanding shares of Common Stock into a greater number of shares (by any stock split, stock dividend or otherwise), the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced, and, conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased.
5.6 Adjustment for Mergers or Reorganizations. If at any time or from time to time there shall be a capital reorganization of the Common Stock (other than a subdivision or combination of shares provided for in Section 5.5) or a merger or consolidation of the Company with or into another Person or the sale of all or substantially all of the Company's properties and assets to any other Person, then, as a part of and as a condition to the effectiveness of such reorganization, merger, consolidation or sale (but subject to the rights set forth in Section 5.2(ii) hereof), lawful and adequate provision shall be made so that if the Company is not the surviving company the Series C Preferred Stock shall be converted into preferred stock
of the surviving Person having equivalent preferences, rights and privileges, except that in lieu of being able to convert into shares of Common Stock of the Company or common stock of the surviving Person, the holders of the Series C Preferred Stock (including any such preferred stock issued upon conversion of the Series C Preferred Stock) shall thereafter be entitled to receive upon conversion of the Series C Preferred Stock (including any such preferred stock issued upon conversion of the Series C Preferred Stock) the number of shares of stock or other securities or property of the surviving Person resulting from such reorganization, merger or consolidation or sale to which a holder of the number of shares of Common Stock deliverable upon conversion of the Series C Preferred Stock immediately prior to the capital reorganization, merger, consolidation or sale would have been entitled on such capital reorganization, merger, consolidation, or sale. In any such case, appropriate provisions shall be made with respect to the rights of the holders of the Series C Preferred Stock (including any such preferred stock issued upon conversion of the Series C Preferred Stock) after the reorganization, merger, consolidation or sale to the effect that the provisions of this Section 5 (including without limitation provisions for adjustment of the Conversion Price and the number of shares issuable upon conversion of the Series C Preferred Stock or such preferred stock) shall thereafter be applicable, as nearly as may be, with respect to any shares of stock, securities or assets to be deliverable thereafter upon the conversion of the Series C Preferred Stock or such preferred stock.
5.7 No Adjustment for Small Changes. No adjustment of the Conversion Price shall be made if such adjustment would result in a change in Conversion Price in an amount less than $0.01 per share. Any adjustments not made as a result of the preceding sentence shall be included in subsequent future adjustments, but only until such change in the Conversion Price as a result of such cumulative adjustments is equal to at least $0.01 per share.
5.8 No Adjustment for Non-Stock Dividends. No adjustment of the Conversion Price shall be made in respect of non-stock dividends on the Common Stock or the Series C Preferred Stock.
5.9 Mechanics of Elective Conversion. Before any holder of shares of Series C Preferred Stock shall be entitled to convert the same into shares of Conversion Stock pursuant to Section 5.1 hereof, such holder shall surrender the certificate or certificates therefor, duly endorsed or in blank, at the office of the Company or of any transfer agent for the Series C Preferred Stock (or, in addition to the aforementioned places, at such other place as the Board of Directors may reasonably designate), and shall give written notice to the Company (in the manner described in Section 10.2 hereof) at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Conversion Stock are to be issued. The Company shall use its commercially reasonable efforts promptly to (subject to Section 5.10), issue and deliver at such office to such holder of shares of Series C Preferred Stock, or to the nominee or nominees of such holder, (x) a certificate or certificates for the number of shares of Conversion Stock to which such holder shall be entitled as herein provided, (y) a certificate representing any shares of Series C Preferred Stock not so converted and, if applicable, the payment required by Section 5.10. Any conversion shall be deemed to have been made immediately prior to the close of business on (i) the date such written notice is given (provided that such holder's certificate or
certificates are delivered to the Company within two business days after such notice is given) or (ii) in any other case, on the date of such surrender of the shares of Series C Preferred Stock to be converted, and the person or persons entitled to receive the shares of Conversion Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Conversion Stock on such date. Notwithstanding the foregoing, no surrender of certificates shall be required in the event of a mandatory conversion pursuant to Section 5.2 of this Certificate of Designation. Accrued dividends on the Series C Preferred Stock shall not be paid in the event of a conversion.
5.10 Fractional Shares. No fractional shares shall be issued upon conversion of the Series C Preferred Stock into Conversion Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, in its reasonable discretion, the Board of Directors may cause the Company to pay cash to such holder equal to such fraction (calculated as to each conversion to the nearest 1/100th of a share) multiplied by the applicable Conversion Price or may round the number of shares of Conversion Stock to be issued to the nearest whole share as follows: (i) any fractional shares equal to at least one-half shall be rounded upward; and (ii) any fractional shares equal to less than one-half shall be rounded downward.
5.11 Transfer Taxes. The Company will pay any and all taxes that may be payable in respect of the issue or delivery of shares of Conversion Stock on conversion of shares of the Series C Preferred Stock pursuant to this Section 5. The Company shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issue or transfer and delivery of shares of Conversion Stock in a name other than that in which the shares of the Series C Preferred Stock so converted were registered, and no issue or delivery shall be made unless and until the person requesting such issue has paid to the Company the amount of any such tax or has established to the satisfaction of the Company that such tax has been paid.
5.12 No Impairment; Cooperation. The Company will not, through any 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 hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 5 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 Series C Preferred Stock against impairment. Subject to Section 4.1 of this Certificate of Designation, this provision shall not restrict the Company from effecting an amendment to its Certificate of Incorporation in accordance with the General Corporation Law of the State of Delaware. The Company shall assist and cooperate with any holder of shares of Series C Preferred Stock required to make any filings or obtain any approvals, governmental or otherwise, prior to or in connection with any conversion of such shares hereunder (including, without limitation, making any filings required to be made by the Company).
5.13 Certificate as to Adjustments. Upon the occurrence of each event
requiring adjustment or readjustment of the Conversion Price pursuant to this
Section 5, the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and shall prepare and cause to
be furnished to holders of Series C Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in reasonable detail the facts upon which such adjustment or readjustment is based. The Company also shall, upon written request of any holder of Series C Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (a) such adjustments and readjustments and (b) the Conversion Price at the time in effect.
5.14 Notices of Record Date. In the event of any taking by the Company 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 or to vote on any matter upon which such stockholders may be entitled to vote, the Company shall give notice to each holder of shares of Series C Preferred Stock at least 10 days prior to the date specified therein, specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or vote.
5.15 Reservation of Stock Issuable Upon Conversion. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Conversion Stock solely for the purpose of effecting the conversion of the outstanding shares of Series C Preferred Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series C Preferred Stock. All shares of Conversion Stock that shall be so issued shall be duly and validly issued, fully paid, nonassessable and free from all taxes, liens and charges arising out of or by reason of the issue thereof.
Section 6. Redemption.
6.1 The Company shall have the right to redeem all or any portion of the shares of Series C Preferred Stock from a holder thereof for no additional consideration in partial or complete satisfaction of any liquidated indemnity claim of the Company against any such holder pursuant to Sections 8.2 and 8.3 of the Agreement and Plan of Reorganization dated as of March 20, 2001 by and among the Company, MetroWave Communications Inc., a Cayman Islands corporation d/b/a OpticWave Communications ("MetroWave"), OpticWave Communications, Inc., a Delaware corporation and the stockholders signatory thereto (the "Agreement"), which claim has been finally determined pursuant to the arbitration process provided under Section 8.6 of the Agreement or agreed to by the holder (a "Claim"), and remains unpaid for more than 15 days after it becomes due and owing. Each holder shall have the right to require the Company to redeem all or any portion of the shares of Series C Preferred Stock of such holder thereof for no additional consideration in partial or complete satisfaction of a Claim of the Company against any such holder pursuant to Sections 8.2 or 8.3 of the Agreement. For purposes of satisfying any Claims pursuant to the foregoing redemption right, shares of Series C Preferred Stock shall be valued at the Series C Issue Price (with respect to all shares of Series C Preferred Stock to be redeemed, the "Redemption Price").
6.2 At least 5 days and not more than 15 days prior to the date fixed for any redemption of the Series C Preferred Stock from a holder thereof, written notice shall be given in accordance with Section 10.2; provided, that, no failure to give such notice nor any deficiency therein shall affect the validity of the procedure for the redemption of any shares of Series C Preferred Stock to be redeemed except as to the holder or holders to whom the
Company has failed to give said notice or except as to the holder or holders whose notice was defective. The redemption notice shall state: (i) the amount of the Claim with respect to such holder; (ii) the total number of shares of Series C Preferred Stock being redeemed; (iii) the number of shares of Series C Preferred Stock held, as of the appropriate record date, by the holder that the Company intends to redeem; (iv) the date fixed for redemption; and (v) that the holder is to surrender to the Company, at the place or places where certificates for shares of Series C Preferred Stock are to be surrendered for redemption, in the manner and at the price designated, the certificate or certificates representing the shares of Series C Preferred Stock to be redeemed.
6.3 Each holder shall surrender the certificate or certificates representing such shares of Series C Preferred Stock to the Company, duly endorsed, in the manner and at the place designated in the redemption notice, and each surrendered certificate shall be canceled and retired. In the event that a holder seeks to redeem shares of Series C Preferred Stock, the holder shall surrender the certificate or certificates representing such shares of Series C Preferred Stock to the Company at its principal place of business, duly endorsed, together with a writing that describes the shares to be redeemed, and each surrendered certificate shall be canceled and retired. In the event that less than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares.
6.4 Notwithstanding the foregoing, the rights to redemption of this Section 6 are subject to the provisions of Section 5.11(c) of the Agreement and shall not be exercised to the extent that such redemption would reduce the overall number of Series C Preferred Stock received in connection with the Agreement to a number of shares having a value as of the Closing Date (as defined in the Agreement), of less than fifty percent (50%) of the value of all of the formerly outstanding stock of MetroWave as of the same date.
Section 7. Replacement. Upon receipt of evidence reasonably satisfactory to the Company (an affidavit of the registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of Series C Preferred Stock, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Company, or, in the case of any such mutilation, upon surrender of such certificate, the Company shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and dividends shall accrue on the Series C Preferred Stock represented by such new certificate from the date to which dividends have been fully paid on such lost, stolen, destroyed or mutilated certificate.
Section 8. Covenants.
8.1 Corporate Existence. The Company shall do or cause to be done, at its own cost and expense, all things necessary to preserve and keep in full force and effect its corporate existence and the corporate existence of each of its subsidiaries in accordance with the respective organizational documents of each such subsidiary and the material rights (charter and
statutory) and franchises of the Company and each such subsidiary; provided, however, that the Company shall not be required to preserve, with respect to itself, any material right or franchise and, with respect to any of its subsidiaries, any such existence, material right or franchise, if the Board of Directors of the Company shall determine in good faith that the preservation thereof is no longer desirable in the conduct of the business of the Company and the subsidiaries, taken as a whole.
8.2 Payment of Taxes and Other Claims. The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (A) all material taxes, assessments and governmental charges (including withholding taxes and any penalties, interest and additions to taxes) levied or imposed upon it or any of its subsidiaries or properties of it or any of its subsidiaries and (B) all lawful claims for labor, materials and supplies that, if unpaid, might by law become a lien upon the property of it or any of its subsidiaries; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings properly instituted and diligently conducted for which adequate reserves, to the extent required under U.S. generally accepted accounting principles, have been taken.
8.3 Maintenance of Properties and Insurance.
8.3.1 The Company shall, and shall cause each of its subsidiaries to, maintain its material properties in good working order and condition (subject to ordinary wear and tear) and make all necessary repairs, renewals, replacements, additions, betterments and improvements thereto and actively conduct and carry on its business; provided, however, that nothing in this Section 8.3.l shall prevent the Company or any of its subsidiaries from discontinuing the operation and maintenance of any of its properties, if such discontinuance is, in the good faith judgment of the Board of Directors of the Company or the subsidiary, as the case may be, desirable in the conduct of their respective businesses and is not disadvantageous in any material respect to the holders of Series C Preferred Stock.
8.3.2 The Company shall provide or cause to be provided, for itself and each of its subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds that, in the good faith judgment of the Board of Directors of the Company, are adequate and appropriate for the conduct of the business of the Company and such subsidiaries in a prudent manner, with reputable insurers or with the government of the United States of America or any agency or instrumentality thereof, in such amounts, with such deductibles, and by such methods as shall be customary, in the good faith judgment of the Board of Directors of the Company, for companies similarly situated in the industry.
8.4 Compliance with Laws. The Company shall comply, and shall cause each of its subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions of the United States of America, all states and municipalities thereof, and of any governmental department, commission, board, regulatory authority, bureau, agency and instrumentality of the foregoing, in respect of the conduct of their respective businesses and the ownership of their respective properties, except for such noncompliances as are not in the aggregate reasonably likely to have a
material adverse effect on the financial condition or results of operations of the Company and its subsidiaries, taken as a whole.
Section 9. Event of Default. If, on any date, an Event of Default (as defined below) shall have occurred and be continuing, whether or not by reason of the absence of legally available funds therefor, then the holders of a majority of the Series C Preferred Stock then outstanding shall be entitled to appoint one observer to attend all meetings of the Company's Board of Directors. "Event of Default" means any of the following: (i) a material breach of the covenants set forth in Section 8 which, if such breach is one that can be remedied, is not remedied within 90 days of written notice of such breach from the holders of Series C Preferred Stock to the Company; (ii) the acceleration prior to its scheduled maturity of any indebtedness of the Company in excess of $10,000,000; or (iii) any voluntary or involuntary declaration of bankruptcy by the Company.
Section 10. Miscellaneous.
10.1 Definitions. For the purposes of this Certificate of Designation:
"Affiliate" means, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, twenty percent or more of the Stock (as defined
below) having ordinary voting power in the election of directors of such Person,
(b) each Person that controls, is controlled by or is under common control with
such Person and (c) in the case of individuals, the immediate family members,
spouses and lineal descendants of individuals who are Affiliates of the Company.
For purposes of this definition, "control" of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of voting
securities, by contract or understanding, by virtue of being an executive
officer or a director or otherwise. For purposes of this definition, "Stock"
means all shares, options, warrants, general or limited partnership or
membership interests or other equivalents (regardless of how designated) of or
in a Person, whether voting or nonvoting, including common stock, preferred
stock or any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended).
"Common Stock" means, collectively, the Company's common stock, par value $.0001 per share, and any capital stock of any class of the Company hereafter authorized which is not limited to a fixed sum or percentage of par or stated value with respect to the rights of the holders thereof to participate in dividends or in the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the Company.
"Conversion Stock" means shares of the Common Stock issuable upon conversion of the Series C Preferred Stock, provided that if there is a change such that the securities issuable upon conversion of the Series C Preferred Stock are issued by a Person other than the Company or there is a change in the class of securities so issuable, then the term "Conversion Stock" shall mean the aggregate number of shares of the securities issuable upon conversion of the Series C Preferred Stock if such securities are
issuable in shares, or the aggregate of the smallest units in which such securities are issuable if such securities are not issuable in shares.
"Liquidation Value" of any share of Series C Preferred Stock as of any particular date shall be equal to $30.00 per share of Series C Preferred Stock, plus any and all cumulative and unpaid dividends, including those dividends required to be paid thereon under Section 2 hereof.
"Person" means any individual, sole proprietorship, corporation, partnership, unincorporated organization, association, limited liability company, trust, joint venture or other business or not for profit entity or government.
10.2 Notices. Except as otherwise expressly provided hereunder, all notices referred to herein shall be in writing and shall be deemed given upon the earlier of delivery thereof if by hand, or upon receipt if sent by mail (registered or certified mail, return receipt requested and postage prepaid), or on the next business day after deposit if sent by reputable overnight courier service, charges prepaid, or upon transmission if sent by telecopy or facsimile transmission (with request of assurance of receipt in a manner customary for communication of such type), and shall be deemed to have been given when so mailed or sent (i) to the Company, at its principal executive offices, and (ii) to any holder of shares of Series C Preferred Stock or of Conversion Stock, at such holder's address as it appears in the stock records of the Company (unless otherwise indicated by any such holder).
10.3 Severability. If any right, preference or limitation of the Series C Preferred Stock set forth in this Certificate of Designation is finally adjudicated by a court of competent jurisdiction to be invalid, unlawful or incapable of being enforced by any rule of law or public policy, all other rights, preferences and limitations set forth in this Certificate of Designation (as so amended) which can be given effect without the invalid, unlawful or unenforceable right, preference or limitation, shall, nevertheless, remain in full force and effect, and no right, preference or limitation herein set forth shall be dependent upon any other such right, preference or limitation unless so expressed herein.
IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the Company by its President and attested by its Secretary this 11th day of April, 2001.
/s/ Valentin P. Gapontsev ---------------------------------------- Valentin P. Gapontsev Chairman of the Board and Chief Executive Officer Attest: /s/ Angelo P. Lopresti ------------------------------------- Angelo P. Lopresti Secretary |
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IPG PHOTONICS CORPORATION
IPG PHOTONICS CORPORATION, (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation (the "Board of Directors") duly adopted resolutions to amend the Certificate of Incorporation of the Corporation, as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation be amended by deleting the first and second paragraphs of Article FOURTH in their entirety and substituting therefor the following:
FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is 85,000,000 shares of which 70,000,000 shares shall be designated Common Stock, par value of $.0001 per share ("Common Stock"), and 15,000,000 shares shall be designated Preferred Stock, par value of $.0001 per share ("Preferred Stock").
The Board of Directors is authorized, subject to the limitations prescribed by law and the terms of this Certificate, to provide for the issuance of shares of Preferred Stock in one or more series, to establish the number of shares to be included in each such series, and to fix the designations, powers, including without limitation voting powers, preferences, and rights of the shares of each such series and any qualifications, limitations or restrictions thereof.
SECOND: That as of the date hereof the Corporation has received approval of a majority of stockholders of the Corporation.
THIRD: That the aforesaid amendment was duly adopted by written consent of the stockholders without a meeting in accordance with the applicable provisions of Section 228 and Section 242 of the General Corporation Law of the State of Delaware.
[The next page is the signature page]
IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of August, 2003.
IPG PHOTONICS CORPORATION
By: /s/ Valentin P Gapontsev ------------------------------------ Name: Valentin P. Gapontsev Title: Chairman of the Board and Chief Executive Officer |
CERTIFICATE OF DESIGNATION
OF
SERIES D PREFERRED STOCK
OF
IPG PHOTONICS CORPORATION
(Pursuant to Section 151(g) of The General Corporation Law of the State of Delaware)
IPG PHOTONICS CORPORATION, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), hereby certifies, in accordance with Section 151(g) thereof, that the Corporation, at meeting on July 24, 2003 pursuant to the authority expressly vested in the Corporation's board of directors (the "Board of Directors") by the Certificate of Incorporation of the Corporation (the "Certificate of Incorporation"), adopted the following resolutions creating a series of Five Million Four Hundred Thousand (5,400,000) shares of the Corporation's preferred stock, par value $.0001 per share (the "Preferred Stock"), designated as Series D Preferred Stock:
RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors by the Certificate of Incorporation, the Board of Directors hereby creates a series of the Preferred Stock, par value $.0001 per share, of the Corporation (the "Series D Preferred Stock") and hereby states that the powers, designations and number of shares thereof, and the relative, participating, optional and other rights of the shares of such Series D Preferred Stock and the qualifications, limitations or restrictions thereof, are as follows (capitalized terms not immediately defined or referenced shall have the meanings provided for such terms in Section 10.1 of this Certificate of Designation or in the Certificate of Incorporation):
Section 1. Designation and Amount
1.1 There shall be a series of the Preferred Stock which shall be designated as the "Series D Preferred Stock," par value $.0001 per share, and the number of shares constituting such series shall be Five Million Four Hundred Thousand (5,400,000). Subject to Section 4, such number of shares may be decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series D Preferred Stock to a number less than that of the shares of Series D Preferred Stock then outstanding plus the number of shares of Series D Preferred Stock issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Corporation with respect to shares of Series D Preferred Stock.
1.2 The Corporation shall not reissue any shares of the Series D Preferred Stock and shall from time to time in accordance with applicable law increase the authorized amount of its Common Stock in the event that the number of authorized shares of Common Stock remaining available for issuance shall not be sufficient to permit conversion of the Series D Preferred Stock.
Section 2. Dividends and Distributions. The holders of Series D Preferred Stock shall be entitled to receive dividends out of funds legally available therefor at such times and in such amounts as the Board of Directors may determine in its sole discretion; provided, however, that no such dividend may be declared or paid on any shares of Common Stock, Series A Preferred Stock or Series B Preferred Stock or any one or more other series of preferred stock subsequently designated as pari passu with the Series D Preferred Stock, unless at the same time a dividend is declared or paid on all outstanding shares of Series D Preferred Stock, with holders of Series A Preferred Stock, Series B Preferred Stock, Series D Preferred Stock, any one or more other series of preferred stock subsequently designated as pari passu with the Series D Preferred Stock and Common Stock sharing in any such dividends as if they constituted a single class of stock and with each holder of shares of Series D Preferred Stock entitled to receive such dividends based on the number of shares of Common Stock into which such shares of Series D Preferred Stock are then convertible in accordance with Section 5 hereof.
Section 3. Liquidation. Upon any liquidation, dissolution or winding up of
the Corporation, or upon any Liquidating Merger, each holder of shares of Series
D Preferred Stock shall be entitled to be paid, on a pari passu basis to the
Series A Preferred and the Series B Preferred Stock and or any one or more other
series of preferred stock subsequently designated as pari passu with the Series
D Preferred Stock (collectively including the Series D Preferred Stock, the
"Senior Stock"), before any distribution or payment is made upon any Common
Stock and any other capital stock ranking on liquidation junior to the Series D
Preferred Stock (the Common Stock and such other capital stock being referred to
collectively as, "Junior Stock"), from the assets of the Corporation available
for distribution to its Stockholders, whether from capital, surplus or earnings,
an amount in cash equal to the sum of the aggregate Liquidation Value of all
shares of Series D Preferred Stock held by such holder. Prior to the
liquidation, dissolution or winding up of the Corporation or to any Liquidating
Merger, the Corporation shall declare for payment all declared and unpaid
dividends, if any, with respect to the Series D Preferred Stock as set forth in
Section 2 hereof. If upon any such liquidation, dissolution or winding up of the
Corporation or any such Liquidating Merger, the Corporation's assets to be
distributed among the holders of the Senior Stock are insufficient to permit
payment to such holders of the aggregate amount that they are entitled to be
paid, then the entire assets to be distributed shall be distributed ratably
among such holders based upon their respective aggregate preferential amounts to
which they are entitled. The Corporation shall give written notice of such
liquidation, dissolution or winding up or of such Liquidating Merger, not less
than 30 days prior to the payment date stated therein, to each record holder of
shares of Series D Preferred Stock. Neither the consolidation or merger of the
Corporation into or with any other entity or entities that is a wholly-owned
subsidiary of the Corporation, nor the sale or transfer by the Corporation of
all or any part of its assets to any such wholly-owned subsidiary, nor the
reduction of the capital stock of the Corporation, shall be deemed to be a
liquidation, dissolution winding up or Liquidating Merger of the Corporation
within the meaning of this Section 3. After distribution of the holders of
Series D Preferred Stock and any other class of securities ranking in
liquidation on parity with the Series D Preferred Stock of the full preferential
amount to which they are entitled, the Series D Preferred Stock shall be
cancelled and not entitled to any further rights under this
Certificate of Designation of Series D Preferred Stock, the remaining assets of the Corporation available for distribution, if any, to the stockholders of the Corporation shall be distributed to the holders of shares of Junior Stock pro rata based and other shares of preferred stock having rights of participation with the Common Stock.
In the event of a Liquidating Merger, the amount deemed distributed to the holders of the Series D Preferred Stock upon any such transaction shall be the cash or the value of the property, rights or securities distributed to such holders by the Corporation or the acquiring person, firm or other entity, as applicable; provided, however, that holders of the Series D Preferred Stock shall have any and all rights to be paid in cash with respect to such distribution to the extent that holders of Series A Preferred Stock, Series B Preferred Stock or any other capital stock of the Corporation are paid in cash. In the event the distribution is not in cash, the value of such property, rights or other securities shall be determined consistently with the determination made with respect to the distribution made to holders of Series A Preferred Stock, Series B Preferred Stock and any other capital stock of the Corporation. The Corporation shall promptly provide to the holders of shares of Series B Preferred Stock such information concerning the terms of such merger, consolidation, asset sale or change of control transaction and the value of the assets of the Corporation as may reasonably be requested by the holders of Series D Preferred Stock and may be produced by the Corporation without undue burden or expense.
Section 4. Voting Rights. Each outstanding share of Series D Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which such share of Series D Preferred Stock is then convertible pursuant to Section 5 hereof as of the record date for the vote or written consent of stockholders, if applicable. Each holder of shares of Series D Preferred Stock shall be entitled to notice of any stockholder's meetings in accordance with the by-laws of the Corporation and shall vote with holders of the Common Stock, voting together as single class, upon all matters submitted to a vote of stockholders including any merger, sale of assets, liquidation, dissolution, recapitalization or other fundamental transaction involving the Corporation or any of its subsidiaries, excluding those matters required to be submitted to a class or series vote pursuant to the terms hereof or the Certificate of Incorporation.
4.1 Protective Voting Provisions. So long as shares of the Series D Preferred Stock shall be outstanding, without first obtaining the approval (by vote or written consent, as provided by law or by the Certificate of Incorporation or the bylaws of the Corporation, each as amended from time to time) of a majority of the outstanding shares of Series D Preferred Stock, voting separately as a class, the Corporation shall not:
(i) increase the authorized number of shares of Series D Preferred Stock; or
(ii) amend, alter, or repeal the rights, powers or preferences of the holders of the Series D Preferred Stock as set forth herein as to affect them adversely.
Section 5 Conversion. Upon any conversion of any share of Series D Preferred Stock, each such share of Series D Preferred Stock shall be canceled and not subject to reissuance as Series D Preferred Stock, but shall rather be undesignated and unreserved Preferred Stock of the Corporation.
5.1 Elective Conversion. At any time and from time to time, at his, her or its absolute and sole discretion, any holder of shares of Series D Preferred Stock may convert all or any portion of the Series D Preferred Stock (including any fraction of a share) held by such holder, into a number of fully paid and nonassessable shares of Conversion Stock equal to the product of the number of shares of Series D Preferred Stock being converted multiplied by the Conversion Ratio then in effect by delivery to the Corporation of a number of shares of Series D Preferred Stock to be converted, and by surrendering such holder's certificate(s) in accordance with Section 5.6 hereof, and subject to Section 5.7 hereof.
5.2 Automatic Conversion. Immediately prior the closing of (i) a Qualified IPO, (ii) the consummation of any merger or sale of a majority of the Common Stock of the Corporation or of all or substantially all of its assets (other than a merger with or sale to an Affiliate of the Corporation) in which the holders of the Series D Preferred Stock would be entitled to receive in a transaction consideration worth at least $1.90 per share of Series D Preferred Stock (as adjusted for stock dividends, splits, divisions or combinations and the like) or such lesser amount as shall approved by the holders of the Series A Preferred Stock and Series B Preferred Stock voting as a single class provided that each share of Series A Preferred Stock, Series B Preferred Stock and Series D Preferred Stock receives an equal amount to which they would be entitled to in a liquidation of the Company, or (iii) the conversion of all outstanding shares of Series A Preferred Stock and Series B Preferred Stock into Common Stock, then any and all outstanding shares of Series D Preferred Stock shall automatically convert to Conversion Stock at the then effective Conversion Ratio without any further action on the part of any holder of the Series D Preferred Stock, subject to Sections 5.8 and Section 5.9 hereof. Transactions subject to Section 5.2 shall not be deemed to be a Liquidating Merger.
5.3 Conversion Ratio. The "Conversion Ratio" shall be determined by
dividing the Original Liquidation Price by the Conversion Price (as defined in
Section 5.4 hereof).
5.4 Conversion Price. The initial "Conversion Price" shall equal $1.90 per share. The Conversion Price shall be subject to adjustment from time to time as follows:
5.5 Adjustments to the Conversion Price. Except as provided in Section 5.6 and except in the case of an event described in Section 5.7, if and whenever after the date on which the Certificate of Designation of the Series D Preferred Stock becomes effective (the "Closing Date") the Corporation shall issue or sell, or is, in accordance with this Section 5.5, deemed to have issued or sold, any shares of Common Stock for a consideration per share less than the Conversion Price in effect immediately prior to the time of such issuance or sale (a "Dilutive Issuance"), then, upon such Dilutive issuance, the Conversion Price shall be reduced to the price determined by dividing (i) an amount equal to the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issue or sale
multiplied by the then existing Conversion Price and (2) the consideration, if any, received by the Corporation upon such issue or sale (determined as set forth below) by (ii) the total number of shares of Common Stock outstanding immediately prior to such issue or sale plus the number of shares of Common Stock so issued or sold.
For purposes of this Section 5.5, the following shall also be applicable:
5.5.1 Issuance of Rights or Options. If the Corporation shall, at any time after the Closing Date, in any manner grant (whether directly or by assumption in a merger or otherwise) any warrants or other rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock (such warrants, rights or options being called "Options" and such convertible or exchangeable stock or securities being called "Convertible Securities"), in each case for consideration per share (determined, as provided in this paragraph and in Section 5.5.5 less than the Conversion Price, whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options, or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon exercise of such Options, shall be deemed to have been issued as of the date of granting of such Options (and thereafter shall be deemed to be outstanding), at a price per share equal to the amount determined by dividing (A) the total amount, if any, received or receivable by the Corporation as consideration for the granting of such Options, plus the minimum aggregate amount of additional consideration payable to the Corporation upon the exercise of all such Options, plus, in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (B) the total maximum number of shares of Common Stock deemed to have been so issued. Except as otherwise provided in Section 5.5.3, no adjustment of the Conversion Price shall be made upon the actual issue of such Common Stock or of such Convertible Securities upon exercise of such Options or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities.
5.5.2 Issuance of Convertible Securities. If the Corporation shall, at any time after the Closing Date, in any manner issue or sell any Convertible Securities for consideration per share (determined as provided in this paragraph and in Section B.5.5.5 less than the Conversion Price, whether or not the rights to exchange or convert any such Convertible Securities are immediately exercisable, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed to have been issued, as of the date of the issue or sale of such Convertible Securities (and thereafter shall be deemed to be outstanding), at a price per share equal to the amount determined by dividing (A) the total amount received or receivable by the Corporation as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the conversion or exchange thereof, by (B) the total maximum number of shares of Common Stock deemed to have been so issued; provided, that (1) except as otherwise provided in Section 5.5.3, no adjustment of the
Conversion Price shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities and (2) if any such issue or sale of such Convertible Securities is made upon exercise of any Options to purchase any such Convertible Securities, no further adjustment of the Conversion Price shall be made by reason of such issue or sale.
5.5.3 Change in Option Price or Conversion Rate. If there shall occur a change in (A) the maximum number of shares of Common Stock issuable in connection with any Option referred to in Section 5.5.1 or any Convertible Securities referred to in Section 5.5 or 5.6, (B) the purchase price provided for in any Option referred to in Section 5.5, (C) the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in Section 5.5 or 5.6 or (D) the rate at which Convertible Securities referred to in Section B.5.5 or (2) are convertible into or exchangeable for Common Stock (in each case, other than in connection with an event described in Section 5.6, then the Conversion Price in effect at the time of such event shall be readjusted to the Conversion Price that would have been in effect at such time had such Options or Convertible Securities that are still outstanding provided for such changed maximum number of shares, purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold, but only if as a result of such adjustment the Conversion Price then in effect is thereby reduced; and on the termination or repricing of any such Option or any such right to convert or exchange such Convertible Securities, the Conversion Price then in effect hereunder shall be increased to the Conversion Price that would have been in effect at the time of such termination or repricing had such Option or Convertible Securities, to the extent outstanding immediately prior to such termination (i.e., to the extent that fewer than the number of shares of Common Stock deemed to have been issued in connection with such Option or Convertible Securities were actually issued), never been issued or issued at such higher price, as the case may be.
5.5.4 Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities or other property of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of the Series D Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities or other property of the Corporation that they would have received had the Series D Preferred Stock been converted into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during such period under this paragraph with respect to the rights of the holders of the Series D Preferred Stock; and provided further, however, that no such adjustment shall be made if the holders of Series D Preferred simultaneously receive a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities as they would have received if all outstanding share of Series D Preferred Stock had been converted into Common Stock on the date of such event.
5.5.5 Consideration for Stock. In case any shares of Common Stock shall be issued or sold, or deemed issued or sold, for cash, the consideration received therefor shall be deemed to be the amount received or to be received by the Corporation therefor (determined with respect to deemed issuances and sales in connection with Options and Convertible Securities in accordance with clause (A) of Section 5.5.1 or 2, as appropriate. In case any shares of Common Stock shall be issued or sold, or deemed issued or sold, for a consideration other than cash, the amount of the consideration other than cash received by the Corporation shall be deemed to be the fair value of such consideration received or to be received by the Corporation (determined with respect to deemed issuances and sales in connection with Options and Convertible Securities in accordance with clause (A) of Section 5.5.1 or 2 as appropriate) as determined in good faith by the Board of Directors of the Corporation. In case any Options shall be issued in connection with the issue and sale of other securities of the Corporation, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued for such consideration as determined in good faith by the Board of Directors of the Corporation.
5.5.6 Record Date. In case the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.
5.5.7 Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Corporation; provided, that the disposition of any such shares shall be considered an issue or sale of Common Stock for the purpose of this Section 5.
5.6 Certain Issues of Common Stock Excepted. Anything herein to the contrary notwithstanding, the Corporation shall not be required to make any adjustment of the Conversion Price in the case of the issuance from and after the Closing Date of (i) shares of Common Stock upon conversion of shares of Series A Preferred Stock, Series B Preferred Stock and Series D Preferred Stock or the Convertible Note or upon exercise of warrants to purchase Common Stock outstanding as of December 31, 2000, (ii) shares issued in exchange for the stock or assets of another company in connection with the acquisition of or merger into such company; provided, that such actions shall have been approved by a majority of the members of the Board of Directors, which shall include the Series B Preferred Stock Director Designee, or (iii) up to an aggregate of 7,500,000 shares of Common Stock (subject to appropriate adjustment for any stock split, stock dividend or similar event) to directors, officers, employees or consultants of the Corporation in connection with their service as directors of the Corporation, their employment by the Corporation or their retention as consultants by the Corporation or to the National Advisory Board, in each case authorized by the Board of Directors and issued pursuant to the Corporation's 2000 Incentive Compensation Plan or any other equity incentive plan approved by a Majority
Interest ("Excluded Share"), plus such number of Excluded Shares that are
repurchased by the Corporation from such persons after such Closing Date in
accordance with the Amended and Restated Certificate of Incorporation of the
Corporation, pursuant to contractual rights held by the Corporation and at
repurchase prices not exceeding the respective original purchase prices
(appropriately adjusted to reflect the occurrence of any event described in
Section 5.7 paid by such persons to the Corporation therefor).
5.7 Other Adjustments.
5.7.1. Subdivision or Combination of Common Stock. In case the Corporation shall at any time after the Closing Date subdivide its outstanding shares of Common Stock into a greater number of shares (by any stock split, stock dividend or otherwise), the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced, and, conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased. In the case of any such subdivision, no further adjustment shall be made pursuant to Section 5.5.4 by reason thereof.
5.7.2. Repayment of Convertible Note. In the event that the convertible Note shall be repaid, in whole or in part, the Conversion Price shall be appropriately increased to the Conversion Price that would have been in effect on the Closing Date had the portion of the repaid Convertible Note been excluded in calculating the diluted ownership represented by the Series D Preferred Stock, as follows:
Conversion Price = 102,000,000/X (rounded to the nearest penny)
Where: W = 5,100,000 + the principal amount of Convertible Note outstanding after repayment
Y = W/102,000,000
X = CSE /(1 - Y)
CSE= 38,441,668 (Common Stock Outstanding) + 500,000 (Series A Preferred Stock) + 3,800,000 (Series B Preferred Stock) + 4,995,353 (options) + cumulative effect of anti-dilution adjustments to the Series A Preferred Stock and Series B Preferred Stock up to and including the issuance of the Series D Preferred Stock, giving effect to the calculation of Y (excluding any dilutive issuances after the issuance of the Series D Preferred Stock or the Convertible Note).
It is agreed that if the entire Convertible Note were repaid immediately after the Closing Date, the Conversion Price would be adjusted to $2.02 per share.
5.7.3. Exercise of Warrants. Upon the date the Series B Warrants become exercisable, the Conversion Price shall be appropriately decreased to the Conversion Price that would have been in effect on the Closing Date had the Series B Warrants been exercised immediately prior to the Closing Date and included in calculating the diluted ownership
represented by the Series D Preferred Stock, in the manner set forth in Section in 5.7.2, except that W = 5,100,000 + the then outstanding principal amount of the Convertible Note, and CSE shall also include the number of shares of Common Stock issuable upon exercise of the Series B Warrants. For this calculation, the treasury method shall be used for calculating the number of shares issuable upon exercise of the Series B Warrant and the "Liquidity Event Price", as defined in the Series B Warrants shall be deemed to be the price at which Common Stock is purchased back under the Series B Warrants.
5.8 Reorganization or Reclassification. If any capital reorganization or reclassification of the capital stock of the Corporation shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, as a condition of such reorganization or reclassification, lawful and adequate provisions shall be made whereby each holder of a share or shares of Series D Preferred Stock shall thereupon have the right to receive, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore receivable upon the conversion of such share or shares of Series D Preferred Stock, as the case may be, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such Common Stock immediately theretofore receivable upon such conversion had such reorganization or reclassification not taken place, and in any such case appropriate provisions shall be made with respect to the rights and interests of such holder to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Conversion Price) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise of such conversion rights.
5.9 Adjustment for Merger or Reorganization, etc. In case of any consolidation or merger of the Corporation with or into another corporation or the sale of all or substantially all of the assets of the Corporation to another corporation, each share of Series D Preferred Stock shall thereafter be convertible into the kind and amount of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such Series D Preferred Stock would have been entitled upon such consolidation, merger or sale; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions in Section 5 set forth with respect to the rights and interests thereafter of the holders of the Series D Preferred Stock, to the end that the provisions set forth in Section 5 (including provisions with respect to changes in and other adjustments of the Series D Preferred Stock Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Series D Preferred Stock. Notwithstanding anything to the contrary contained herein, each holder of shares of Series D Preferred Stock shall have the right to elect to give effect to the conversion rights contained in Sections 5.1 or Section 5.2 instead of giving effect to the provisions contained in this Section 5.9 with respect to the shares of Series D Preferred Stock owned by such holder.
5.10 Mechanics of Conversion.
5.10.1 Elective Conversion. Before any holder of shares of Series D Preferred Stock shall be entitled to convert the same into shares of Conversion Stock pursuant to Section 5.1 hereof, such holder shall surrender the certificate or certificates therefor, duly endorsed or in blank, at the office of the Corporation or of any transfer agent for the Series D Preferred Stock (or, in addition to the aforementioned places, at such other place as the Board of Directors may reasonably designate), and shall give written notice to the Corporation (in the manner described in Section 10.2 hereof) at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Conversion Stock are to be issued. The Corporation shall use its commercially reasonable efforts promptly to (subject to Section 5.13 hereof), issue and deliver at such office to such holder of shares of Series D Preferred Stock, or to the nominee or nominees of such holder, (x) a certificate or certificates for the number of shares of Conversion Stock to which such holder shall be entitled as herein provided, (y) a certificate representing any shares of Series D Preferred Stock not so converted and (z) an amount of cash equal to declared but unpaid dividends on the shares converted, calculated through the date of such conversion and, if applicable, the payment required by Section 5.11 and Section 5.12 hereof. Any conversion shall be deemed to have been made immediately prior to the close of business on (i) the date such written notice is given (provided that such holder's certificate or certificates are delivered to the Corporation within two business days after such notice is given) or (ii) in any other case, on the date of such surrender of the shares of Series D Preferred Stock to be converted, and the person or persons entitled to receive the shares of Conversion Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Conversion Stock on such date. Notwithstanding the foregoing, no written notice of election to convert or surrender of certificates shall be required in the event of an automatic conversion pursuant to Section 5.10.2.
5.10.2 Automatic Conversion. Immediately prior to the closing of a Qualified IPO (the "Automatic Conversion Date"), all outstanding shares of Series D Preferred Stock shall be converted into shares of Common Stock without any further action by the holders of such shares and whether or not the certificates representing such shares of Series D Preferred Stock are surrendered to the Corporation or its transfer agent. On the Automatic Conversion Date, all rights with respect to the Series D Preferred Stock so converted shall terminate, except any of the rights of the holders thereof upon surrender of their certificate or certificates therefor or delivery of an affidavit of loss thereof to receive certificates for the number of shares of Common Stock into which such Series D Preferred Stock has been converted. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. Upon surrender of such certificates or affidavit of loss, the Corporation shall issue and deliver to such holder, promptly (and in any event in such time as is sufficient to enable such holder to participate in such Qualified IPO) at such office and in its name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of
Common Stock into which the shares of the Series D Preferred Stock surrendered are convertible on the Automatic Conversion Date.
5.11 Fractional Shares. No fractional shares shall be issued upon conversion of the Series D Preferred Stock into Conversion Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, in its reasonable discretion, the Board of Directors may cause the Corporation to pay cash to such holder equal to such fraction (calculated as to each conversion to the nearest 1/100th of a share) multiplied by the applicable Conversion Price or may round the number of shares of Conversion Stock to be issued to the nearest whole share as follows: (i) any fractional shares equal to at least one-half shall be rounded upward; and (ii) any fractional shares equal to less than one-half shall be rounded downward.
5.12 Declared, but Unpaid Dividends. Promptly upon conversion, the Corporation shall also pay to the former holders of shares of the Series D Preferred Stock so converted an amount in cash equal to any and all declared but unpaid dividends on the shares of Series D Preferred Stock surrendered for conversion through the date of such conversion (whether or not declared) out of funds legally available for such payment; provided, however, that if the funds of the Corporation legally available for payment of such dividends are insufficient to pay all such dividends required to be paid on such date, those funds which are legally available and not subject to such restrictions shall be used to pay the maximum possible amount of such dividends and the remaining dividends shall be paid as soon as practicable when additional funds of the Corporation not subject to such restrictions become legally available therefor.
5.13 Transfer Taxes. The Corporation will pay any and all taxes that may be payable in respect of the issue or delivery of shares of Conversion Stock on conversion of shares of the Series D Preferred Stock pursuant to this Section 5. The Corporation shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issue or transfer and delivery of shares of Conversion Stock in a name other than that in which the shares of the Series D Preferred Stock so converted were registered, and no issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid.
5.14 No Impairment; Cooperation. The Corporation will not avoid or seek to
avoid the observance or performance of the conversion rights of the holders of
Series D Preferred Stock into Common Stock as set forth in Section 5. Subject to
Section 4.1, this provision shall not restrict the Corporation from effecting an
amendment to its Certificate of Incorporation in accordance with the General
Corporation Law of the State of Delaware. The Corporation shall assist and
cooperate with any holder of shares of Series D Preferred Stock required to make
any filings or obtain any approvals, governmental or otherwise, prior to or in
connection with any conversion of such shares hereunder (including, without
limitation, making any filings required to be made by the Corporation).
5.15 Certificate as to Adjustments. Upon the occurrence of each event
requiring adjustment or readjustment of the Conversion Price pursuant to this
Section 5, the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and shall prepare and cause to be furnished to holders of Series D Preferred Stock a certificate setting forth such adjustment or readjustment and showing in reasonable detail the facts upon which such adjustment or readjustment is based. The Corporation also shall, upon written request of any holder of record of Series D Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (a) such adjustments and readjustments and (b) the Conversion Price at the time in effect.
5.16 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 or to vote on any matter upon which such stockholders may be entitled to vote, the Corporation shall give notice to each holder of shares of Series D Preferred Stock and to each holder of outstanding warrants, options or other rights to acquire Series D Preferred Stock at least 10 days prior to the date specified therein, specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or vote.
5.17 Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Conversion Stock solely for the purpose of effecting the conversion of the outstanding shares of Series D Preferred Stock and convertible notes convertible into shares of Series D Preferred Stock and all shares of Series D Preferred Stock issuable upon exercise of outstanding convertible notes, warrants and options, such number of shares of Conversion Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series D Preferred Stock and all shares of Series D Preferred Stock issuable upon exercise of outstanding convertible notes, warrants and options. All shares of Conversion Stock that shall be so issued shall be duly and validly issued, fully paid, nonassessable and free from all taxes, liens and charges arising out of or by reason of the issue thereof.
Section 6. Replacement. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of Series D Preferred Stock, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation, or, in the case of any such mutilation, upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and dividends shall accrue on the Series D Preferred Stock represented by such new certificate from the date to which dividends have been fully paid on such lost, stolen, destroyed or mutilated certificate.
Section 7. Notice; Adjustments.
7.1 Liquidation Events, Extraordinary Transactions, Etc. In the event (i) the Corporation establishes a record date to determine the holders of any class of securities who are entitled to receive any dividend or other distribution or who are entitled to vote at a meeting (or by written consent)
in connection with any of the transactions identified in clause (ii) hereof, or
(ii) the Board of Directors of the Corporation shall determine in good faith
that a Liquidating Merger, Qualified IPO or any other public offering is
reasonably likely to occur, the Corporation shall mail or cause to be mailed by
first class mail (postage prepaid) to each holder of Series D Preferred Stock at
least thirty (30) days prior to such record date specified therein or the
expected effective date of any such transaction, whichever is earlier, a notice
specifying (A) the date of such record date for the purpose of such dividend or
distribution or meeting or consent and a description of such dividend or
distribution or the action to be taken at such meeting or by such consent, (B)
the date on which any such Liquidating Merger, Qualified IPO or other public
offering is expected to become effective, and (C) the date on which the books of
the Corporation shall close or a record shall be taken with respect to any such
event. Such notice shall be accompanied by a certificate prepared by the chief
financial officer of the Corporation describing in detail (1) the facts of such
transaction, (2) the amount(s) per share of Series D Preferred Stock each holder
of Series D Preferred Stock would receive pursuant to the applicable provisions
of this Amended and Restated Certificate of Incorporation, and (3) the facts
upon which such amounts were determined.
7.2 Waiver of Notice. The holders of a majority of the outstanding Series D Preferred Stock may, at any time upon written notice to the Corporation, waive any notice or certificate delivery provisions specified herein for the benefit of such holders, and any such waiver shall be binding upon all holders of such securities.
Section 8. Contractual Rights of Holders. The various provisions set forth herein for the benefit of the holders of the Series D Preferred Stock shall be deemed contract rights enforceable by them, including, without limitation, one or more actions for specific performance.
Section 9. Redemption. Upon the election of holders of a majority of the outstanding shares of Series D Preferred Stock, upon each date whereby holders of the Series B Preferred Stock properly require the Corporation to redeem shares of Series B Preferred Stock under Article Fourth Section B.5 of the Amended and Restated Certificate of Incorporation, as amended from time to time, the Corporation shall redeem, out of funds legally available therefore, up to a percentage of the Series D Preferred Stock as corresponds to the percentage of Series B Preferred Stock which holders of Series B Preferred Stock may elect to have redeemed by the Corporation at such time under such Article Fourth Section B.5. The redemption price per share for Series D Preferred Stock in connection with any redemption made pursuant this Section 9 shall be equal to the Liquidation Value of the Series D Preferred Stock, and all payments to the holders of Series D Preferred Stock and Series B Preferred Stock shall be proportionate to the Liquidation Value of the Series D Preferred Stock and the Series B Redemption Amount of the Series B Preferred Stock with respect to the shares to be redeemed under this Section 9 and such Article Fourth Section B.5. Other than with respect to the redemption price, which for the Series D Preferred Stock shall be the Liquidation Value of Series D Preferred Stock, the Corporation shall provide to the holders of the Series D Preferred Stock the same rights, preferences and privileges with respect to redemption as provided to holders of the Series B Preferred Stock under such Article Fourth Section B.5 and the Corporation shall follow corresponding procedures with respect to the same.
The redemption rights under this Section 9 shall be subject to all the limitations, terms and conditions applicable to the holders of Series B Preferred Stock as set forth under such Article Fourth Section B.5, and the other conditions set forth in this Section 9.
Section 10. Miscellaneous.
10.1 Definitions. For the purposes of Section 1 through Section 10 of this Article Fourth:
"Affiliate" means, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, twenty percent or more of the Stock (as defined
below) having ordinary voting power in the election of directors of such Person,
(b) each Person that controls, is controlled by or is under common control with
such Person and (c) in the case of individuals, the immediate family members,
spouses and lineal descendants of individuals who are Affiliates of the
Corporation. For purposes of this definition, "control" of a Person shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of voting
securities, by contract or understanding, by virtue of being an executive
officer or a director or otherwise. For purposes of this definition, "Stock"
means all shares, options, warrants, general or limited partnership or
membership interests or other equivalents (regardless of how designated) of or
in a Person, whether voting or nonvoting, including common stock preferred stock
or any other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended).
"Common Stock" means, collectively, the Corporation's common stock, par value $.0001 per share, and any capital stock of any class of the Corporation hereafter authorized which is not limited to a fixed sum or percentage of par or stated value with respect to the rights of the holders thereof to participate in dividends or in the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation.
"Conversion Price" shall have the meaning assigned to it in Section 5.4 hereof.
"Conversion Ratio" shall have the meaning assigned to it in Section 5.3 hereof
"Conversion Stock" means shares of the Common Stock issuable upon conversion of the Series D Preferred Stock, provided that if there is a change such that the securities issuable upon conversion of the Series D Preferred Stock are issued by a Person other than the Corporation or there is a change in the class of securities so issuable, then the term "Conversion Stock" shall mean the number of shares of the securities issuable upon conversion of the Series D Preferred Stock if such securities are issuable in shares, or the units in which such securities are issuable if such securities are not issuable in shares.
"Convertible Note" shall mean the Convertible Promissory Note of the Corporation dated August 13, 2003 in the aggregate principal amount of $5,100,000.
"Liquidation Value" of any share of Series D Preferred Stock as of any particular date shall be equal to the Original Liquidation Price per share of Series D Preferred Stock, plus any and all declared and unpaid dividends, including those dividends required to be paid thereon under Section 2 hereof.
"Liquidating Merger" shall mean any merger, consolidation or sale or
exchange of all or substantially all of the property and assets of the
Corporation which will result in the stockholders of the Corporation immediately
prior to such transaction not holding (by virtue of such shares or securities
issued solely with respect thereto) at least 50% of the combined voting power of
the surviving, continuing or purchasing entity, provided, that, such events
shall not be deemed a Liquidating Merger if the Series A Preferred Stock and the
Series B Preferred Stock waive their respective rights and do not elect to treat
such events as a Liquidating Merger or Liquidating Event under Article Fourth
Section A.3 and Article Fourth Section B.3.3 of the Amended and Restated
Certificate of Incorporation, as amended from time to time.
"Original Liquidation Price" of any share of Series D Preferred Stock shall be equal to $1.90 per share.
"Person" means any individual, sole proprietorship, company, partnership, unincorporated organization, association, limited liability company, trust, joint venture or other business or not for profit entity or government.
"Qualified IPO" means a sale of the Common Stock to the public in a firm commitment public offering, pursuant to an effective registration statement under the Securities Act of 1933, as amended (together with any successor thereto, the "Securities Act"), at per share price (before deducting underwriting discounts and other customary offering expenses) of not less than $1.90 per share (as adjusted for stock dividends, splits, divisions or combinations and the like) or such lesser amount as shall approved by the holders of the Series A Preferred Stock and Series B Preferred Stock voting as a single class, provided that all shares of Series A Preferred Stock and Series B Preferred Stock convert into Common Stock in such transaction.
"Series B Warrants" shall mean Common Stock purchase warrants entitling the holders to purchase an aggregate of $23,750,000 of Common Stock issued in connection with the sale of Series B Preferred Stock.
10.2 Notices. Except as otherwise expressly provided hereunder, all notices referred to herein shall be in writing and shall be deemed given upon the earlier of delivery thereof if by hand, or upon receipt if sent by mail (registered or certified mail, return receipt requested and postage prepaid), or on the next business day after deposit if sent by reputable overnight courier service, charged prepaid, or upon transmission if sent by telecopy or facsimile transmission (with request of assurance of receipt in a manner customary for communication of such type), and shall be deemed to have been given when so mailed or sent (i) to the Corporation, at its principal
executive offices, and (ii) to any holder of shares of Series D Preferred Stock or of Conversion Stock, at such holder's address as it appears in the stock records of the Corporation (unless otherwise indicated by any such holder).
10.3 Severability. If any right, preference or limitation of the Series D Preferred Stock set forth in this Certificate of Incorporation is finally adjudicated by a court of competent jurisdiction to be invalid, unlawful or incapable of being enforced by any rule of law or public policy, all other rights, preferences and limitations set forth in this Certificate of Incorporation which can be given effect without the invalid, unlawful or unenforceable right, preference or limitation, shall, nevertheless, remain in full force and effect, and no right, preference or limitation herein set forth shall be dependent upon any other such right, preference or limitation unless so expressed herein.
[The signature page follows]
IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the Corporation by its Chairman and attested by its Secretary this 12th day of August, 2003.
By: /s/ Valentin P. Gapontsev ------------------------------------ Chairman of the Board and Chief Executive Officer Attest: /s/ Angelo P. Lopresti ------------------------------------- Angelo P. Lopresti Secretary |
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IPG PHOTONICS CORPORATION
IPG PHOTONICS CORPORATION, (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation (the "Board of Directors") duly adopted a resolution to amend the Certificate of Incorporation of the Corporation, as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation be amended by deleting Article FOURTH, B, Section 7.2 in its entirety and substituting therefor the following new Article FOURTH, B, Section 7.2:
Certain Issues of Common Stock Excepted. Anything herein to the contrary notwithstanding, the Corporation shall not be required to make any adjustment of the Conversion Price in the case of the issuance from and after the Closing Date of (i) shares of Common Stock upon conversion of shares of Series A Preferred Stock and Series B Preferred Stock or upon exercise of warrants for purchase Common Stock outstanding as of August 25, 2000, (ii) shares issued in exchange for the stock or assets of another company in connection with the acquisition of or merger into such company; provided, that such actions shall have been approved by a majority of the members of the Board of Directors, which shal1 include the Series B Preferred Stock Director Designee, or (iii) up to an aggregate of 8,750,000 shares of Common Stock (subject to appropriate adjustment for any stock split, stock dividend or similar event) to directors, officers, employees or consultants of the Corporation in connection with their service as directors of the Corporation, their employment by the Corporation or their retention as consultants by the Corporation or to the National Advisory Board, in each case authorized by the Board of Directors and issued pursuant to the Corporation's 2000 Incentive Compensation Plan or any other equity incentive plan approved by a Majority Interest ("Excluded Shares"), plus such number of Excluded Shares that are repurchased by the Corporation from such persons after such Closing Date in accordance with this Amended and Restated Certificate of Incorporation, pursuant to contractual rights held by the Corporation and at purchase prices not exceeding the respective original purchase prices (appropriately adjusted to reflect the occurrence of any event described in Section B.7.3) paid by such persons to the Corporation therefor.
SECOND: That as of the date hereof, the Corporation has received approval of a majority of Series B Convertible Participating Preferred Stockholders of the Corporation.
THIRD: That the aforesaid amendment was duly adopted by the Series B Convertible Participating Preferred Stockholders of the Corporation at a meeting in accordance with the applicable provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of July, 2005.
IPG PHOTONICS CORPORATION
By: /s/ Valentin P Gapontsev ------------------------------------ Name: Valentin P. Gapontsev Title: Chairman of the Board and Chief Executive Officer |
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IPG PHOTONICS CORPORATION
IPG PHOTONICS CORPORATION, (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation (the "Board of Directors") duly adopted a resolution to amend the Certificate of Incorporation of the Corporation, as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation be amended by deleting in its entirety Section 5.6 of the Certificate of Designation of Series D Preferred Stock of the Corporation and substituting therefor the following new Section 5.6:
Certain Issues of Common Stock Excepted. Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make
any adjustment of the Conversion Price in the case of the issuance from
and after the Closing Date of (i) shares of Common Stock upon conversion
of shares of Series A Preferred Stock, Series B Preferred Stock and
Series D Preferred Stock or the Convertible Note or upon exercise of
warrants to purchase Common Stock outstanding as of December 31, 2000,
(ii) shares issued in exchange for the stock or assets of another
company in connection with the acquisition of or merger into such
company; provided, that such actions shall have been approved by a
majority of the members of the Board of Directors, which shall include
the Series B Preferred Stock Director Designee, or (iii) up to an
aggregate of 8,750,000 shares of Common Stock (subject to appropriate
adjustment for any stock split, stock dividend or similar event) to
directors, officers, employees or consultants of the Corporation in
connection with their service as directors of the Corporation, their
employment by the Corporation or their retention as consultants by the
Corporation or to the National Advisory Board, in each case authorized
by the Board of Directors and issued pursuant to the Corporation's 2000
Incentive Compensation Plan or any other equity incentive plan approved
by a Majority Interest ("Excluded Share"), plus such number of Excluded
Shares that are repurchased by the Corporation from such persons after
such Closing Date in accordance with the Amended and Restated
Certificate of Incorporation of the Corporation, pursuant to contractual
rights held by the Corporation and at repurchase prices not exceeding
the respective original purchase prices (appropriately adjusted to
reflect the occurrence of any event described in Section 5.7 paid by
such persons to the Corporation therefor); and
SECOND: That as of the date hereof, the Corporation has received approval of the Series D Preferred Stockholder of the Corporation.
THIRD: That the aforesaid amendment was duly adopted by the Series D Preferred Stockholder of the Corporation by written consent without a meeting pursuant to Section 228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of September, 2005.
IPG PHOTONICS CORPORATION
By: /s/ Valentin P Gapontsev ------------------------------------ Name: Valentin P. Gapontsev Title: Chairman of the Board and Chief Executive Officer |
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IPG PHOTONICS CORPORATION
IPG PHOTONICS CORPORATION, (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation (the "Board of Directors") duly adopted a resolution to amend the Certificate of Incorporation of the Corporation, as set forth on Exhibit A hereto.
SECOND: That as of the date hereof, the Corporation has received approval of the holders of a majority of the outstanding Series B Convertible Participating Preferred Stock of the Corporation and holders of a majority of the outstanding stock of the Corporation entitled to vote thereon.
THIRD: That the aforesaid amendments were duly adopted by the stockholders of
the Corporation in accordance with the applicable provisions of Section
242 of the General Corporation Law of the State of Delaware by consent
of stockholders in lieu of meeting without a meeting in accordance with
Section 228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I have hereunto set my hand this 30th day of December, 2005.
IPG PHOTONICS CORPORATION
By: /s/ Valentin P Gapontsev ------------------------------------ Name: Valentin P. Gapontsev Title: Chairman of the Board and Chief Executive Officer |
Exhibit A
RESOLVED, that Article Fourth, Section B of the Corporation's Amended and Restated Certificate of Incorporation be amended by deleting in its entirety Section B, and substituting a new Section B as follows:
B. Series B Preferred Stock.
Section 1. Designation and Amount. A total of 3,800,000 shares of the Corporation's Preferred Stock shall be designated as a series known as Series B Convertible Participating Preferred Stock, par value $0.0001 per share (the "Series B Preferred Stock").
Section 2. Dividends and Distributions. The holders of Series B Preferred Stock shall be entitled to receive dividends out of funds legally available therefor at such times and in such amounts as the Board of Directors may determine in its sole discretion; provided, however, that no such dividend may be declared or paid on any shares of Common Stock or Series A Preferred Stock unless at the same time a dividend is declared or paid on all outstanding shares of Series B Preferred Stock, with holders of Series A Preferred Stock, Series B Preferred Stock and Common Stock sharing in any such dividends as, if they constituted a single class of stock and with each holder of shares of Series B Preferred Stock entitled to receive such dividends based on the number of shares of Common Stock into which such shares of Series B Preferred Stock are then convertible in accordance with Section B.6 hereof.
Section 3. Liquidation: Merger, etc.
3.1 Series B Liquidation Preference. Upon any liquidation, dissolution or winding up of the Corporation and its subsidiaries, whether voluntary or involuntary (a "Liquidation Event"), each holder of outstanding shares of Series B Preferred Stock shall be entitled to be paid, on a pari passu basis to the Series A Preferred, before any amount shall be paid or distributed to the holders of the Common Stock and any other capital stock ranking on liquidation junior to the Series B Preferred Stock (the Common Stock and such other capital stock being referred to collectively as, "Junior Stock"), an amount per share of Series B Preferred Stock, payable in cash, equal to the sum of (i) $25.00 plus any declared but unpaid dividends on such shares of Series B Preferred Stock (such amount to be adjusted appropriately for stock splits, stock dividends, recapitalizations and the like) (the "Series B Participation Amount") and (ii) such amount of the remaining assets of the Corporation as would have been payable per share of Series B Preferred Stock had each such share been converted to Common Stock immediately prior to such Liquidation Event pursuant to the provisions of Section B.6 hereof (the sum of (i) and (ii), the "Series B Preference Amounts"); provided, however, that in the event that the Series B Preference Amount determined pursuant to the foregoing formula would result in amount equal to or greater than $100.00 per share (such amount to be adjusted appropriately for stock splits, stock dividends, recapitalizations and the like), the Series B Participation Amount shall be adjusted in a linear fashion such that the adjusted Series B Participation Amount equals the product of (x) the Series B Participation Amount prior to the adjustment and (y) the Adjustment Factor (as defined below). "Adjustment Factor" shall be a
number not less than zero and not greater than one determined by the following formula:
where:
x = the Series B Preference Amount prior to any adjustment to the Series B Participation Amount (but adjusted appropriately for stock splits, stock dividends, recapitalizations and the like);
y = $100.00 per share (adjusted appropriately for stock splits, stock dividends, recapitalizations and the like);
z = $25.00 per share (adjusted appropriately for stock splits, stock dividends, recapitalizations and the like);
If the amounts available for distribution to holders of Series A Preferred Stock and Series B Preferred Stock upon a Liquidation Event are not sufficient to pay all amounts due, such holders shall share ratably in any distribution of assets in proportion to the full respective preferential amounts to which they are entitled.
3.2 Remaining Assets. After the payment of all preferential amounts required to be paid to the holders of the Series B Preferred Stock and any other class or series of stock of the Corporation ranking on liquidation on a parity with the Series B Preferred Stock, the holders of shares of Junior Stock then outstanding shall be entitled to receive the remaining assets and funds of the Corporation available for distribution to its stockholders.
3.3 Amount Payable in Mergers, etc. The holders of not less than a Majority Interest may elect to have treated as a Liquidation Event (i) any merger or consolidation of the Corporation into or with another corporation (except one in which the holders of capital stock of the Corporation immediately prior to such merger or consolidation continue to hold at least a majority of the voting power of the capital stock of the surviving corporation), (ii) any sale of all or substantially all of the assets or capital stock of the Corporation, or (iii) any other transaction by or as a result of which a single person (or group of affiliated persons) newly acquires or holds stock representing a majority of the Corporation's outstanding voting power (a "Change of Control Transaction"). In such event, all consideration payable to the stockholders of the Corporation by the relevant purchaser or the Corporation in connection with a merger, consolidation or Change of Control Transaction, or all consideration payable to the Corporation and distributable to its stockholders, together with all other available assets of the Corporation (net of obligations owed by the Corporation), in the case of an asset sale, shall be paid by the purchaser or distributed by the Corporation in redemption of the Series B Preferred Stock, as applicable, to the holders of capital stock of the Corporation in accordance with the preferences and priorities set forth in Sections B.3.1 and B.3.2 above, with such preferences and priorities specifically intended to be applicable in any such merger, consolidation, asset sale or Change of
Control Transaction as if the same were a Liquidation Event. The Corporation shall promptly provide to the holders of shares of Series B Preferred Stock such information concerning the terms of such merger, consolidation, asset sale or Charge of Control Transaction and the value of the assets of the Corporation as may reasonably be requested by the holders of Series B Preferred Stock. If applicable, the Corporation shall cause the agreement or plan of merger, consolidation or Change of Control Transaction agreement to provide for a rate at which the shares of capital stock of the Corporation are converted into or exchanged for cash, new securities or other property, or redeemed, on a basis which gives effect to the provisions of this Section B.3. The amount deemed distributed to the holders of Series B Preferred Stock upon any such transaction shall be the cash or the value of the property, rights or securities distributed to such holders by the Corporation or the acquiring person, firm or other entity, as applicable; provided, however, that in the event the amount per share to be paid in any such transaction is $25.00 or less (such amount to be adjusted appropriately for stock splits, stock dividends, recapitalizations and the like), such amount shall be paid in cash. The value of such property, rights or other securities shall be determined as provided below in good faith by agreement of the Board of Directors of the Corporation and a Majority Interest. Notwithstanding anything to the contrary contained herein, the holders of shares of Series B Preferred Stock shall have the right to elect by vote of a Majority Interest to give effect o the conversion rights contained in Section B.6 (or by vote of a Majority Interest to give effect to the rights contained in Section B.7.5, if applicable) instead of giving effect to the provisions contained in this Section B.3.3 with respect to the shares of Series B Preferred Stock owned by them. Any election pursuant to this Section B.3.3 shall be made by written notice to the Corporation at least 5 days prior to the closing of the relevant transaction, and any such election shall bind all holders of this Series B Preferred Stock.
For purposes of valuing any securities or other noncash or consideration to be delivered to the holders of the Series B Preferred Stock any transaction to which this Section B.3 is applicable, the following shall apply:
(i) If traded on a nationally recognized securities exchange or inter-dealer quotation system, the value shall be deemed to be the average of the closing prices of the securities on such exchange or system over the 30-day period ending three (3) business days prior to the closing;
(ii) If traded over-the-counter, the value shall be deemed to be
the average of the closing bid prices over the 30-day period ending three
(3) business days prior to the closing; and
(iii) If there is no active public market, the value shall be the fair market value thereof, as mutually determined by the Corporation and the holders of not less than a Majority Interest; provided that if the Corporation and the holders of a Majority interest are unable to reach agreement, then by independent appraisal by a mutually agreed to investment banker, the fees of which shall be paid by the Corporation.
Section 4. Election of Directors: Voting.
4.1.1 Election of Directors. The holders of outstanding shares of Series B Preferred Stock shall, voting together as a separate class, be entitled to elect one (1) Director of the Corporation. Such Director shall be the candidate receiving the greatest number of affirmative votes (with each holder of Series B Preferred Stock entitled to cast one vote, for or against each candidate with respect to each share of Series B Preferred Stock held by such holder) of the outstanding shares of Series B Preferred Stock (the "Series B Preferred Stock Director Designee"), with votes cast against such candidate and votes withheld having no legal effect. The election of the Series B Preferred Stock Director Designee shall occur (i) at the annual meeting of holders of capital stock, (ii) at any special meeting of holders of capital stock, (iii) at any special meeting of holders of Series B Preferred Stock called by holders of not less than a majority interest of the outstanding shares of the Series B Preferred Stock (a "Majority Interest") or (iv) by the written consent of the holder or holders of not less than a Majority Interest. If at any time when any share of Series B Preferred Stock is outstanding any Series B Preferred Stock Director Designee should cease to be a Director for any reason, the vacancy shall only be filled by the vote or written consent of the holders of the outstanding shares of Series B Preferred Stock, voting together as a separate class, in the manner and on the basis specified above or as otherwise provided by law. The holders of outstanding shares of Series B Preferred Stock shall also be entitled to vote for all other Directors of the Corporation together with holders of all other shares of the Corporation's outstanding capital stock entitled to vote thereon, voting as a single class, with each outstanding share entitled to the same number of votes specified in Section B.4.2. Notwithstanding the foregoing, the holders of outstanding shares of Series B Preferred Stock, may, in their sole discretion, determine to elect no Series B Preferred Stock Director Designee from time to time, and during any such period the Board of Directors nonetheless shall be deemed duly constituted.
4.2 Voting Generally. Each outstanding share of Series B Preferred
Stock shall be entitled to a number of votes equal to the number of shares of
Common Stock into which such share of Series B Preferred Stock is then
convertible pursuant to Section B.6 hereof as of the record date for the vote or
written consent of stockholders, if applicable. Each holder of shares of Series
B Preferred Stock shall be entitled to notice of any stockholder's meeting in
accordance with the by-laws of the Corporation and shall vote with holders of
the Common Stock, voting together as single class, upon all matters submitted to
a vote of stockholders, excluding those matters required to be submitted to a
class or series vote pursuant to the terms hereof (including without limitation,
Section B.8) or by law.
Section 5. Redemption.
5.1 Redemption.
5.1.1 At any time on or after April 15, 2007, upon the election of the holder or holders of not less a Majority Interest, the Corporation shall redeem, out of funds legally available therefor, up to thirty-three and one-third percent (33 1/3%) of the originally issued and outstanding shares of Series B Convertible Preferred Stock held by each holder of Series B Convertible Preferred Stock at such time;
5.1.2 At any time on or after August 25, 2007, upon the election
of the holder or holders of not less than a Majority Interest the
Corporation shall redeem, out of funds legally available therefor, up to
that percentage of outstanding shares of Series B Convertible Preferred
Stock that would, when combined with any prior redemptions pursuant to
Section B.5.1.1 above, result in the redemption by the Corporation of up to
sixty-six and two-thirds percent (66 2/3%) of the originally issued and
outstanding shares of Series B Convertible Preferred Stock held by each
holder of Series B Convertible Preferred Stock at such time; and
5.1.3 At any time on or after August 25, 2008, upon the election
of the holder or holders of not less than a Majority Interest, the
Corporation shall redeem, out of funds legally available therefor, up to
that percentage of outstanding shares of Series B Convertible Preferred
Stock that would, when combined with any prior redemptions pursuant to
Section B.5.1.1 and Section B.5.1.2 above, result in the redemption by the
Corporation of up to one hundred percent (100%) of the outstanding shares
of Series B Convertible Preferred Stock held by each holder of Series B
Convertible Preferred Stock at such time.
The foregoing elections shall be made by such holders giving the Corporation and each of the other holders of Series B Preferred Stock not less than sixty (60) business days prior written notice, which notice shall set forth the date for such redemption and the percentage of such shares of Series B Preferred Stock to be redeemed from each holder (which percentage so elected on each redemption date shall be the same for each holder). The price per share for Series B Preferred Stock in connection with any redemption made pursuant to Section B.5.1 shall equal the Series B Participation Amount (the "Series B Redemption Price").
5.2 Redemption Date and Price Determination. Upon the election of the
holders of not less than a Majority Interest to cause the Corporation to redeem
Series B Preferred Stock pursuant to Section B.5.1, each holder of Series B
Preferred Stock shall be deemed to have elected to cause the applicable
percentage of such shares held by such holder to be so redeemed or to so
participate. The date upon which a redemption is to occur in accordance with
Section B.5.1 shall be specified in the notice of redemption pursuant to Section
B.5.1 and shall be referred to as a "Redemption Date". Subject to Section B.5.3,
the aggregate Series B Redemption Price shall be payable in cash in immediately
available funds to the respective holders on the Redemption Date in the amount
specified in Section B.5.1.
5.3 Insufficient Funds. If the funds of the Corporation legally available for the redemption of shares of Series B Preferred Stock on the Redemption Date are insufficient to redeem the total number of such shares required to be redeemed on such date, the Corporation shall (i) take such action as shall be necessary or appropriate, to the extent reasonably within its control, to remove promptly any impediments to its ability to redeem the total number of shares of Series B Preferred Stock required to be so redeemed, including without limitation, (A) reducing the stated capital of the Corporation or causing a revaluation of the assets of the Corporation under Section 154 of the Delaware General Corporation Law, to the extent permissible under applicable law, to create sufficient surplus to make such
redemption and (B) incurring any indebtedness necessary to make such redemption, and (ii) in any event, use any funds that are legally available to redeem the maximum possible number of such shares from the holders of such shares to be redeemed in proportion to the respective number of such shares that otherwise would have been redeemed if all such shares had been redeemed in full. At any time thereafter when additional funds of the Corporation are legally available for the redemption of such shares of Series B Preferred Stock, such funds will immediately be used to redeem the balance of the shares that the Corporation became obligated to redeem on the Redemption Date (but which it has not yet redeemed) at the Series B Redemption Price.
In the event that the Corporation fails for any reason to redeem shares for which redemption is required pursuant to this Section B.5, including without limitation due to a prohibition of such redemption under the Delaware General Corporation Law, then such shares shall continue to be outstanding and entitled to all of the rights and preferences provided herein, and during the period from the applicable Redemption Date through the date on which such shares are redeemed, the applicable redemption price shall increase at the rate per annum equal to 3% in excess of the rate established from time to time by Citibank, N.A. as its prime rate (the "Prime Rate") providing, however, that in no event shall such interest exceed the maximum permitted rate of interest under applicable law (the "Maximum Permitted Rate"). In the event that fulfillment of any provision hereof results in such rate of interest being in excess of the Maximum Permitted Rate, the obligation to be fulfilled shall automatically be reduced to eliminate such excess; provided, however, that, to the extent permitted by law, any subsequent increase in the Maximum Permitted Rate shall be retroactively effective to the applicable Redemption Date.
5.4 Surrender of Certificates. Each holder of shares of Series B Preferred Stock to be redeemed shall surrender the certificate or certificates representing such shares to the Corporation, duly assigned or endorsed for transfer to the Corporation (or accompanied by duly executed stock powers relating thereto), or, in the event the certificate or certificates are lost, stolen or missing, shall deliver an affidavit or agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection therewith (an "Affidavit of Loss"), at the principal executive office of the Corporation or such other place as the Corporation may from time to time designate by notice to the holders of Series B Preferred Stock, and each surrendered certificate shall be canceled and retired and the Corporation shall thereafter make payment of the applicable Series B Redemption Price by certified check or wire transfer; provided, however, that if the Corporation has insufficient funds legally available to redeem all shares of Series B Preferred Stock required to be redeemed, each such holder shall, in addition to receiving the payment of the portion of the applicable Series B Redemption Price that the Corporation is not prohibited from paying by certified check or wire transfer, receive a new stock certificate for those shares of Series B Preferred Stock not so redeemed.
Section 6. Conversion. The holders of Series B Preferred Stock shall have the following conversion rights:
6.1 Right to Convert. Each share of Series B Preferred Stock shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share and on or prior to the fifth (5th) day prior to a Redemption Date, if any, at the office of the Corporation or any transfer agent for such series, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing $25.00 by the Conversion Price at the time in effect for such series (the "Conversion Rate"). In addition, the holders of shares of Series B Preferred Stock shall be entitled at any time, upon the written election of the holder or holders of not less than a Majority Interest, without the payment of any additional consideration, to cause all (but not less than all) of the outstanding shares of Series B Preferred Stock to be converted into Common Stock on the basis that each outstanding share of Series B Preferred Stock shall be converted into the number of fully paid and nonassessable shares of Common Stock which results from dividing $25.00 by the Conversion Price in effect at the time of such conversion, and upon the election to so convert in the manner and on the basis specified in this sentence, all holders of the Series B Preferred Stock shall be deemed to have elected to voluntarily convert all outstanding shares of Series B Preferred Stock pursuant to this Section B.6.1. The "Conversion Price" per share for shares of Series B Preferred Stock shall be $25.00, subject to adjustment as set forth in Section B.7 for event subsequent to the August 25, 2000.
6.2 Automatic Conversion. All shares of Series B Preferred Stock shall automatically be converted into the right to receive a pro rata portion of the QPO Consideration (as defined below) as of, and in all cases subject to, the closing of the Corporation's first underwritten offering to the public pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"), covering the offer and sale of shares of the Corporation's common stock (i) in which proceeds received by the Corporation (before deduction of underwriter discounts and commissions) equal or exceed $75,000,000, (ii) with respect to which such common stock is listed for trading on either the New York Stock Exchange or the NASDAQ National Market, (iii) at an initial public offering price per share of common stock (before deduction of underwriter discounts and commissions), of not less than $3.00 per share (appropriately adjusted for any stock split, stock dividend, combination, recapitalization and the like) and (iv) in which either (A) the Warrants (as defined below) are purchased by the Corporation or its assignee at the closing of the offering for the Warrant Payment Amount (as defined below) or, at the option of the Corporation (B) the holders of the Warrants are permitted to exercise all of the outstanding Warrants on a net exercise basis and are permitted to sell all such shares of common stock issuable upon such exercise of the Warrants in the offering (a "QPO" or "Qualified Public Offering"). If a closing of a QPO occurs, all outstanding shares of Series B Preferred Stock shall be deemed to have been converted into QPO Consideration immediately prior to such closing. For the avoidance of doubt, if the Corporation's underwritten offering to the public pursuant to an effective registration statement under the Securities Act does not meet the requirements for a QPO set forth above, the shares of Series B Preferred Stock shall remain outstanding and shall not be converted as provided in this Section 6.2 upon the closing of such underwritten offering to the public, and there shall be no adjustment of the Conversion Price pursuant to this Section 6.2 because of the offering and any adjustments required by Section 7 shall be made.
"Warrants" shall mean those certain Common Stock Purchase Warrants entitling the holders to purchase an aggregate of $23,750,000.00 of Common
Stock issued from August to December 2000 in connection with the sale of Series B Preferred Stock, as amended from time to time.
"QPO Consideration" shall mean the QPO Notes (as defined below) and the QPO Shares (as defined below).
"QPO Shares" shall mean a number of duly and validly issued, fully paid and
nonassessable shares of common stock of the Corporation equal to the quotient of
(i) the sum of the Base Share Amount less the aggregate face value of the QPO
Notes, divided by (ii) the initial public offering price per share of common
stock (before deduction of underwriter discounts and commissions).
"Base Share Amount" shall mean the greater of (x) the value the holder of the shares of Series B Stock would have received pursuant to Section 3.1 hereof if a Change of Control Transaction treated as Liquidation Event in the form of a sale of all of the Corporation's stock for cash with the consideration to be paid to the stockholders of the Corporation being equal to the pre-money QPO valuation (as defined below) and (y) the value the holders of the Series B Stock would receive if the Series B Stock converts to Common Stock upon the closing of the QPO using a Conversion Price determined as follows (appropriately adjusted for any stock split, stock dividend, combination, recapitalization and the like):
price per share to the public in Conversion Price the QPO (before deduction of underwriter discounts and commissions) equal to or greater than $3.00 $10.00 and less than $25.00 equal to or greater than $25.00 price per share to the public in and less than $62.50 the QPO divided by 2.5 equal to or greater than $62.50 $25.00 |
"QPO Notes" shall mean unsecured three (3) year term notes issued by the Corporation to the holder of shares of Series B Preferred Stock (the "Payee") with a principal amount equal to the product of (x) the quotient obtained by dividing the number of shares of Series B Preferred Stock converted in a QPO by 3,800,000 and (y) $20,000,000.00, with the following terms and in a form reasonably approved by the holder or holders of a Majority Interest; (i) the indebtedness evidenced by the QPO Note shall be subordinate to the existing and future senior indebtedness of the Corporation, (ii) the indebtedness evidenced by the QPO Note shall be prepayable in whole or part at option of the Corporation without penalty, and (iii) interest on any outstanding principal amount shall be paid in cash annually on the anniversary of the issuance of such note at an interest rate equal to (a) the higher of the short term (3 years or less) applicable federal rate and 4% for the first year, (b) 7% for the second year, and (c) 10% for the third year.
"Warrant Payment Amount" shall mean an amount equal to the product of (x) $23,750,000.00 and (y) the difference between one (1) and the quotient
obtained by dividing the underwriter discount and commission per share in the QPO by the offering price per share to the public in the QPO.
"pre-money QPO valuation" shall mean an amount equal to the product of (x) the number of shares of common stock of the Corporation outstanding immediately prior to the QPO on a fully-diluted basis and (y) the price per share to the public in the QPO (before deduction of underwriter discounts and commissions). For purposes hereof "on a fully-diluted basis" shall mean the common stock equivalents used by the underwriters to determine the offering price per share to the public, including (1) any outstanding shares of preferred stock that are convertible into common stock are considered to be converted on the terms in effect immediately prior to the QPO, (2) shares of common stock issuable upon exercise of the Warrants shall be included only if the Warrants are not purchased by the Corporation or its assignee, (3) shares of common stock issuable upon conversion of outstanding notes or other convertible securities, and (4) shares of common stock issuable upon exercise of in the money stock options using the treasury stock method, shall be deemed to be outstanding.
6.3 Procedure for Conversion.
6.3.1 Voluntary Conversions. Upon election to convert pursuant to
Section B.6.1, the relevant holder of Series B Preferred Stock shall
surrender the certificate or certificates representing the Series B
Preferred Stock being converted to the Corporation, duly assigned or
endorsed for transfer to the Corporation (or accompanied by duly executed
stock powers relating thereto) or shall deliver an affidavit of loss to the
Corporation, at its principal executive office or such other place as the
Corporation may from time to time designate by notice to the holders of the
Series B Preferred Stock. Upon surrender of such certificate(s) or delivery
of an affidavit of loss, the Corporation shall issue and send by hand
delivery, by courier or by first class mail (postage prepaid) to the holder
thereof or to such holder's designee, at the address designated by such
holder, certificates for the number of shares of Common Stock to which such
holder shall be entitled upon conversion. The issuance of certificates for
Common Stock upon conversion of Series B Preferred Stock shall be deemed
effective as of the date of surrender of such Series B Preferred Stock
certificates or delivery of such affidavit of loss and will be made without
charge to the holders of such shares for any issuance tax in respect
thereof or other costs incurred by the Corporation in connection with such
conversion and the related issuance of such stock.
6.3.2 Automatic Conversion. As of the closing of a QPO (the "Automatic Conversion Date"), all outstanding shares of Series B Preferred Stock shall be converted into the right to receive QPO Consideration without any further action by the holders of such shares and whether or not the certificates representing such shares of Series B Preferred Stock are surrendered to the Corporation or its transfer agent. On the Automatic Conversion Date, all rights with respect to the Series B Preferred Stock so converted shall terminate, except any of the rights of the holders thereof upon surrender of their certificate or certificates therefor or delivery of an affidavit of loss thereof to receive QPO Notes and certificates for the number of shares of Common Stock into which such Series B Preferred Stock has
been converted. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. Upon surrender of such certificates, the Warrants or affidavit of loss, the Corporation shall issue and deliver to such holder, promptly (and in any event in such time as is sufficient to enable such holder to participate in such QPO) at such office and in its name as shown on such surrendered certificate or certificates, (1) a QPO Note with a principal amount equal to the product of (x) the quotient obtained by dividing the number of shares of Series B Preferred Stock surrendered by 3,800,000 and (y) $20,000,000.00, (2) certificate or certificates for a number of QPO Shares equal to the product of (x) the quotient obtained by dividing the number of shares of Series B Preferred Stock surrendered by 3,800,000 and (y) the total number of QPO Shares, and (3) certificate or certificates for the number of duly and validly issued, fully paid and nonassessable shares of Common Stock issuable upon the exercise of the Warrant surrendered and not purchased by the Corporation or its assignee in connection with the QPO.
6.4 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 Series B Preferred Stock such number of in shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series B 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 of the then outstanding shares of Series B Preferred Stock, the Corporation will take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose, and to reserve such shares for issuance upon such conversion.
6.5 No Closing of Transfer Books. The Corporation shall not close its books against the transfer of shares of Series B Preferred Stock in any manner that would interfere with the timely conversion of any shares of Series B Preferred Stock.
Section 7. Adjustments.
7.1 Adjustment to the Conversion Price. Except as provided in Section B.7.2 and except in the case of an event described in Section B.7.3, if and whenever after August 30, 2000 (the "Closing Date") the Corporation shall issue or sell, or is, in accordance with this Section B.7.1, deemed to have issued or sold, any shares of Common Stock for a consideration per share less than the Conversion Price in effect immediately prior to the time of such issuance or sale (a "Dilutive Issuance"), then, upon such Dilutive issuance, the Conversion Price shall be reduced as follows:
(X) if such Dilutive Issuance occurs at any time on or prior to August 25, 2001 (except in connection with issuances of shares of Common Stock to strategic investors in a strategic
alliance or other corporate partnering transaction approved by the
Board of Directors of the Corporation, (a "Strategic Investment")
which shall be subject to clause (Y) below), the Conversion Price
shall be reduced to the price so as to be equal to the lowest
consideration per share (determined as provided in Section B.7.1.1,
Section B.7.1.2 or Section B.7.1.5, as applicable) received for each
additional share upon such dilutive issuance.
(Y) if such Dilutive issuance occurs in connection with a
Strategic Investment or at any time after August 25, 2001, the
Conversion Price shall be reduced to the price determined by dividing
(i) an amount equal to the sum of (1) the number of shares of Common
Stock outstanding immediately prior to such issue or sale multiplied
by the then existing Conversion Price and (2) the consideration, if
any, received by the Corporation upon such issue or sale (determined
as set forth below) by (ii) the total number of shares of Common Stock
outstanding immediately prior to such issue or sale plus the number of
shares of Common Stock so issued or sold.
For purposes of this Section B.7.1, the following shall also be applicable:
7.1.1 Issuance of Rights or Options. If the Corporation shall, at any time after the Closing Date, in any manner grant (whether directly or by assumption in a merger or otherwise) any warrants or other rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock (such warrants, rights or options being called "Options" and such convertible or exchangeable stock or securities being called "Convertible Securities"), in each case for consideration per share (determined, as provided in this paragraph and in Section B.7.1.5 less than the Conversion Price, whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options, or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon exercise of such Options, shall be deemed to have been issued as of the date of granting of such Options (and thereafter shall be deemed to be outstanding), at a price per share equal to the amount determined by dividing (A) the total amount, if any, received or receivable by the Corporation as consideration for the granting of such Options, plus the minimum aggregate amount of additional consideration payable to the Corporation upon the exercise of all such Options, plus, in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (B) the total maximum number of shares of Common Stock deemed to have been so issued. Except as otherwise provided in Section B.7.1.3, no adjustment of the Conversion Price shall be made upon the actual issue of such Common Stock or of such Convertible Securities upon exercise of such Options or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities.
7.1.2 Issuance Convertible Securities. If the Corporation shall, at any time after the Closing Date, in any manner issue or sell any Convertible Securities for consideration per share (determined as provided in this paragraph and in Section B.7.1.5 less than the Conversion Price, whether or not the rights to exchange or convert any such Convertible Securities are immediately exercisable, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed to have been issued, as of the date of the issue or sale of such Convertible Securities (and thereafter shall be deemed to be outstanding), at a price per share equal to the amount determined by dividing (A) the total amount received or receivable by the Corporation as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the conversion or exchange thereof, by (B) the total maximum number of shares of Common Stock deemed to have been so issued; provided, that (1) except as otherwise provided in Section B.7.13, no adjustment of the Conversion Price shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities and (2) if any such issue or sale of such Convertible Securities is made upon exercise of any Options to purchase any such Convertible Securities, no further adjustment of the Conversion Price shall be made by reason of such issue or sale.
7.1.3 Change in Option Price or Conversion Rate. If there shall occur a change in (A) the maximum number of shares of Common Stock issuable in connection with any Option referred to in Section B.7.1 or any Convertible Securities referred to in Section B.7.1 or 2, (B) the purchase price provided for in any Option referred to in Section B.7.1, (C) the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in Section B.7.1 or 2 or (A) the rate at which Convertible Securities referred to in Section B.7.1 or (2) are convertible into or exchangeable for Common Stock (in each case, other than in connection with an event described in Section B.7.2, then the Conversion Price in effect at the time of such event shall be readjusted to the Conversion Price that would have been in effect at such time had such Options or Convertible Securities that are still outstanding provided for such changed maximum number of shares, purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold, but only if as a result of such adjustment the Conversion Price then in effect is thereby reduced; and on the termination or repricing of any such Option or any such right to convert or exchange such Convertible Securities, the Conversion Price then in effect hereunder shall be increased to the Conversion Price that would have been in effect at the time of such termination or repricing had such Option or Convertible Securities, to the extent outstanding immediately prior to such termination (i.e., to the extent that fewer than the number of shares of Common Stock deemed to have been issued in connection with such Option or Convertible Securities were actually issued), never been issued or issued at such higher price, as the case may be.
7.1.4 Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time shall
make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities or other property of the Corporation other than shares of Common Stock then and in each such event provision shall be made so that the holders of the Series B Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities or other properly of the Corporation that they would have received had the Series B Preferred Stock been converted into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during such period under this paragraph with respect to the rights of the holders of the Series B Preferred Stock; and provided further, however, that no such adjustment shall be made if the holders of Series B Preferred simultaneously receive a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities as they would have received if all outstanding share of Series B Preferred Stock had been converted into Common Stock on the date of such event.
7.1.5 Consideration for Stock. In case any shares of Common Stock shall be issued or sold, or deemed issued or sold, for cash, the consideration received therefor shall be deemed to be the amount received or to be received by the Corporation therefor (determined with respect to deemed issuances and sales in connection with Options and Convertible Securities in accordance with clause (A) of Section B.7.1.1 or 2, as appropriate. In case any shares of Common Stock shall be issued or sold, or deemed issued or sold, for a consideration other than cash, the amount of the consideration other than cash received by the Corporation shall be deemed to be the fair value of such consideration received or to be received by the Corporation (determined with respect to deemed issuances and sales in connection with Options and Convertible Securities in accordance with clause (A) of Section B.7.1.1 or 2 as appropriate) as determined in good faith by the Board of Directors of the Corporation. In case any Options shall be issued in connection with the issue and sale of other securities of the Corporation, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued for such consideration as determined in good faith by the Board of Directors of the Corporation and a Majority Interest.
7.1.6 Record Date. In case the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.
7.1.7 Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Corporation; provided, that the disposition of any such shares shall be considered an issue or sale of Common Stock for the purpose of this Section B.7.
7.2 Certain Issues of Common Stock Excepted. Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Conversion Price in the case of the issuance from and after
the Closing Date of (i) shares of Common Stock upon conversion of shares of
Series A Preferred Stock and Series B Preferred Stock or upon exercise of
warrants to purchase Common Stock outstanding as of August 25, 2000, (ii) shares
issued in exchange for the stock or assets of another company in connection with
the acquisition of or merger into such company; provided, that such actions
shall have been approved by a majority of the members of the Board of Directors,
which shall include the Series B Preferred Stock Director Designee, or (iii) up
to 8,750,000 shares of Common Stock or options therefor (subject to appropriate
adjustment for any stock split, stock dividend or similar event) to directors,
officers, employees or consultants of the Corporation in connection with their
service as directors of the Corporation, their employment by the Corporation or
their retention as consultants by the Corporation or to the National Advisory
Board, in each case authorized by the Board of Directors and issued pursuant to
the Corporation's 2000 Incentive Compensation Plan or any other equity incentive
plan approved by a Majority Interest ("Excluded Shares"), plus such number of
Excluded Shares that are repurchased by the Corporation from such persons after
such Closing Date in accordance with the Corporation's Certificate of
Incorporation, pursuant to contractual rights held by the Corporation and at
repurchase prices not exceeding the respective original purchase prices
(appropriately adjusted to reflect the occurrence of any event described in
Section B.7.3 paid by such persons to the Corporation therefor.
7.3 Subdivision or Combination of Common Stock. In case the Corporation shall at any time after the Closing Date subdivide its outstanding shares of Common Stock into a greater number of shares (by any stock split, stock dividend or otherwise), the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced, and, conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased. In the case of any such subdivision, no further adjustment shall be made pursuant to Section B.7.1.4 by reason thereof.
7.4 Reorganization or Reclassification. If any capital reorganization or reclassification of the capital stock of the Corporation shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, as a condition of such reorganization or reclassification, lawful and adequate provisions shall be made whereby each holder of a share or shares of Series B Preferred Stock shall thereupon have the right to receive, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore receivable upon the conversion of such share or shares of Series B Preferred Stock, as the case may be, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a
number of outstanding shares of such Common Stock equal to the number of shares of such Common Stock immediately theretofore receivable upon such conversion had such reorganization or reclassification not taken place, and in any such case appropriate provisions shall be made with respect to the rights and interests of such holder to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Conversion Price) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise of such conversion rights.
7.5 Adjustment for Merger or Reorganization, etc. In case of any consolidation or merger of the Corporation with or into another corporation or the sale of all or substantially all of the assets of the Corporation to another corporation, each share of Series B Preferred Stock shall thereafter be convertible into the kind and amount of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such Series B Preferred Stock would have been entitled upon such consolidation, merger or sale; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions in Section B.7 set forth with respect to the rights and interests thereafter of the holders of the Series B Preferred Stock, to the end that the provisions set forth in Section B.7 (including provisions with respect to changes in and other adjustments of the Series B Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Series B Preferred Stock Notwithstanding anything to the contrary contained herein, each holder of shares of Series B Preferred Stock shall have the right to elect to give effect to the conversion rights contained in Section B.6 (or the rights contained in Section B.3.3, if applicable) instead of giving effect to the provisions contained in this Section B.7.3 with respect to the shares of Series B Preferred Stock owned by such holder.
Section 8. Covenants. The Corporation shall not (whether by merger, consolidation, operation of law or otherwise), without first having provided written notice of such proposed action to each holder of outstanding shares of Series B Preferred Stock and having obtained the affirmative vote or written consent of the holders of a Majority Interest:
8.1 declare or pay any dividends or make any distributions of cash, property or securities of the Corporation in respect of its capital stock (other than (i) with respect to the Series A Preferred Stock or (ii) dividends that are paid pro rata to the holders of the Series B Preferred Stock), or apply any of its assets to the redemption, retirement, purchase or other acquisition of its capital stock or stock appreciation, phantom stock or similar rights, directly or indirectly, through subsidiaries or otherwise, except for (i) the redemption of Series B Preferred Stock pursuant to and as provided in the Corporation's Certificate of Incorporation, (ii) the repurchase of Excluded Shares pursuant to contractual rights held by the Corporation and at repurchase prices not exceeding the respective original purchase price (appropriately adjusted to reflect the occurrence of any event described in Section B.7.3), or (iii) dividends or distributions payable solely in shares of Common Stock;
8.2 authorize or issue, or obligate itself to issue, any convertible debt or other debt with any equity participation or any other equity security ranking senior to the Series B Preferred Stock as to liquidation, sale or merger preferences, conversion, redemption or dividend rights or with any special voting rights;
8.3 amend, alter or repeal (whether by merger, consolidation,
operation of law or otherwise) any provision of, or add any provision to,
Section B of the Corporation's Certificate of Incorporation or otherwise alter
or change the rights, preferences, privileges or powers of or restrictions
provided for the benefit or, the Series B Preferred Stock;
8.4 otherwise adopt (whether by merger, consolidation, operation of law or otherwise) any amendment to the Corporation's Certificate of Incorporation or by-laws that adversely affects the powers, preferences or material rights of the Series B Preferred Stock or that results in the holders of any other series of preferred stock of the Corporation receiving more value in cash, securities of the Corporation or a combination thereof in a Qualified Public Offering than such holders would have received if a Liquidation Event had occurred under the terms of such preferred stock as they existed on December 21, 2005, assuming the assets of the Corporation are valued at an amount equal to the pre-money IPO valuation for the QPO in such Liquidation Event;
8.5 increase the number of authorized shares of Series B Preferred Stock or reclassify any capital stock;
8.6 change the nature of the business now conducted by the Company;
8.7 effect a recapitalization or reorganization in a form which results in the termination of the Corporation's status as a Corporation under the Internal Revenue Code of 1986, as amended (including without limitation, any reorganization into a limited liability company, a partnership or any other non-corporate entity which is treated as a partnership for federal income tax purposes);
8.8 enter into any agreement to do say of the foregoing that is not expressly made conditional on obtaining the affirmative vote or written consent of a Majority Interest.
Further, the Corporation shall not, by amendment of the Corporation's Certificate of Incorporation or through any Liquidation Event or other reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, agreement 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 and shall at all times in good faith assist in the carrying out of all the provisions of this Article IV and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holders of the Series B Preferred Stock against impairment. Any successor to the Corporation shall agree in writing, as a condition to such succession, to carry out and observe the obligations of the Corporation hereunder with respect to the Series B Preferred Stock.
Section 9. Notice: Adjustment.
9.1 Liquidation Events, Extraordinary Transactions, Etc. In the event
(i) the Corporation establishes a record date to determine the holders of any
class of securities who are entitled to receive any dividend or other
distribution or who are entitled to vote as a meeting (or by written consent) in
connection with any of the transactions identified in clause (ii) hereof, or
(ii) any Liquidation Event, event deemed a Liquidation Event pursuant to Section
B.3.3 hereof, QPO or any other public offering becomes reasonably likely to
occur, the Corporation shall mail or cause to be mailed by first class mail
(postage prepaid) to each holder of Series B Preferred Stock at least thirty
(30) days prior to such record date specified therein or the expected effective
date of any such transaction, whichever is earlier, a notice specifying (A) the
date of such record date for the purpose of such dividend or distribution or
meeting or consent and a description of such dividend or distribution or the
action to be taken at such meeting or by such consent, (B) the date on which any
such Liquidation Event, event deemed a Liquidation Event pursuant to Section
3.3.3 hereof, QPO or other public offering is expected to become effective, and
(C) the date on which the books of the Corporation shall close or a record shall
be taken with respect to any such event. Such notice shall be accompanied by a
certificate prepared by the chief financial officer of the Corporation
describing in detail (1) the facts of such transaction, (2) the amount(s) per
share of Series B Preferred Stock each holder of Series B Preferred Stock would
receive pursuant to the applicable provisions of the Corporation's Certificate
of Incorporation, and (3) the facts upon which such amounts were determined.
9.2 Adjustments; Calculations. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to Section B.7, 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 Series B Preferred Stock a certificate setting forth in detail (i) such adjustment or readjustment, (ii) the Conversion Price before and after such adjustment or readjustment, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of such holder's shares of Series B Preferred Stock. All such calculations shall be made to the nearest cent or to the nearest one hundredth (1/100) of a share as the case may be.
9.3 Waiver of Notice. The holder or holders of a Majority interest may, at my time upon written notice to the Corporation, waive any notice or certificate delivery provisions specified herein for the benefit of such holders, and any such waiver shall be binding upon all holders of such securities.
Section 10. No Reissuance of Series Preferred Stock. No share or shares of Series B Preferred Stock acquired by the Corporation by reason of redemption, purchase, conversion or otherwise shall be reissued, and all such shares shall be canceled, retired and eliminated from the shares which the Corporation shall be authorized to issue.
Section 11. Contractual Rights of Holders. The various provisions set forth herein for the benefit of the holders of the Series B Preferred Stock shall be deemed contract rights enforceable by them, including, without limitation, one or more actions for specific performance.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IPG PHOTONICS CORPORATION
IPG PHOTONICS CORPORATION, (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation (the "Board of Directors") duly adopted resolutions to amend the Certificate of Incorporation of the Corporation, as set forth on Exhibit A hereto
SECOND: That as of the date hereof, the Corporation has received approval of the holders of a majority of the outstanding Series A Convertible Preferred Stock of the Corporation and holders of a majority of the outstanding stock of the Corporation entitled to vote thereon.
THIRD: That the aforesaid amendments were duly adopted by the stockholders of
the Corporation in accordance with the applicable provisions of Section
242 of the General Corporation Law of the State of Delaware by consent
of stockholders in lieu of meeting without a meeting in accordance with
Section 228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I have hereunto set my hand this 6th day of January, 2006.
IPG PHOTONICS CORPORATION
By: /s/ Valentin P. Gapontsev ------------------------------------ Chairman of the Board and Chief Executive Officer |
Exhibit A
RESOLVED, that Article Fourth, Section A.5.4 of the Corporation's Amended
and Restated Certificate of Incorporation be amended by deleting in its entirety
Section A.5.4, and substituting a new Section A.5.4 as follows:
5.4 Conversion Price. In the event of a Qualified IPO, the Conversion Price shall equal the lower of (i) $10.00 per share as adjusted from time to time as set forth below or (ii) the price to the public of a share of Common Stock (before deduction of underwriter discounts and commissions). In all other events, the Conversion Price shall equal $10.00 per share as adjusted from time to time as set forth below.
RESOLVED, that the definition of "Qualified IPO" in Article Fourth, Section
A.7.1 of the Corporation's Amended and Restated Certificate of Incorporation be
amended by deleting such definition its entirety, and substituting a new
definition of "Qualified IPO" in Section A.7.1 as follows:
"Qualified IPO" means the sale of the Common Stock to the public in a firm commitment public offering, pursuant to an effective registration statement under the Securities Act of 1933, as amended (together with any successor thereto, the "Securities Act") in which (i) the gross proceeds from primary shares offered by the Company to equal or exceed $35 million, (ii) the per share price in the initial public offering (before deduction of underwriter discounts and commissions) shall equal or exceed $3.00 per share (appropriately adjusted for any stock split, stock dividend, combination, recapitalization, and the like), and (iii) the common stock is listed for trading on either the New York Stock Exchange or NASDAQ National Market.
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
IPG PHOTONICS CORPORATION
The name of the corporation is IPG Photonics Corporation. The corporation was incorporated under the name IPG Photonics Corporation by the filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware on December 2, 1998. This Amended and Restated Certificate of Incorporation of the corporation, which both restates and further amends the provisions of the corporation's Amended and Restated Certificate of Incorporation, was duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware. The Amended and Restated Certificate of Incorporation of the corporation is hereby amended and restated to read in its entirety as follows:
FIRST: The name of the corporation (the "Corporation") is "IPG Photonics Corporation."
SECOND: The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, Wilmington, Delaware, County of New Castle, and the name of the its registered agent at such address is The Corporation Trust Company.
THIRD: The purpose for which the Corporation is organized is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number shares which the Corporation shall have authority to issue is 180,000,000 shares of which 175,000,000 shares shall be designated Common Stock, par value of $.0001 per share ("Common Stock"), and 5,000,000 shares shall be designated Preferred Stock, par value of $.0001 per share ("Preferred Stock").
The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized to provide for the issuance of shares of Preferred Stock in one or more series and, by filing a certificate pursuant to the applicable law of the State of Delaware (hereinafter referred to as "Preferred Stock Designation"), to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof. The authority of the Board of Directors with respect to each series shall include, but not be limited to, determination of the following:
(a) The designation of the series, which may be by distinguishing number, letter or title.
(b) The number of shares of the series, which number the Board of Directors may thereafter (except where otherwise provided in the Preferred
Stock Designation) increase or decrease (but not below the number of shares thereof then outstanding).
(c) The amounts payable on, and the preferences, if any, of shares of the series in respect of dividends, and whether such dividends, if any, shall be cumulative or noncumulative.
(d) Dates at which dividends, if any, shall be payable.
(e) The redemption rights and price or prices, if any, for shares of the series.
(f) The terms and amount of any sinking fund provided for the purchase or redemption of shares of the series.
(g) The amounts payable on, and the preferences, if any, of shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
(h) Whether the shares of the series shall be convertible into or exchangeable for shares of any other class or series, or any other security, of the Corporation or any other corporation, and, if so, the specification of such other class or series or such other security, the conversion or exchange price or prices or rate or rates, any adjustments thereof, the date or dates at which such shares shall be convertible or exchangeable and all other terms and conditions upon which such conversion or exchange may be made.
(i) Restrictions on the issuance of shares of the same series or of any other class or series.
(j) The voting rights, if any, of the holders of shares of the series.
The Common Stock shall be subject to the express terms of the Preferred Stock and any series thereof. Except as may otherwise be provided in this Amended and Restated Certificate of Incorporation, in a Preferred Stock Designation or by applicable law, the holders of shares of Common Stock shall be entitled to one vote for each such share upon all questions presented to the stockholders, the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, and holders of Preferred Stock shall not be entitled to vote at or receive notice of any meeting of stockholders.
The Corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the Corporation shall have notice thereof, except as expressly provided by applicable law.
FIFTH: In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, it is further provided that:
(a) The Board of Directors of the Corporation is expressly authorized to make, alter and repeal the by-laws of the Corporation, subject to the power of the stockholders of the Corporation to alter or repeal any by-law whether adopted by them or otherwise;
(b) Elections of directors need not be by written ballot unless, and only to the extent, otherwise provided in the by-laws of the Corporation.
(c) The books of the Corporation may be kept outside the State of Delaware at such location or locations as may be designated by the board of directors of the Corporation or in the by-laws of the Corporation.
(d) The number of authorized shares of any class or classes of stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of a majority in voting power of the outstanding capital stock of the Corporation entitled to vote thereon irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of the State of Delaware.
SIXTH: Indemnification and Advancement of Expenses
Section 6.1. Right to Indemnification. 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 (a "Covered 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 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, while a director or officer of the Corporation, 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 nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys' fees) reasonably incurred by such Covered Person. Notwithstanding the preceding sentence, except as otherwise provided in Section 6.3, the Corporation shall be required to indemnify a Covered Person in connection with a proceeding (or part thereof) commenced by such Covered Person only if the commencement of such proceeding (or part thereof) by the Covered Person was authorized in the specific case by the Board of Directors of the Corporation.
Section 6.2. Prepayment of Expenses. The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys' fees) incurred by a Covered Person 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 Covered Person to repay all amounts advanced if it should be ultimately determined that the Covered Person is not entitled to be indemnified under this Article SIXTH or otherwise.
Section 6.3. Claims. If a claim for indemnification (following the final disposition of such action, suit or proceeding) or advancement of
expenses under this Article SIXTH is not paid in full within thirty days after a written claim therefor by the Covered Person has been received by the corporation, the Covered Person 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. In any such action the Corporation shall have the burden of proving that the Covered Person is not entitled to the requested indemnification or advancement of expenses under applicable law.
Section 6.4. Nonexclusivity of Rights. The rights conferred on any Covered Person by this Article SIXTH shall not be exclusive of any other rights which such Covered Person may have or hereafter acquire under any statute, provision of this Amended and Restated Certificate of Incorporation, the by-laws, agreement, vote of stockholders or disinterested directors or otherwise.
Section 6.5. Other Sources. The Corporation's obligation, if any, to indemnify or to advance expenses to any Covered 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 nonprofit entity shall be reduced by any amount such Covered Person may collect as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise.
Section 6.6. Amendment or Repeal. Any repeal or modification of the foregoing provisions of this Article SIXTH shall not adversely affect any right or protection hereunder of any Covered Person in respect of any act or omission occurring prior to the time of such repeal or modification.
Section 6.7. Other Indemnification and Prepayment of Expenses. This Article SIXTH shall not limit the right of the Corporation, to the extent and in the manner permitted by law, to indemnify and to advance expenses to persons other than Covered Persons when and as authorized by appropriate corporate action.
SEVENTH: Board of Directors
(a) The Board of Directors shall consist of at least 1 and not more than 11 members, the number thereof to be determined from time to time by resolution of the Board of Directors. Directors need not be stockholders.
(b) Unless otherwise provided by law or this Amended and Restated Certificate of Incorporation, any newly created directorship or any vacancy occurring in the Board of Directors for any cause shall be filled by a majority of the remaining members of the Board of Directors, although such majority is less than a quorum, and each director so elected shall hold office until the expiration of the term of office of the director whom he or she has replaced or until his or her successor is elected and qualified.
EIGHTH: A director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended. Any
amendment, modification or repeal of the foregoing sentence shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission occurring prior to the time of such amendment, modification or repeal.
NINTH: (a) The Corporation reserves the right at any time, and from time to time, to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of any nature conferred upon stockholders, directors or any other persons by and pursuant to this Amended and Restated Certificate of Incorporation in its present form or as hereafter amended are granted subject to the rights reserved in this article.
(b) Notwithstanding anything to the contrary contained elsewhere in this Amended and Restated Certificate of Incorporation and in addition to any affirmative vote of the holders of any class or series of the Corporation's capital stock required by law or this Amended and Restated Certificate of Incorporation, the affirmative vote of the holders of at least sixty six and two-thirds percent (66 2/3%) in voting power of the shares of the Corporation's outstanding capital stock shall be required in order (i) to alter, amend or repeal any provision of this Amended and Restated Certificate of Incorporation or (ii) for the Corporation's stockholders to alter, amend or repeal any provision of the by-laws.
TENTH: At the first annual meeting of stockholders (the "First Meeting") following the first date that any stockholder (together with its affiliates and associates) which beneficially owned twenty-five percent (25%) or more of the total voting power of the outstanding shares of all classes of capital stock entitled to vote generally in the election of directors of the Corporation on the effective date of this Amended and Restated Certificate of Incorporation ceases at any time to beneficially own at least twenty-five percent (25%) of the total voting power of the outstanding shares of all classes of capital stock entitled to vote generally in the election of directors of the Corporation (and without regard to whether any such stockholder again becomes the beneficial owner of twenty-five percent (25%) or more of such voting power), the directors, other than those who may be elected by the holders of any outstanding series of shares of Preferred Stock, shall be divided into three classes, as nearly equal in number as possible and designated Class I, Class II and Class III. Class I shall be initially elected for a term expiring at the first annual meeting of stockholders following the First Meeting, Class II shall be initially elected for a term expiring at the second annual meeting of stockholders following the First Meeting, and Class III shall be initially elected for a term expiring at the third annual meeting of stockholders following the First Meeting. Effective upon the First Meeting, any director, or the entire Board of Directors, may be removed only for cause by the affirmative vote of the holders of a majority in voting power of the stock issued and outstanding and entitled to vote at an election of directors. Members of each class shall hold office until their successors are elected and qualified or until such director's earlier resignation or removal. At each succeeding annual meeting of the stockholders of the Corporation, the successors of the class of directors whose term expires at that meeting shall be elected for a term
expiring at the annual meeting of stockholders held in the third year following the year of their election. In case of any increase or decrease, from time to time, in the number of directors, other than those who may be elected by the holders of any outstanding series of Preferred Stock or any other series or class of stock as set forth in this Amended and Restated Certificate of Incorporation, the number of directors in each class shall be apportioned as nearly equal as possible. For purposes of this Article TENTH and Article TWELFTH, the term "beneficially own" shall have the meaning set forth in Rule 13d-3 of the Securities Exchange Act of 1934, as amended.
ELEVENTH: The Corporation shall not be governed by Section 203 of the
General Corporation Law of the State of Delaware ("Section 203"), and the
restrictions contained in Section 203 shall not apply to the Corporation, until
the first such time as both of the following conditions exist (if ever): (a)
Section 203 by its terms would, but for the provisions of this Article ELEVENTH,
apply to the Corporation; and (b) any person that owned more than twenty-five
percent (25%) of the outstanding voting stock of the Corporation on the
effective date of this Amended and Restated Certificate of Incorporation ceases
to own more than twenty-five percent (25%) of the outstanding voting stock of
the Corporation. Once the Corporation shall become governed by Section 203
pursuant to the preceding sentence the Corporation shall be governed by Section
203 for so long as Section 203 by its terms shall apply to the Corporation,
regardless of whether any person shall thereafter become the owner of more than
twenty-five percent (25%) of the outstanding voting stock of the Corporation.
For purposes of this Article ELEVENTH, the terms "person", "owners" and "voting
stock" shall have the meanings ascribed to them in Section 203, as Section 203
may be amended from time to time.
TWELFTH: Stockholder Action
(a) Except as otherwise provided for or fixed pursuant to the provisions of Article FOURTH of this Amended and Restated Certificate of Incorporation relating to the rights of holders of any series of Preferred Stock, no action that is required or permitted to be taken by the stockholders of the Corporation at any annual or special meeting of stockholders may be effected by written consent of stockholders in lieu of a meeting of stockholders after such time as any stockholder (together with its affiliates and associates) which beneficially owned at least twenty-five percent (25%) or more of the total voting power of the outstanding shares of all classes of capital stock entitled to vote generally in the election of directors of the Corporation on the effective date of this Amended and Restated Certificate of Incorporation ceases to beneficially own twenty-five percent (25%) or more of the total voting power of the outstanding shares of all classes of capital stock entitled to vote generally in an election of directors (and without regard to whether any such stockholder again becomes the beneficial owner of twenty-five percent (25%) or more of such stock).
(b) Special meetings of stockholders for any purpose or purposes may be called at any time by the board of directors, but such special meetings may not be called by any other person or persons. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.
(c) Advance notice of stockholder nominations for the election of directors and of the proposal by stockholders of any other action to be taken by the stockholders shall be given in such manner as shall be provided in the by-laws of the Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated Certificate of Incorporation this _____ day of ________, 2006.
IPG PHOTONICS CORPORATION
EXHIBIT 3.3
BY-LAWS
OF
IPG PHOTONICS CORPORATION
Adopted as of December 2, 1998
Section 1. Certificate of Incorporation and By-Laws.
1.1 Conflicts. In the event of any conflict between the provisions of these by-laws and the provisions of the certificate of incorporation of IPG Photonics Corporation (the "Corporation"), the provisions of the certificate of incorporation shall govern.
1.2 Reference. In these by-laws, references to the certificate of incorporation and by-laws mean the provisions of the certificate of incorporation of the Corporation and these by-laws, respectively, as from time to time in effect.
Section 2. Offices.
2.1 Registered Office. The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware.
2.2 Other Offices. The Corporation may also have offices at such other places within or without the State of Delaware as the board of directors may from time to time determine or the business of the Corporation may require.
Section 3. Stockholders.
3.1 Location of Meetings. All meetings of stockholders shall be held at such places within or without the State of Delaware as shall be designated from time to time by the board of directors. Any adjourned session of any meeting shall be held at the place designated in the vote of adjournment.
3.2 Annual Meeting. The annual meeting of stockholders shall be held at 10
A.M. on the last Wednesday in March in each year (unless that day shall be a
legal holiday at the location where the meeting is to be held, in which case the
meeting shall be held at 10 A.M. on the next succeeding day that is not a legal
holiday) or at such other time and date as shall be designated from time to time
by the board of directors, at which the stockholders shall elect a board of
directors and transact such other business as may be required by law or these
by-laws or as may otherwise properly come before the meeting.
3.3 Special Meeting in Place of Annual Meeting. If the election of directors shall not be held on the day designated by these by-laws, the directors shall cause the election to be held as soon thereafter as convenient. To that end, if the annual meeting is not held on the day provided in Section 3.2 or if the election of directors is not held at the
annual meeting, a special meeting of the stockholders may be held in place of such omitted meeting or election and any business transacted or election held at such special meeting shall have the same effect as if transacted or held at the annual meeting. In such case all references in these by-laws to the annual meeting of the stockholders, or to the annual election of directors, shall be deemed to refer to or include such special meeting. Any such special meeting shall be called, and the purposes thereof shall be specified in the call, as provided in Section 3.4.
3.4 Notice of Annual Meeting. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. Such notice may specify the business to be transacted and actions to be taken at such meeting. No action shall be taken at such meeting unless such notice is given, or unless waiver of such notice is given by the holders of outstanding stock having not less than the minimum number of votes necessary to take such action at a meeting at which all shares entitled to vote thereon were voted. Prompt notice of all actions taken in connection with such waiver of notice shall be given to all stockholders not present or represented at such meeting.
3.5 Other Special Meeting. Unless otherwise prescribed by law or by the certificate of incorporation, special meetings of the stockholders may be called for any purpose or purposes by the president and shall be called by the president or secretary at the request in writing of a majority of the board of directors or of the holders of at least ten percent of all capital stock of the Corporation issued and outstanding and entitled to vote at such meeting, voting as a class. Such request shall state the purpose or purposes of the proposed meeting and the business to be transacted thereat.
3.6 Notice of Special Meeting. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. No action shall be taken at such meeting unless such notice is given, or unless waiver of such notice is given by the holders of outstanding stock having not less than the minimum number of votes necessary to take such action at a meeting at which all shares entitled to vote thereon were voted. Prompt notice of all actions taken in connection with such waiver of notice shall be given to all stockholders not present or represented at such meeting.
3.7 Stockholder List. The officer who has charge of the stock record books of the Corporation shall prepare and make, at least ten 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. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also 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.
3.8 Quorum of Stockholders. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise required by law, the certificate of incorporation or these by-laws. Except as otherwise provided by law, no stockholder present at a meeting may withhold shares owned by such stockholder from the quorum count by declaring those shares to be absent from the meeting.
3.9 Adjournment. Any meeting of stockholders may be adjourned from time to time to any other time and place at which a meeting of stockholders may be held under these by-laws, which time and place shall be announced at the meeting, by a majority of votes cast upon the question, whether or not a quorum is present. If a quorum shall be present or represented at any adjourned meeting, any business may be transacted that might have been transacted at the original meeting. If the adjournment is for more than thirty days or if a new record date is fixed for the adjourned meeting after the adjournment, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
3.10 Proxy Representation. Any stockholder may authorize another person or persons to act for such stockholder by proxy in all matters in which the stockholder is entitled to participate, whether by waiving notice of any meeting, objecting to or voting or participating at a meeting, or expressing consent or dissent without a meeting. Every proxy must be signed by the stockholder or the stockholder's attorney-in-fact. No proxy shall be voted or acted upon after three years from its date unless such proxy provides for a longer period. Except as provided by law, a revocable proxy shall be deemed revoked if the stockholder is present at the meeting for which the proxy was given. A duly executed proxy shall be irrevocable if it states that it is irrevocable and, if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. The authorization of a proxy may but need not be limited to specified action, provided, however, that if a proxy limits its authorization to a meeting or meetings of stockholders, unless otherwise specifically provided such proxy shall entitle the holder thereof to vote at any adjourned session but shall not be valid after the final adjournment thereof.
3.11 Inspectors. The directors or the person presiding at the meeting may,
but need not, appoint one or more inspectors of election and any substitute
inspectors to act at the meeting or any adjournment thereof. Before entering
upon the discharge of the duties of inspector, each inspector shall take and
sign an oath to execute faithfully the duties of inspector at such meeting with
strict impartiality and according to the best of the inspector's ability. The
inspectors, if any, shall (a) determine the number of shares of stock
outstanding and the voting power of each, the shares of stock represented at the
meeting, the existence of a quorum and the validity and effect of proxies, and
(b) receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such acts as are proper
to conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspectors shall make a report in
writing of any challenge, question or matter determined by them and execute a
certificate of any fact found by them.
3.12 Action by Vote. When a quorum is present at any meeting, whether an original or adjourned session, a plurality of the votes properly cast for election to any office shall elect to such office and a majority of the votes properly cast upon any question other than an election to an office shall decide such question, except when a larger vote is required by law, the certificate of incorporation or these by-laws. No ballot shall be required for any election unless requested by a stockholder present or represented at the meeting and entitled to vote in the election.
3.13 Action Without Meetings. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders, or any action that may be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent 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.
Section 4. Directors.
4.1 Number. The number of directors constituting the whole board of directors shall not be less than one nor more than twelve. Within the foregoing limits, the stockholders at the annual meeting shall determine the number of directors, and within such limits, the number of directors may be increased or decreased at any time or from time to time by the stockholders or by the directors by vote of a majority of directors then in office, except that any such decrease by vote of the directors shall only be made to eliminate vacancies existing by reason of the death, resignation or removal of one or more directors. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 4.4 of these by-laws. Directors need not be stockholders.
4.2 Tenure. Except as otherwise provided by law, the certificate of incorporation or these by-laws, each director shall hold office until the next annual meeting and until a successor is elected and qualified, or until such director sooner dies, resigns, is removed or becomes disqualified.
4.3 Powers. The business of the Corporation shall be managed by or under the direction of the board of directors, which shall have and may exercise all the powers of the Corporation and do all such lawful acts and things as are not by law, the certificate of incorporation or these by-laws directed or required to be exercised or done by the stockholders.
4.4 Vacancies. Newly created directorships resulting from any increase in the number of directors and other vacancies may be filled by vote of the stockholders at a meeting called for the purpose, or by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. When one or more directors shall resign from the board of directors, effective at a future date, a majority of the directors then in office, including those who have resigned, shall have power to fill such vacancy or vacancies, the vote or action by writing thereon to take effect when such resignation or resignations shall become effective. The directors shall have and may exercise all their powers notwithstanding the existence of
one or more vacancies in their number, subject to any requirements of law or of the certificate of incorporation or of these by-laws as to the number of directors required for a quorum or for any vote or other actions.
4.5 Committees. The board of directors may, by vote of a majority of the whole board, (a) designate, change the membership of or terminate the existence of any committee or committees, each committee to consist of one or more of the directors; (b) designate one or more directors as alternate members of any such committee who may replace any absent or disqualified member at any meeting of the committee; and (c) determine the extent to which each such committee shall have and may exercise the powers and authority of the board of directors in the management of the business and affairs of the Corporation, including the power to authorize the seal of the Corporation to be affixed to all papers that require it and the power and authority to declare dividends or to authorize the issuance of stock; excepting, however, such powers that by law, the certificate of incorporation or these by-laws they are prohibited from so delegating. In the absence or disqualification of any member of such committee and such member's alternate, if any, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Except as the board of directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the board or such rules, its business shall be conducted as nearly as may be in the same manner as is provided by these by-laws for the conduct of business by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors upon request.
4.6 Regular Meeting. Regular meetings of the board of directors may be held without call or notice at such place within or without the State of Delaware and at such times as the board may from time to time determine, provided that notice of the first regular meeting following any such determination shall be given to absent directors. A regular meeting of the directors may be held without call or notice immediately after and at the same place as the annual meeting of the stockholders.
4.7 Special Meetings. Special meetings of the board of directors may be held at any time and at any place within or without the State of Delaware designated in the notice of the meeting, when called by the president, or by one-third or more in number of the directors, reasonable notice thereof being given to each director by the secretary or by the president or by any one of the directors calling the meeting.
4.8 Notice. It shall be reasonable and sufficient notice to a director to send notice by mail at least forty-eight hours or by telegram at least twenty-four hours before the meeting, addressed to the director at the director's usual or last known business or residence address or to give notice to the director in person or by telephone at least twenty-four hours before the meeting. Notice of a meeting need not be given to any director if a written waiver of notice, executed by the director before or after the meeting, is filed with the records of the meeting, or to any director who attends the meeting without protesting prior thereto or at its commencement the lack of notice to the director. Neither notice of a meeting nor a waiver of a notice need specify the purposes of the meeting.
4.9 Quorum. Except as may be otherwise provided by law, the certificate of incorporation or these by-laws, at any meeting of the directors a majority of the directors then in office shall constitute a quorum; a quorum shall not in any case be less than one-third of the total number of directors constituting the whole board. Any meeting may be adjourned from time to time by a majority of the votes cast upon the question, whether or not a quorum is present, and the meeting may be held as adjourned without further notice.
4.10 Action by Vote. Except as may be otherwise provided by law, the certificate of incorporation or these by-laws, when a quorum is present at any meeting the vote of a majority of the directors present shall be the act of the board of directors.
4.11 Action Without a Meeting. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting if all the members of the board or of such committee, as the case may be, consent thereto in writing, and such writing or writings are filed with the records of the meetings of the board or of such committee. Such consent shall be treated for all purposes as the act of the board or of such committee, as the case may be.
4.12 Participation in Meetings by Conference Telephone. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the board of directors or of any committee thereof may participate in a meeting of such board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Such participation shall constitute presence in person at such meeting.
4.13 Compensation. Unless otherwise restricted by the certificate of incorporation or these by-laws, the board of directors shall have the authority to fix from time to time the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and the performance of their responsibilities as directors and may be paid a fixed sum for attendance at each meeting of the board of directors and/or a stated salary as director. No such payment shall preclude any director from serving the Corporation or its parent or subsidiary corporations in any other capacity and receiving compensation therefor. The board of directors may also allow compensation for members of special or standing committees for service on such committees.
4.14 Interested Directors and Officers.
(a) No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of the Corporation's directors or officers are directors or officers or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board or committee thereof that authorizes the contract or transaction, or solely because the vote of any such person is counted for such purpose, if:
(1) the material facts as to the relationship or interest of the director or officer and the contract or transaction are disclosed or known to the board of directors or the committee, and the board or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors do not constitute a quorum;
(2) the material facts as to the relationship or interest of the director or officer and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or
(3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the board of directors, a committee thereof, or the stockholders.
(b) Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee that authorizes the contract or transaction.
4.15 Resignation or Removal of Directors. Unless otherwise restricted by law or the certificate of incorporation, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the stock issued and outstanding and entitled to vote at an election of directors. Any director may resign at any time by delivering a resignation in writing to the president or the secretary or to a meeting of the board of directors. Such resignation shall be effective upon receipt unless specified to be effective at some other time; and without in either case the necessity of its being accepted unless the resignation shall so state. No director resigning and (except where a right to receive compensation shall be expressly provided in a duly authorized written agreement with the Corporation) no director removed shall have any right to receive compensation as such director for any period following the director's resignation or removal, or any right to damages on account of such removal, whether the director's compensation be by the month or by the year or otherwise; unless in the case of a resignation, the directors, or in the case of removal, the body acting on the removal, shall in their or its discretion provide for compensation.
Section 5. Notices.
5.1 Form of Notice. Whenever, under the provisions of law, or of the certificate of incorporation or of these by-laws, notice is required to be given to any director or stockholder, such notice may be given by mail, addressed to such director or stockholder, at the director's or stockholder's address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Unless written notice by mail is required by law, written notice may also be given by telegram, cable, facsimile, commercial delivery service, telex or similar means, addressed to such director or stockholder at the address thereof as such address appears on the records of the Corporation, in which case such notice shall be deemed to be given when delivered into the control of the persons charged with effecting such transmission, the transmission charge to be paid by the Corporation or the person sending such notice and not by the addressee. Oral
notice or other in-hand delivery (in person or by telephone) shall be deemed given at the time it is actually given.
5.2 Waiver of Notice. Whenever notice is required to be given under the provisions of law, the certificate of incorporation or these by-laws, a written waiver thereof, signed 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 meeting of the stockholders, directors or members of a committee of the board of directors need be specified in any written waiver of notice.
Section 6. Officers and Agents.
6.1 Enumeration; Qualification. The officers of the Corporation shall be a president, a treasurer, a secretary and such other officers, if any, as the board of directors from time to time may in its discretion elect or appoint, including without limitation one or more vice presidents. Any officer may be, but none need be, a director or stockholder. Any two or more offices may be held by the same person. Any officer may be required by the board of directors to secure the faithful performance of the officer's duties to the Corporation by giving bond in such amount and with sureties or otherwise as the board of directors may determine.
6.2 Powers. Subject to law, the certificate of incorporation and these by-laws, each officer shall have, in addition to the duties and powers herein set forth, such duties and powers as are commonly incident to the officer's office and such additional duties and powers as the board of directors may from time to time designate.
6.3 Election. The board of directors at its first meeting after each annual meeting of stockholders shall choose a president, a secretary and a treasurer. Other officers may be appointed by the board of directors at such meeting, at any other meeting or by written consent. At any time or from time to time, the directors may delegate to any officer their power to elect or appoint any other officer or any agents.
6.4 Tenure. Each officer shall hold office until the first meeting of the board of directors following the next annual meeting of the stockholders and until a successor is elected and qualified unless a shorter period shall have been specified in terms of the officer's election or appointment, or in each case until the officer sooner dies, resigns, is removed or becomes disqualified. Each agent of the Corporation shall retain authority at the pleasure of the directors, or the officer by whom the agent was appointed or by the officer who then holds agent appointive power.
6.5 President and Vice Presidents.
(a) Except as determined by the board of directors, the president shall be the chief executive officer and shall have direct and active charge of all business operations of the Corporation and shall have general supervision of the entire business of the Corporation, subject to the control of the board of directors. The president shall preside at all
meetings of the stockholders and of the board of directors at which he or she is present, except as otherwise voted by the board of directors.
(b) The president or treasurer shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the Corporation.
(c) Any vice presidents shall have such duties and powers as shall be designated from time to time by the board of directors or the president.
6.6 Treasurer and Assistant Treasurers.
(a) Except as determined by the board of directors, the treasurer shall be the chief financial officer of the Corporation and shall be in charge of its funds and valuable papers, and shall have such other duties and powers as may be assigned to the treasurer from time to time by the board of directors or the president.
(b) Any assistant treasurers shall have such duties and powers as shall be designated from time to time by the board of directors, the president or the treasurer.
6.7 Secretary and Assistant Secretaries.
(a) The secretary shall record all proceedings of the stockholders, the board of directors and committees of the board of directors in a book or series of books to be kept therefor and shall file therein all writings of, or related to, action by stockholder or director consent. In the absence of the secretary from any meeting, an assistant secretary, or if there is none or each assistant secretary is absent, a temporary secretary chosen at the meeting, shall record the proceedings thereof. Unless a transfer agent has been appointed, the secretary shall keep or cause to be kept the stock and transfer records of the Corporation, which shall contain the names and record addresses of all stockholders and the number of shares registered in the name of each stockholder. The secretary shall have such other duties and powers as may from time to time be designated by the board of directors or the president.
(b) Any assistant secretaries shall have such duties and powers as shall be designated from time to time by the board of directors, the president or the secretary.
6.8 Resignation and Removal. Any officer may resign at any time by delivering a resignation in writing to the president, the secretary or a meeting of the board of directors. Such resignation shall be effective upon receipt unless specified to be effective at some other time, and without in any case the necessity of its being accepted unless the resignation shall so state. The board of directors may at any time remove any officer either with or without cause. The board of directors may at any time terminate or modify the authority of any agent. No officer resigning and (except where a right to receive compensation shall be expressly provided in a duly authorized written agreement with the Corporation) no officer removed shall have any
right to any compensation as such officer for any period following the officer's resignation or removal, or any right to damages on account of such removal, whether the officer's compensation be by the month or by the year or otherwise; unless in the case of a resignation, the directors, or in the case of removal, the body acting on the removal, shall in their or its discretion provide for compensation.
6.9 Vacancies. If the office of the president or the treasurer or the secretary becomes vacant, the directors may elect a successor by vote of a majority of the directors then in office. If the office of any other officer becomes vacant, any person or body empowered to elect or appoint that office may choose a successor. Each such successor shall hold office for the unexpired term of the predecessor, and in the case of the president, the treasurer and the secretary until a successor is chosen and qualified, or in each case until such officer sooner dies, resigns, is removed or becomes disqualified.
Section 7. Capital Stock.
7.1 Stock Certificates. Each stockholder shall be entitled to a certificate stating the number and the class and the designation of the series, if any, of the shares held by the stockholder, in such form as shall, in conformity to law, the certificate of incorporation and the by-laws, be prescribed from time to time by the board of directors. Such certificate shall be signed by (a) the president or a vice-president and (b) the treasurer, an assistant treasurer, the secretary or an assistant secretary. Any of the signatures on the certificate may be facsimiles. In case an officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on such certificate shall have 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 the signatory were such officer, transfer agent, or registrar at the time of its issue.
7.2 Lost Certificates. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or such owner's legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 8. Transfer of Shares of Stock
8.1 Transfer on Books.
(a) Subject to any restrictions with respect to the transfer of shares of stock, shares of stock may be transferred on the books of the Corporation by the surrender to the Corporation or its transfer agent of the certificate therefor properly endorsed or accompanied by a written assignment and power of attorney properly executed, with necessary transfer stamps
affixed, and with such proof of the authenticity of signature as the board of directors or the transfer agent of the Corporation may reasonably require. Except as may be otherwise required by law, the certificate of incorporation or these by-laws, the Corporation shall be entitled to treat the record holder of stock as shown on its books as the owners of such stock for all purposes, including the payment of dividends and the right to receive notice and to vote or to give any consent with respect thereto and to be held liable for such calls and assessments, if any, as may lawfully be made thereon, regardless of any transfer, pledge or other disposition of such stock until the shares have been properly transferred on the books of the Corporation.
(b) It shall be the duty of each stockholder to notify the Corporation of the stockholder's post office address.
Section 9. General Provisions.
9.1 Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or adjournment thereof, or 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 of directors may fix, in advance, a record date, which shall not be more than sixty days nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action to which such record date relates. 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 of directors may fix a new record date for the adjourned meeting. If no record date is fixed:
(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 of directors is necessary, shall be the day on which the first written consent is expressed; and
(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 of directors adopts the resolution relating to such purpose.
9.2 Dividend. Dividends upon the capital stock of the Corporation may be declared by the board of directors at any regular or special meeting or by written consent, pursuant to law. Dividends may be paid in cash, property or shares of the capital stock, subject to the provisions of the certificate of incorporation.
9.3 Payment of Dividends. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.
9.4 Checks. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate.
9.5 Fiscal Year. The fiscal year of the Corporation shall begin on the first of January in each year and shall end on the last day of December next following, unless otherwise determined by the board of directors.
9.6 Seal. The board of directors may, by resolution, adopt a corporate seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the word "Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. The seal may be altered from time to time by the board of directors.
Section 10. Indemnification.
It being the intent of the Corporation to provide maximum protection available under the law to its officers and directors, the Corporation shall indemnify its officers and directors to the full extent the Corporation is permitted or required to do so by the General Corporation Law of Delaware.
Section 11. Amendments.
These by-laws may be altered, amended or repealed or new by-laws may be adopted by the stockholders or by the board of directors when such power is conferred upon the board of directors by the certificate of incorporation, at any regular meeting of the stockholders or of the board of directors or at any special meeting of the stockholders or of the board of directors. If the power to adopt, amend or repeal by-laws is conferred upon the board of directors by the certificate of incorporation, it shall not divest or limit the power of the stockholders to adopt, amend or repeal by-laws.
Exhibit 3.4
AMENDED AND RESTATED BY-LAWS
OF
IPG PHOTONICS CORPORATION
Adopted as of _______________, 2006
SECTION I
Certificate of Incorporation and Bylaws
1.1 Conflicts. In the event of any conflict between the provisions of these bylaws and the provisions of the certificate of incorporation of IPG Photonics Corporation (the "Corporation"), the provisions of the certificate of incorporation shall govern.
1.2 References. In these bylaws, references to the certificate of incorporation and bylaws mean the provisions of the certificate of incorporation of the Corporation and these bylaws, respectively, as from time to time in effect.
SECTION II
Offices
2.1 Registered Office. The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware.
2.2 Other Offices. The Corporation may also have offices at such other places within or without the State of Delaware as the board of directors may from time to time determine or the business of the Corporation may require.
SECTION III
Stockholders
3.1 Location of Meetings. All meetings of stockholders shall be held at such place, if any, within or without the State of Delaware, as shall be designated from time to time by the board of directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof.
3.2 Annual Meeting. If required by applicable law, an annual meeting of stockholders shall be held for the election of directors at such date, time and place, if any, either within or without the State of Delaware, as may be designated by resolution of the Board of Directors from time to time. Any other proper business may be transacted at the annual meeting.
3.3 Notice of Meeting. Whenever stockholders are required or permitted to take any action at a meeting, a notice of meeting shall be given that shall state the place, if any, date and hour of the meeting, the means of remote communication, if any, by which the stockholders or 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. Unless otherwise provided by law, the certificate of incorporation or these bylaws, the notice of any meeting shall be given 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.
3.4 Stockholder List. The officer who has charge of the stock ledger 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. 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, either (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of meeting or (b) at the principal place of business of the Corporation during the Corporation's ordinary business hours. If the meeting is to be held at a place, the list shall also 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.
3.5 Quorum of Stockholders. The holders of a majority of the voting power of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise required by law, the certificate of incorporation or these bylaws.
3.6 Adjournment. Any meeting of stockholders, annual or special, may be adjourned from time to time to reconvene at the same or some other place, if any, and notice need not be given of any such adjourned meeting if the time and place, if any, or means of remote communication, if any, thereof 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 more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
3.7 Inspectors of Election. The Corporation may, and shall if required by law, in advance of any meeting of stockholders, appoint one or more inspectors of election who may be employees of the Corporation, to act at the meeting or any adjournment thereof and to make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. In the event that no inspector so appointed or designated is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. 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. The inspector or inspectors so appointed or designated shall (i) ascertain the number of shares of capital stock of the Corporation outstanding and the voting power of each such share, (ii) determine the shares of capital stock of the Corporation 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 represented at the meeting and such inspectors' count of all votes and ballots. Such certification and report 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. No person who is a candidate for an office at an election may serve as an inspector at such election.
3.8 Action by Vote. Except as otherwise provided by or pursuant to the provisions of the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. Voting at meetings of stockholders need not be by written ballot, unless so directed by the chairman of the meeting. At all meetings of stockholders for the election of directors, a plurality of the votes cast shall be sufficient to elect. All other elections and questions shall, unless otherwise provided by the certificate of incorporation, these bylaws, the rules or regulations of any stock exchange or quotation system 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 the holders of a majority in voting power of the shares of stock of the Corporation which are present in person or by proxy and entitled to vote thereon.
3.9 Proxy Representation. Any stockholder may authorize another person or persons to act for such stockholder by proxy in all matters in which the stockholder is entitled to participate, whether by waiving notice of any meeting, objecting to or voting or participating at a meeting, or expressing consent or dissent without a meeting. No proxy shall be voted or acted upon after three years from its date unless such proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and, if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary of the Corporation a revocation of the proxy or a new proxy bearing a later date.
3.10 Action Without Meetings. Unless otherwise restricted in the certificate of incorporation, any action required or permitted to be taken at any annual or special meeting of 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 and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which minutes of proceedings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall, to the extent required by law, 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.
3.11 Conduct of Meetings. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the person presiding over the meeting. 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 inconsistent with such rules and regulations as adopted by the board of directors, the person presiding over any meeting of stockholders shall have the right and authority to convene and to adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such presiding person, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the board of directors or prescribed by the presiding person of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the presiding person of the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (e) limitations on the time allotted to questions or comments by participants. The presiding person at any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such presiding person should so determine, such presiding person shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the board of directors or the person presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.
3.12 Notice of Stockholder Business and Nominations.
(a) Annual Meetings of Stockholders.
(i) Nominations of persons for election to the board of directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders only (A) pursuant to the Corporation's notice of meeting (or any supplement thereto), (B) by or at the direction of the board of directors or (C) by any stockholder of the Corporation who was a stockholder of record of the Corporation at the time the notice provided for in this Section 3.12 is delivered to the secretary of the Corporation, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 3.12.
(ii) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (C) of paragraph (a)(i) of this Section 3.12, the stockholder must have given timely notice thereof in writing to the secretary of the Corporation and any such proposed business other than the nominations of persons for election to the board of directors must constitute a proper
matter for stockholder action. To be timely, a stockholder's notice shall be delivered to the secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on the ninetieth day nor earlier than the close of business on the one hundred twentieth day prior to the first anniversary of the preceding year's annual meeting (provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, notice by the stockholder must be so delivered not earlier than the close of business on the one hundred twentieth day prior to such annual meeting and not later than the close of business on the later of the ninetieth day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made by the Corporation). In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a stockholder's notice as described above. Such stockholder's notice shall set forth: (A) as to each person whom the stockholder proposes to nominate for election as a director (1) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to and in accordance with Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and (2) such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected; (B) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, 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, the language of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (1) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner, (2) the class and number of shares of capital stock of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner, (3) 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 (4) 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 Corporation's outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (y) otherwise to solicit proxies from stockholders in support of such proposal or nomination. The foregoing notice requirements of this Section 3.12 shall be deemed satisfied by a stockholder if the stockholder has notified the Corporation of his or her intention to present a proposal or nomination at an annual meeting in compliance with applicable rules and regulations promulgated under the Exchange Act and such stockholder's proposal or nomination has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting. The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation.
(iii) Notwithstanding anything in the second sentence of paragraph (a)(ii) of this Section 3.12 to the contrary, in the event that the number of directors to be elected to the board of directors at an annual meeting is increased and there is no public announcement by the Corporation naming the nominees for the additional directorships at least one hundred (100) days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Section 3.12 shall also be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered to the secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the board of directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (i) by or at the direction of the board of
directors or (ii) provided that the board of directors has determined that
directors shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder of record at the time the notice provided for
in this Section 3.12 is delivered to the secretary of the Corporation, who is
entitled to vote at the meeting and upon such election and who complies with the
notice procedures set forth in this Section 3.12. In the event the Corporation
calls a special meeting of stockholders for the purpose of electing one or more
directors to the board of directors, any such stockholder entitled to vote in
such election of directors may nominate a person or persons (as the case may be)
for election to such position(s) as specified in the Corporation's notice of
meeting, if the stockholder's notice required by paragraph (a)(ii) of this
Section 3.12 shall be delivered to the secretary of the Corporation at the
principal executive offices of the Corporation not earlier than the close of
business on the one hundred twentieth day prior to such special meeting and not
later than the close of business on the later of the ninetieth day prior to such
special meeting or the tenth day following the day on which public announcement
is first made of the date of the special meeting and of the nominees proposed by
the board of directors to be elected at such meeting. In no event shall the
public announcement of an adjournment or postponement of a special meeting
commence a new time period (or extend any time period) for the giving of a
stockholder's notice as described above.
(c) General.
(i) Only such persons who are nominated in accordance with the procedures set forth in this Section 3.12 shall be eligible to be elected at an annual or special meeting of stockholders of the Corporation to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 3.12. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty (A) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 3.12 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be,
proxies in support of such stockholder's nominee or proposal in compliance with
such stockholder's representation as required by clause (a)(ii)(C)(4) of this
Section 3.12) and (B) if any proposed nomination or business was not made or
proposed in compliance with this Section 3.12, to declare that such nomination
shall be disregarded or that such proposed business shall not be transacted.
Notwithstanding the foregoing provisions of this Section 3.12, unless otherwise
required by law, if the stockholder (or a qualified representative of the
stockholder) does not appear at the annual or special meeting of stockholders of
the Corporation to present a nomination or proposed business, such nomination
shall be disregarded and 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 3.12, to be considered a qualified
representative of the stockholder, a person 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.
(ii) For purposes of this Section 3.12, "public announcement" shall include disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable 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.
(iii) Notwithstanding the foregoing provisions of this
Section 3.12, a stockholder shall also comply with all applicable requirements
of the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 3.12. Nothing in this Section 3.12 shall be
deemed to affect any rights (A) of stockholders to request inclusion of
proposals or nominations in the Corporation's proxy statement pursuant to
applicable rules and regulations promulgated under the Exchange Act or (B) of
the holders of any series of preferred stock to elect directors pursuant to any
applicable provisions of the certificate of incorporation.
3.13 Fixing Date for Determination of Stockholders of Record. 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 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 of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which record date: (1) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting; (2) in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall not be more than ten (10) days from the date upon which the resolution fixing the record date is adopted by the board of directors; and (3) in the case of any other action, shall not be more than sixty (60) days prior to such other action. If no record date is fixed: (1) 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; (2) the record date
for determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action of the board of directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation in accordance with applicable law, or, if prior action by the board
of directors is required by law, shall be at the close of business on the day on
which the board of directors adopts the resolution taking such prior action; and
(3) the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the board of directors 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 of directors may
fix a new record date for the adjourned meeting.
SECTION IV
Directors
4.1 Number and Tenure. The board of directors shall be constituted as provided in the certificate of incorporation of the Corporation. The directors need not be stockholders. The directors shall be elected at the annual meeting of the stockholders in accordance with the Certificate of Incorporation and shall hold office until their successors are elected and qualified or until such director's earlier resignation or removal.
4.2 Powers. The business of the Corporation shall be managed by or under the direction of the board of directors, which shall have and may exercise all the powers of the Corporation and do all such lawful acts and things as are not by law or the certificate of incorporation directed or required to be exercised or done by the stockholders.
4.3 Vacancies. Unless otherwise provided by law or the certificate of incorporation, any newly created directorship or any vacancy occurring in the board of directors for any cause shall be filled by a majority of the remaining members of the board of directors, although such majority is less than a quorum, and each director so elected shall hold office until the expiration of the term of office of the director whom he or she has replaced or until his or her successor is elected and qualified. When one or more directors shall resign from the board of directors, effective at a future date, a majority of the directors then in office, including those who have resigned, shall have power to fill such vacancy or vacancies, the vote or action by writing thereon to take effect when such resignation or resignations shall become effective. The directors shall have and may exercise all their powers notwithstanding the existence of one or more vacancies in their number, subject to any requirements of law or of the certificate of incorporation or of these bylaws as to the number of directors required for a quorum or for any vote or other actions.
4.4 Committees. The board of directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The board of directors 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 the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent permitted by law and to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors 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 which may require it. Except as the board of directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the board of directors or such rules, its business shall be conducted as nearly as may be in the same manner as is provided by these bylaws for the conduct of business by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors upon request.
4.5 Regular Meeting. Regular meetings of the board of directors may be held at such place within or without the State of Delaware and at such times as the board of directors may from time to time determine. A regular meeting of the directors may be held immediately after and at the same place as the annual meeting of the stockholders.
4.6 Special Meetings. Special meetings of the board of directors may be held at any time and at any place within or without the State of Delaware designated in the notice of the meeting, when called by the chairman of the board of directors, the president, or by one-third or more in number of the directors, reasonable notice thereof being given to each director by the secretary, the chairman of the board of directors, the president or by any one of the directors calling the meeting.
4.7 Notice. It shall be reasonable and sufficient notice to a director to send notice by mail at least forty-eight hours or by telecopier or other means of electronic transmission at least twenty-four hours before the meeting, addressed to the director at the director's usual or last known business or residence address or to give notice to the director in person or by telephone at least twenty-four hours before the meeting. Notice of a meeting need not be given to any director if a waiver of notice, given by the director before or after the meeting, is filed with the records of the meeting, or to any director who attends the meeting without protesting prior thereto or at its commencement to the transaction of business because the meeting is not lawfully called or convened. Neither notice of a meeting nor a waiver of a notice need specify the purposes of the meeting.
4.8 Quorum. Except as may be otherwise provided by law, the certificate of incorporation or these bylaws, at any meeting of the directors a majority of the directors then in office shall constitute a quorum; a quorum shall not in any case be less than one-third of the total number of directors constituting the whole board. Any meeting may be adjourned from time to time by a majority of the votes cast upon the question, whether or not a quorum is present, and the meeting may be held as adjourned without further notice.
4.9 Action by Vote. Except as may be otherwise provided by law, the certificate of incorporation or these bylaws, when a quorum is present at any meeting, the vote of a majority of the directors present shall be the act of the board of directors.
4.10 Action 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 of directors or of any committee thereof may be taken without a meeting if all the members of the board or of such committee, as the case may be, consent thereto in writing or by electronic transmission or transmissions, and such writing or writings or electronic transmission or transmissions are filed with the records of the meetings of the board of directors or of such committee. Such consent shall be treated for all purposes as the act of the board of directors or of such committee, as the case may be.
4.11 Participation in Meetings by Conference Telephone. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors or of any committee thereof may participate in a meeting of such board of directors or committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other. Such participation shall constitute presence in person at such meeting.
4.12 Compensation. Unless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors or a committee of the board of directors shall have the authority to fix from time to time the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and the performance of their responsibilities as directors and may be paid a fixed sum for attendance at each meeting of the board of directors and/or a stated salary as director. No such payment shall preclude any director from serving the Corporation or its parent or subsidiary corporations in any other capacity and receiving compensation therefor. The board of directors may also allow compensation for members of special or standing committees for service on such committees.
4.13 Resignation or Removal of Directors. Unless otherwise provided by law or the certificate of incorporation, any director or the entire board of directors may be removed, with or without cause, by the affirmative vote of the holders of a majority in voting power of the stock issued and outstanding and entitled to vote at an election of directors. Any director may resign at any time by delivering a resignation in writing or by electronic transmission to the chairman of the board of directors, the president or the secretary or to a meeting of the board of directors. Such resignation shall be effective upon receipt unless specified to be effective at some other time; and without in either case the necessity of its being accepted unless the resignation shall so state. No director resigning and (except where a right to receive compensation shall be expressly provided in a duly authorized written agreement with the Corporation) no director removed shall have any right to receive compensation as such director for any period following the director's resignation or removal, or any right to damages on account of such removal, whether the director's compensation be by the month or by the year or otherwise; unless in the case of a resignation, the directors, or in the case of removal, the body acting on the removal, shall in their or its discretion provide for compensation.
SECTION V
Notices
5.1 Form of Notice. Whenever, under the provisions of law, or of the certificate of incorporation or of these bylaws, notice is required to be given to any director or stockholder, such notice may be given by mail, addressed to such director or stockholder, at the director's or stockholder's address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Except as otherwise provided by law notice may also be given by telegram, cable, facsimile, commercial delivery service, telex or other means of electronic transmission, addressed to such director or stockholder at the address thereof as such address appears on the records of the Corporation, in which case such notice shall be deemed to be given when delivered into the control of the persons charged with effecting such transmission, the transmission charge to be paid by the Corporation or the person sending such notice and not by the addressee. Oral notice or other in-hand delivery (in person or by telephone) shall be deemed given at the time it is actually given.
5.2 Waiver of Notice. Whenever notice is required to be given under the provisions of law, the certificate of incorporation or these bylaws, a waiver thereof, given 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 meeting of the stockholders, directors or members of a committee of the board of directors need be specified in any waiver of notice.
SECTION VI
Officers and Agents
6.1 Enumeration; Qualification. The officers of the Corporation shall consist of a chairman of the board of directors, a president, a treasurer, a secretary and such other officers, if any, as the board of directors from time to time may in its discretion elect or appoint, including without limitation one or more vice presidents. Any officer may be, but none need be, a director or stockholder, except that the chairman shall be a member of the board of directors. Any two or more offices may be held by the same person. Any officer may be required by the board of directors to secure the faithful performance of the officer's duties to the Corporation by giving bond in such amount and with sureties or otherwise as the board of directors may determine.
6.2 Powers. Subject to law, the certificate of incorporation and these bylaws, each officer shall have, in addition to the duties and powers herein set forth, such duties and powers as are commonly incident to the officer's office and such additional duties and powers as the board of directors may from time to time designate.
6.3 Election. The board of directors at its first meeting after each annual meeting of stockholders shall choose a chairman, a president, a secretary and a treasurer. Other officers may be appointed by the board of
directors at such meeting, at any other meeting or by written consent. At any time or from time to time, the directors may delegate to any officer their power to elect or appoint any other officer or any agents.
6.4 Tenure. Each officer shall hold office until the first meeting of the board of directors following the next annual meeting of the stockholders and until a successor is elected and qualified unless a shorter period shall have been specified in terms of the officer's election or appointment, or in each case until the officer sooner dies, resigns, is removed or becomes disqualified. Each agent of the Corporation shall retain authority at the pleasure of the directors, or the officer by whom the agent was appointed or by the officer who then holds agent appointive power.
6.5 Chairman, President and Vice Presidents.
(a) The chairman of the board of directors shall be a member of the board of directors, an officer of the Corporation and, if present, shall preside at each meeting of the board of directors and the stockholders. The chairman of the board shall be responsible for the general management of the affairs of the Corporation and shall perform all duties incidental to his office which may be required by law and all such other duties as are properly required of him by the board of directors. Except where by law the signature of the president is required, the chairman of the board of directors shall possess the same power as the president to sign all certificates, contracts, and other instruments of the Corporation which may be authorized by the board of directors.
(b) The president shall act in a general executive capacity and shall assist the chairman of the board in the administration and operation of the Corporation's business and general supervision of its policies and affairs. The president shall, in the absence of or because of the inability to act of the chairman of the board, perform all duties of the chairman of the board and preside at all meetings of stockholders and of the board of directors.
(c) The chairman, president or treasurer shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the Corporation.
(d) Any vice presidents shall have such duties and powers as shall be designated from time to time by the board of directors, the chairman or the president.
6.6 Treasurer and Assistant Treasurers.
(i) Except as determined by the board of directors, the treasurer shall be the chief financial officer of the Corporation and shall be in charge of its funds and valuable papers, and shall have such other duties and powers as may be assigned to the treasurer from time to time by the board of directors, the chairman of the board of directors or the president.
(ii) Any assistant treasurers shall have such duties and powers as shall be designated from time to time by the board of directors, the chairman of the board of directors, the president or the treasurer.
6.7 Secretary and Assistant Secretaries.
(i) The secretary shall record all proceedings of the stockholders, the board of directors and committees of the board of directors in a book or series of books to be kept therefor and shall file therein all writings of, or related to, action by stockholder or director consent. In the absence of the secretary from any meeting, an assistant secretary, or if there is none or each assistant secretary is absent, a temporary secretary chosen at the meeting, shall record the proceedings thereof. Unless a transfer agent has been appointed, the secretary shall keep or cause to be kept the stock and transfer records of the Corporation, which shall contain the names and record addresses of all stockholders and the number of shares registered in the name of each stockholder. The secretary shall have such other duties and powers as may from time to time be designated by the board of directors, the chairman of the board of directors or the president.
(ii) Any assistant secretaries shall have such duties and powers as shall be designated from time to time by the board of directors, the chairman of the board of directors, the president or the secretary.
6.8 Resignation and Removal. Any officer may resign at any time by delivering a resignation in writing to the chairman, the president, the secretary or a meeting of the board of directors. Such resignation shall be effective upon receipt unless specified to be effective at some other time, and without in any case the necessity of its being accepted unless the resignation shall so state. The board of directors may at any time remove any officer either with or without cause. The board of directors may at any time terminate or modify the authority of any agent. No officer resigning and (except where a right to receive compensation shall be expressly provided in a duly authorized written agreement with the Corporation) no officer removed shall have any right to any compensation as such officer for any period following the officer's resignation or removal, or any right to damages on account of such removal, whether the officer's compensation be by the month or by the year or otherwise; unless in the case of a resignation, the directors, or in the case of removal, the body acting on the removal, shall in their or its discretion provide for compensation.
6.9 Vacancies. If the office of the chairman of the board of directors, the president or the treasurer or the secretary becomes vacant, the directors may elect a successor by vote of a majority of the directors then in office. If the office of any other officer becomes vacant, any person or body empowered to elect or appoint that office may choose a successor. Each such successor shall hold office for the unexpired term of the predecessor, and in the case of the chairman of the board of directors, the president, the treasurer and the secretary until a successor is chosen and qualified, or in each case until such officer sooner dies, resigns, is removed or becomes disqualified.
SECTION VII
Capital Stock
7.1 Stock Certificates. The shares of the Corporation shall be represented by certificates, provided that the board of directors may provide by resolution that some or all of any or all classes or series of it stock shall be uncertificated shares. Each stockholder of stock represented by certificates shall be entitled to a certificate stating the number and the class and the designation of the series, if any, of the shares held by the stockholder, in such form as shall, in conformity to law, the certificate of incorporation and the bylaws, be prescribed from time to time by the board of directors. Such certificate shall be signed by (a) the chairman, the president or a vice-president and (b) the treasurer, an assistant treasurer, the secretary or an assistant secretary. Any of the signatures on the certificate may be facsimiles. In case an officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on such certificate shall have 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 the signatory were such officer, transfer agent, or registrar at the time of its issue.
7.2 Lost Certificates. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or such owner's legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.
SECTION VIII
Transfer of Shares of Stock
8.1 Transfer on Books.
(i) Subject to any restrictions with respect to the transfer of shares of stock, shares of stock may be transferred on the books of the Corporation by the surrender to the Corporation or its transfer agent of the certificate therefor properly endorsed or accompanied by a written assignment and power of attorney properly executed, with necessary transfer stamps affixed, and with such proof of the authenticity of signature as the board of directors or the transfer agent of the Corporation may reasonably require. Except as may be otherwise required by law, the certificate of incorporation or these bylaws, the Corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to receive notice and to vote or to give any consent with respect thereto and to be held liable for such calls and assessments, if any, as may lawfully be made thereon, regardless of any transfer, pledge or other disposition of such stock until the shares have been properly transferred on the books of the Corporation.
(ii) It shall be the duty of each stockholder to notify the Corporation of the stockholder's post office address.
SECTION IX
General Provisions
9.1 Dividends. Dividends upon the capital stock of the Corporation may be declared by the board of directors at any regular or special meeting of the board of directors or by unanimous written consent, pursuant to law. Dividends may be paid in cash, property or shares of the capital stock, subject to the provisions of the certificate of incorporation.
9.2 Payment of Dividends. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.
9.3 Checks. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate.
9.4 Fiscal Year. The fiscal year of the Corporation shall begin on the first of January in each year and shall end on the last day of December in that year, unless otherwise determined by the board of directors.
9.5 Seal. The board of directors may, by resolution, adopt a corporate seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the word "Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. The seal may be altered from time to time by the board of directors.
9.7 Form of Records. Any records maintained by this Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or by means of, or be in the form of, any information storage device or method, provided that the records so kept can be clearly legible paper form within a reasonable time.
SECTION X
Indemnification
10.1 Right to Indemnification. 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 (a "Covered 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 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, while a director or officer of the Corporation, 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 nonprofit entity, including
service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys' fees) reasonably incurred by such Covered Person. Notwithstanding the preceding sentence, except as otherwise provided in Section 10.3, the Corporation shall be required to indemnify a Covered Person in connection with a proceeding (or part thereof) commenced by such Covered Person only if the commencement of such proceeding (or part thereof) by the Covered Person was authorized in the specific case by the Board of Directors of the Corporation.
10.2. Prepayment of Expenses. The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys' fees) incurred by a Covered Person 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 Covered Person to repay all amounts advanced if it should be ultimately determined that the Covered Person is not entitled to be indemnified under this Section X or otherwise.
10.3. Claims. If a claim for indemnification (following the final disposition of such action, suit or proceeding) or advancement of expenses under this Section X is not paid in full within thirty days after a written claim therefor by the Covered Person has been received by the Corporation, the Covered Person 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. In any such action the Corporation shall have the burden of proving that the Covered Person is not entitled to the requested indemnification or advancement of expenses under applicable law.
10.4. Nonexclusivity of Rights. The rights conferred on any Covered Person by this Section X shall not be exclusive of any other rights which such Covered Person may have or hereafter acquire under any statute, provision of the certificate of incorporation, these by-laws, agreement, vote of stockholders or disinterested directors or otherwise.
10.5. Other Sources. The Corporation's obligation, if any, to indemnify or to advance expenses to any Covered 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 nonprofit entity shall be reduced by any amount such Covered Person may collect as indemnification or advancement of expenses from such other Corporation, partnership, joint venture, trust, enterprise or non-profit enterprise.
10.6. Amendment or Repeal. Any repeal or modification of the foregoing provisions of this Section X shall not adversely affect any right or protection hereunder of any Covered Person in respect of any act or omission occurring prior to the time of such repeal or modification.
10.7. Other Indemnification and Prepayment of Expenses. This Section X shall not limit the right of the Corporation, to the extent and in the manner permitted by law, to indemnify and to advance expenses to persons other than Covered Persons when and as authorized by appropriate corporate action.
SECTION XI
Amendments
Except as set forth in the certificate of incorporation, these bylaws may be altered, amended or repealed or new bylaws may be adopted by the board of directors when such power is conferred upon the board of directors by the certificate of incorporation or by the holders of at least sixty-six and two-third percent (66 2/3%) in voting power of the shares of the Corporation's outstanding capital stock, at any regular meeting of the board of directors or of the stockholders or at any special meeting of the board of directors or of the stockholders. If the power to adopt, amend or repeal bylaws is conferred upon the board of directors by the certificate of incorporation, it shall not divest or limit the power of the stockholders to adopt, amend or repeal bylaws.
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is dated as of the 30th day of August, 2000 by and among IPG Photonics Corporation., a Delaware corporation (the "Company"), and the persons designated as Investors on the signature pages hereto and any assignees or transferees thereof (each, an "Investor" and collectively, the "Investors").
WHEREAS, the parties to this Agreement have entered into a certain Stock Purchase Agreement, dated as of August 30, 2000 (the "Purchase Agreement"), pursuant to which the Investors have agreed to purchase, from the Company shares of Series B Convertible Participating Preferred Stock, par value $.0001 per share, of the Company ("Series B Convertible Preferred Stock"), which shares are convertible into shares of Common Stock, $.0001 par value per share, of the Company ("Common Stock") and warrants to purchase Common Stock as described in the Purchase Agreement ("Warrants"); and
WHEREAS, the execution of this Agreement is an inducement and a condition to the purchase by the Investors of the Series B Convertible Preferred Stock and the Warrants under the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises of the parties herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Investors hereby covenant and agree with each other as follows:
1. Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings:
"Board of Directors" means the Board of Directors of the Company.
"Commission" shall mean the United States Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act and the Exchange Act.
"Common Stock" shall mean the Common Stock and any other common equity securities issued by the Company, and any other shares of stock issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares, recapitalization, merger, consideration or other corporate reorganization).
"Company" shall refer to the Company and any successor or successors thereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
"Majority Interest" means the Investors holding not less than a majority in interest of the Registrable Securities held by all Investors (provided, however, that prior to any IPO (as defined hereinafter), a Majority Interest shall mean Investors holding not less than a Majority of the Registrable Securities referred to in clause (i)(X) of the definition thereof.
"Person" shall mean an individual, a corporation, an association, a joint venture, a partnership, a limited liability company, an estate, a trust, an unincorporated organization, and any other entity or organization, governmental or otherwise.
"Registrable Securities" shall mean (i) any shares of Common Stock held by the Investors or their transferees, or subject to acquisition by any Investor or their transferees upon (X) conversion of the Series B Convertible Preferred Stock or (Y) exercise of the Warrants, (it being understood that for purposes of this Agreement, a Person will be deemed to be a holder of Registrable Securities whenever such Person has the right to then acquire or obtain from the Company any Registrable Securities, whether or not such acquisition has actually been effected) and (ii) any other securities issued or issuable with respect to any such shares described in clause (i) by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization; provided, however, that notwithstanding anything to the contrary contained herein.
"Registrable Securities" shall not at any time include any securities
(i) registered and sold pursuant to the Securities Act, (ii) sold to the public
pursuant to Rule 144 promulgated under the Securities Act or (iii) which could
then be sold in their entirety pursuant to Rule 144(k) promulgated under the
Securities Act without limitation or restriction.
"Registration Expenses" shall mean the expenses so described in
Section 6 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any similar successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
2. Demand Registrations.
(a) At any time after the earlier of (i) the 3rd anniversary of the date hereof or (ii) the date of the Company's initial public offering of its Common Stock pursuant to an effective registration under the Securities Act (the "IPO"), a Majority Interest of the Investors may notify the Company that they intend to offer or cause to be offered for public sale, and request that the Company register under the Securities Act for public sale, all or any portion of the Registrable Securities held by the Investors in the manner specified in such notice; provided, however, that in the case of such a request pursuant to clause(ii) above, such registration may not become effective prior to the date which is the earlier of six (6) months after the date of the Company's IPO and the date that any applicable Holdback Period (as defined hereinafter) or other lockup period applicable to such IPO expires. Upon receipt of such request, the Company shall promptly deliver notice of such request to all Persons holding Registrable Securities who shall then have thirty (30) days to notify the Company in writing of their desire to have Registrable Securities held by them included in such
registration (which response shall specify the number of Registrable Securities proposed to be included in such registration). If the request for registration contemplates an underwritten public offering, the Company shall state such in the written notice and in such event the right of any Person to include Registrable Securities in such registration shall be conditioned upon such Person's participation in such underwritten public offering and the inclusion of such Person's Registrable Securities in the underwritten public offering to the extent provided herein.
The Company will use its commercially reasonable best efforts to expeditiously effect the registration under the Securities Act of all Registrable Securities of each holder who requested inclusion of such holders Registrable Securities in such registration and to qualify such Registrable Securities for sale under any state blue sky law; provided, however, that the Company shall not be required to effect more than two (2) registrations pursuant to requests under this Section 2(a). Notwithstanding anything to the contrary contained herein, no request may be made under this Section 2 within sixty (60) days after the effective date of a registration statement filed by the Company covering a firm commitment underwritten public offering. The Company may postpone the filing or the effectiveness of any registration statement required to be filed pursuant to this Section 2 for a reasonable time period, provided that such postponements shall not exceed sixty (60) days in the aggregate during any twelve (12) month period, if (i) the Company has been advised by legal counsel that such filing or effectiveness would require disclosure of a material financing, acquisition or other corporate transaction, and the Board of Directors determines in good faith that such disclosure is not in the best interests of the Company and its stockholders or (ii) the Company is then in possession of material non-public information the disclosure of which the Board of Directors has determined would have a material adverse effect upon the Company or its then current business plans. A registration will not count as a requested registration under this Section 2(a) unless and until the registration statement relating to such registration has been declared effective by the Commission at the request of the initiating holders; provided, however, that a majority in interest of the participating holders of Registrable Securities may request, in writing, that the Company withdraw a registration statement which has been filed under this Section 2(a) but not yet been declared effective, and a majority in interest of such holders may thereafter request the Company to reinstate such Registration Statement, if permitted under the Securities Act, or to file another registration statement, in accordance with the procedures set forth herein and without reduction in the number of demand registrations permitted under this Section 2(a);
(b) If a requested registration involves an underwritten public offering and the managing underwriter of such offering determines in good faith that the number of securities sought to be offered should be limited due to market conditions, then the number of securities to be included in such underwritten public offering shall be reduced to a number, reasonably deemed satisfactory by such managing underwriter, provided that the securities to be excluded shall be determined in the following sequence: (i) first, securities held by any other Persons (other than Persons holding Registrable Securities) having contractual, incidental or "piggy-back" registration rights, (ii) second, securities sought to be registered by the Company and (iii) third, Registrable Securities held by the Investors, it being understood that no shares shall be registered for the account of the Company or any shareholder other than the Investors unless all Registrable Securities for which Investors have requested registration have been
registered. If there is a reduction in the number of shares of Common Stock or Registrable Securities to be registered pursuant to clauses (i), (ii) or (iii) above, such reduction shall be made within each tranche on a pro rata basis (based upon the aggregate number of shares of Common Stock or Registrable Securities held by the holders in each such tranche and subject to the priorities set forth in the preceding sentence).
(c) With respect to a request for registration pursuant to Section 2(a) which is for an underwritten public offering, the managing underwriter shall be chosen by the Company, subject to the Investors' consent, which consent shall not be unreasonably withheld. The Company may not cause any other registration of securities for sale for its own account (other than a registration effected solely to implement an employee benefit plan or a transaction to which Rule 145 of the Securities Act is applicable) to become effective within one hundred eighty (180) days following the effective date of any registration required pursuant to this Section 2.
3. Form S-3. After the first public offering of its securities registered
under the Securities Act, the Company shall use its best efforts to qualify and
remain qualified to register securities on Form S-3 (or any successor form)
under the Securities Act. An Investor or Investors holding Registrable
Securities anticipated to have an aggregate sale price (net of underwriting
discounts and commissions, if any) in excess of $500,000 shall have the right,
on one or more occasions, to request registration on Form S-3 (or any successor
form) for the Registrable Securities held by such requesting Investor or
Investors. Such requests shall be in writing and shall state the number of
shares of Registrable Securities to be disposed of and the intended method of
disposition of such securities by such holder or holders. The Company shall give
notice to all other holders of Registrable Securities of the receipt of a
request for registration pursuant to this Section 3, and such other holders of
Registrable Securities shall then have thirty (30) days to notify the Company in
writing of their desire to participate in the registration, subject to the
limitations set forth in Section 4. The Company may postpone the filing or the
effectiveness of any registration statement pursuant to this Section 3 for a
reasonable period of time, provided that such postponements shall not exceed
forty-five (45) days in the aggregate during any twelve (12) month period, if
(a) the Company has been advised by legal counsel that such filing or
effectiveness would require disclosure of a material financing, acquisition or
other corporate transaction, and the Board of Directors of the Company
determines in good faith that such disclosure is not in the best interests of
the Company and its stockholders, (b) the Company is then in possession of
material non-public information the disclosure of which the Board of Directors
has determined would have a material adverse effect upon the Company or its then
current business plans, (c) the managing underwriter determines in good faith
that an audit (other than the Company's regular year-end audit) would be
required to successfully market such offering, and (d) the Company's President
certifies in writing that the Company is then currently engaged in discussions
with its managing underwriter concerning a registration statement that would be
subject to Section 4 hereof.
4. Piggy-Back Registration. If the Company at any time proposes to register any of its Common Stock under the Securities Act for sale to the public either for its own account or for the account of another Person other than the Investors (except pursuant to a demand by the Investors under Section 2 hereof, which demand registration shall be governed by the terms of said Section 2, and except with respect to registration statements on Forms
S-4, S-8 or any other form not available for registering the Registrable Securities for sale to the public), each such time it will promptly give written notice to each holder of Registrable Securities of its intention to effect such registration. Upon the written request of any such holder of Registrable Securities given within thirty (30) days after receipt by such holder of such notice, the Company will, subject to the limits contained in this Section 4, use its commercially reasonable best efforts to cause all Registrable Securities of such holder that such holder so requests to be registered under the Securities Act and qualified for sale under any state blue sky law, all to the extent required to permit such sale or other disposition of said Registrable Securities; provided, however, that if the Company is advised in writing in good faith by the managing underwriter of the Company's securities being offered in an underwritten public offering pursuant to such registration statement that the amount to be sold by Persons other than the Company (collectively, "Selling Stockholders") is greater than the amount which can be offered without adversely affecting the marketability of the offering, the Company may reduce the amount offered for the accounts of Selling Stockholders (including any holders of Registrable Securities) to a number reasonably deemed satisfactory by such managing underwriter; and provided, further, that the securities to be excluded shall be determined in the following sequence: (i) first, securities held by any Persons not having any contractual, incidental or "Piggy-Back" registration rights, (ii) second, securities held by any Persons having contractual, incidental or "Piggy-Back" registration rights pursuant to an agreement which is not this Agreement and Registrable Securities held by the Investors and (iii) securities sought to be registered by the Company. If there is a reduction in the number of shares of Common Stock or Registrable Securities to be registered pursuant to clauses (i) or (ii) above, such reduction shall be made within each tranche on a pro rata basis (based upon the aggregate number of shares of Common Stock or Registrable Securities held by the holders in each such tranche and subject to the priorities set forth in the preceding sentence).
5. Registration Procedures. If and whenever the Company is required by the provisions of this Agreement to effect the registration of any of its securities under the Securities Act, the Company will, as expeditiously as possible:
(a) use its commercially reasonable best efforts diligently to prepare and file with the Commission a registration statement on the appropriate form under the Securities Act with respect to such securities, which form shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the Commission to be filed therewith, and use its reasonable best efforts to cause such registration statement to become and remain effective until completion of the proposed offering (but not for more than one hundred eighty (180) days);
(b) use its commercially reasonable best efforts to prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until the completion of the offering (but not for more than one hundred eighty (180) days) and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such registration statement whenever the seller or sellers of such securities shall desire to sell or otherwise dispose of the same, but only to the extent provided in this Agreement;
(c) furnish to each selling holder and the underwriters, if any, such number of copies of such registration statement, any amendments thereto, any documents incorporated by reference therein, the prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as such selling holder may reasonably request in order to facilitate the public sale or other disposition of the securities owned by such selling holder;
(d) use its commercially reasonable best efforts to register or qualify the securities covered by such registration statement under and to the extent required by such other securities or state blue sky laws of such jurisdictions as each selling holder shall reasonably request, and do any and all other acts and things which may be necessary under such securities or blue sky laws to enable such selling holder to consummate the public sale or other disposition in such jurisdictions of the securities owned by such selling holder, except that the Company shall not for any such purpose be required to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified;
(e) within a reasonable time before each filing of the registration statement or prospectus or amendments or supplements thereto with the Commission, furnish to counsel selected by the holders of Registrable Securities copies of such documents proposed to be filed, which documents shall be subject to the reasonable approval of such counsel;
(f) promptly notify each selling holder of Registrable Securities, such selling holders' counsel and any underwriter and (if requested by any such Person) confirm such notice in writing, of the happening of any event which makes any statement made in the registration statement or related prospectus untrue or which requires the making of any changes in such registration statement or prospectus so that they will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances under which they were made not misleading; and, as promptly as practicable thereafter, prepare and file with the Commission and furnish a supplement or amendment to such prospectus so that, as thereafter deliverable to the purchasers of such Registrable Securities, such prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(g) use its commercially reasonable best efforts to prevent the issuance of any order suspending the effectiveness of a registration statement, and if one is issued use its commercially reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a registration statement at the earliest possible moment;
(h) if requested by the managing underwriter or underwriters (if any), any selling holder, or such selling holder's counsel, promptly incorporate in a prospectus supplement or post-effective amendment such information as such Person requests to be included therein with respect to the selling holder or the securities being sold, including, without limitation, with respect to the securities being sold by such selling holder to such underwriter or underwriters, the purchase price being paid therefor by such underwriter or underwriters and with respect to any other terms of an underwritten offering of the securities to be sold in such offering, and
promptly make all required filings of such prospectus supplement or post-effective amendment;
(i) make available to each selling holder, any underwriter participating in any disposition pursuant to a registration statement, and any attorney, accountant or other agent or representative retained by any such selling holder or underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the "Records"), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information requested by any such Inspector in connection with such registration statement subject, in each case, to such confidentiality agreements as the Company shall reasonably request;
(j) enter into any reasonable underwriting agreement required by the proposed underwriter(s) for the selling holders, if any, and use its reasonable best efforts to facilitate the public offering of the securities;
(k) request that each prospective selling holder be furnished a signed counterpart, addressed to the prospective selling holder, of (i) an opinion of counsel for the Company, dated the effective date of the registration statement, and (ii) if and to the extent permitted by applicable professional standards, a "comfort" letter signed by the independent public accountants who have certified the Company's financial statements included in the registration statement, covering substantially the same matters with respect to the registration statement (and the prospectus included therein) and (in the case of the accountants' letter) with respect to events subsequent to the date of the financial statements, as are customarily covered (at the time of such registration) in opinions of the Company's counsel and in accountants' letters delivered to the underwriters in underwritten public offerings of securities;
(l) use its commercially reasonable best efforts to cause the securities covered by such registration statement to be listed on the securities exchange or quoted on the quotation system on which the Common Stock is then listed or quoted (or, if the Common Stock is not yet listed or quoted, then on such exchange or quotation system as the selling holders of Registrable Securities and the Company shall determine);
(m) otherwise use its commercially reasonable best efforts to comply with all applicable rules and regulations of the Commission and make generally available to its security holders, in each case as soon as reasonably practicable, an earnings statement of the Company (which need not be audited) which will satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any comparable successor provisions); and
(n) otherwise cooperate with the underwriter(s), the Commission and other regulatory agencies and take all reasonable actions and execute and deliver or cause to be executed and delivered all documents reasonably necessary to effect the registration of any securities under this Agreement.
6. Expenses. All reasonable expenses incurred by the Company and the Investors in effecting the registrations provided for in Section 2, Section 3
and Section 4, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company and one counsel for the Investors as a group (selected by a majority in interest of the Investors who participate in the registration), underwriting expenses (other than commissions or discounts), expenses of any audits incident to or required by any such registration and expenses of complying with the securities or blue sky laws of any jurisdiction pursuant to Section 5(d) hereof (all of such expenses referred to as "Registration Expenses"), shall be paid by the Company.
7. Indemnification.
(a) The Company shall indemnify and hold harmless the selling holder of Registrable Securities, each underwriter (as defined in the Securities Act), and each other Person who participates in the offering of such securities and each other Person, if any, who controls (within the meaning of the Securities Act) such seller, underwriter or participating Person (individually and collectively, the "Indemnified Person") against any losses, claims, damages or liabilities (collectively, the "liability"), joint or several, to which such Indemnified Person may become subject under the Securities Act or any other statute or at common law, insofar as such liability (or actions in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation by the Company of the Securities Act, any state securities or "blue sky" laws or any rule or regulation thereunder in connection with such registration; provided, however, that the Company shall not be liable to any Indemnified Person in any such case to the extent that any such liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, preliminary or final prospectus, or amendment or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person specifically for use therein provided, further, that the foregoing indemnity shall not inure to the benefit of any underwriter, with respect to any preliminary prospectus, from whom the person asserting any losses, claims, damages and liabilities and judgments purchased Registrable Securities or any Person controlling such underwriter, if a copy of the prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such underwriter to such Person, if required by law so to have been delivered, or prior to a written confirmation of the sale of the Registrable Securities to such Person, and if the prospectus (as so amended and supplemented) would have cured the defect giving rise to such liability, unless such failure to deliver the prospectus (as so amended and supplemented) was a result of noncompliance by the Company with Section 5(c) hereof. The Company shall reimburse each such Indemnified Person in connection with investigating or defending any such liability as expenses in connection with the same are incurred.
(b) Each selling holder of any securities included in such registration being effected shall indemnify and hold harmless each other selling holder of any securities, the Company, its directors and officers,
each underwriter and each other Person, if any, who controls the Company or such underwriter (individually and collectively also the "Indemnified Person"), against any liability, joint or several, to which any such Indemnified Person may become subject under the Securities Act or any other statute or at common law, insofar as such liability (or actions in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which securities were registered under the Securities Act at the request of such selling holder, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or (ii) any omission or alleged omission by such selling holder to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in the case of (i) and (ii) to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in such registration statement, preliminary or final prospectus, amendment or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by such selling holder specifically for use therein. Such selling holder shall reimburse any Indemnified Person for any fees incurred in investigating or defending any such liability; provided, however, that such selling holder's obligations hereunder shall be limited to an amount equal to the proceeds to such selling holder of the securities sold in any such registration.
(c) Indemnification similar to that specified in Section 7(a) and
Section 7(b) shall be given by the Company and each selling holder (with such
modifications as may be appropriate) with respect to any required registration
or other qualification of their securities under any federal or state law or
regulation of governmental authority other than the Securities Act.
(d) If the indemnification provided for in this Section 7 for any reason is held by a court of competent jurisdiction to be unavailable to an Indemnified Person in respect of any losses, claims, damages, expenses or liabilities referred to therein, then each Indemnifying Party under this Section 7, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, expenses or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, the selling holders and the underwriters from the offering of the Registrable Securities 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, the other selling holders and the underwriters in connection with the statements or omissions which resulted in such losses, claims, damages, expenses or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company, the selling holders and the underwriters shall be deemed to be in the same respective proportions that the net proceeds from the offering (before deducting expenses) received by the Company and the selling holders and the underwriting discount received by the underwriters, in each case as set forth in the table on the cover page of the applicable prospectus, bear to the aggregate public offering price of the Registrable Securities. The relative fault of the Company, the selling holders and the underwriters 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, the selling holders or the underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
The Company, the selling holders and the underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata or per capita allocation or by any other method of allocation which does not take into account the equitable considerations referred to in the immediately preceding paragraph. In no event, however, shall a selling holder be required to contribute any amount under this Section 7(d) in excess of the lesser of (i) that proportion of the total of such losses, claims, damages or liabilities indemnified against equal to the proportion of the total Registrable Securities sold under such registration statement which are being sold by such selling holder or (ii) the net proceeds received by such selling holder from its sale of Registrable Securities under such registration statement. No person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not found guilty of such fraudulent misrepresentation.
(e) Promptly after receipt by an Indemnified Person of notice of the commencement of any action involving a claim referred to in the preceding paragraphs of this Section, such indemnified Person will, if a claim in respect thereof is made against an indemnifying party, give written notice to the latter of the commencement of such action.
(f) The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person or any officer, director or controlling person of such Indemnified Person and will survive the transfer of securities.
8. Holdback Agreement. If the Company shall consummate a Qualified Public Offering (as defined in the Shareholder Agreement) and the managing underwriter for such registration shall request, the Investors shall not sell, make any short sale of, grant any option for the purchase of, or otherwise dispose of any Registrable Securities (other than those shares of Common Stock included in such registration) without the prior written consent of the Company for a period designated by the Company in writing to the Investors, which period shall not begin more than ten (10) days prior to the effectiveness of the registration statement pursuant to which such public offering shall be made and shall not last more than one hundred eighty (180) days after the effective date of such registration statement (the "Holdback Period"); provided that the Investors shall be bound by this provision only if, and to the extent, the executive officers of the Company owning Common Stock shall be bound by the same provision; provided, further, that if any executive officer is permitted to sell any shares of Common Stock prior to the expiration of the Holdback Period, then the Investors shall also be permitted to do so.
9. Underwriting Agreement. Notwithstanding the provisions of Sections 5, 8 and 13, to the extent that the Company and the Investors selling Registrable Securities in a proposed registration shall enter into an underwriting or similar agreement, which agreement contains provisions covering one or more issues addressed in such Sections, the provisions contained in such Sections addressing such issue or issues shall be superseded with respect to such registration by such other agreement.
10. Compliance with Rule 144. In the event that the Company (i) registers a class of securities under Section 12 of the Exchange Act or (ii) shall commence to file reports under Section 13 or 15(d) of the Exchange Act, the Company will use its best efforts thereafter to file with the Commission such information as is required under the Exchange Act for so long as there are holders of Registrable Securities; and in such event, the Company shall use its best efforts to take all action as may be required as a condition to the availability of Rule 144 under the Securities Act (or any comparable successor rules). After the occurrence of the first underwritten public offering of Common Stock pursuant to an offering registered under the Securities Act on Form S-1 or Form SA-1 (or any comparable successor forms), subject to the limitations on transfers imposed by this Agreement, the Company shall use its reasonable best efforts to facilitate and expedite transfers of Registrable Securities pursuant to Rule 144 under the Securities Act, which efforts shall include timely notice to its transfer agent to expedite such transfers of Registrable Securities.
11. Amendments. The provisions of this Agreement may be amended, and the Company may take any action herein prohibited or omit to perform any act herein required to be performed by it, only with the written consent of the Company and a Majority Interest of the Investors.
12. Transferability of Registration Rights. The registration rights set forth in this Agreement are transferable to each permitted transferee of Registrable Securities provided, however, that the Company is given notice by the Investor at the time of or within a reasonable time after the transfer, stating the name and address of the transferee and identifying the securities with respect to which such registration rights are being assigned. Subject to the foregoing provision, this Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns; provided, further, that the registration rights granted in this Agreement shall not be transferred to Persons who received Registrable Securities pursuant to a registration statement under the Securities Act or pursuant to a transaction under Rule 144 or any successor provision thereto. Each subsequent holder of Registrable Securities must consent in writing to be bound by the terms and conditions of this Agreement in order to acquire the rights granted pursuant to this Agreement.
13. Rights Which May Be Granted to Subsequent Investors. Other than transferees of Registrable Securities under Section 10 hereof, the Company shall not, without the prior written consent of a Majority Interest of the Investors, allow purchasers of the Company's securities to become a party to this Agreement or grant any other registration rights to any third parties which are superior to those registration rights granted to the Investors in this Agreement.
14. Damages. The Company recognizes and agrees that each holder of Registrable Securities will not have an adequate remedy if the Company fails to comply with the terms and provisions of this Agreement and that damages will not be readily ascertainable, and the Company expressly agrees that, in the event of such failure, it shall not oppose an application by any holder of Registrable Securities or any other Person entitled to the benefits of this Agreement requiring specific performance of any and all provisions hereof or enjoining the Company from continuing to commit any such breach of this Agreement.
15. Information by Holder. Each Investor selling Registrable Securities in a proposed registration shall furnish to the Company such written information regarding such holder and the distribution proposed by such Investor as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Agreement.
16. Miscellaneous.
(a) This Agreement shall bind and inure to the benefit of the Company and the Investors and their respective successors and assigns.
(b) This Agreement shall terminate and be of no further force or effect upon the date on which there remains no Registrable Securities outstanding. The indemnification provisions of Section 7 shall survive the termination of this Agreement.
(c) This Agreement contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior arrangements or understandings with respect hereto.
(d) All notices, requests, demands and other communications provided for hereunder shall be in writing and mailed (by first class registered or certified mail, postage prepaid), telegraphed, sent by express overnight courier service or electronic facsimile transmission (with a copy by mail), or delivered to the applicable party at the addresses indicated below:
If to the Company: IPG Photonics Corporation 660 Main Street; P.O. Box 519 Sturbridge, MA 01566 Attn: Valentin P. Gapontsev With a copy to: Winston & Strawn 1400 L Street, N.W. Washington, D.C 20005 Facsimile: (202) 371-5950 Attn: Barry Hart If to the Investors: c/o TA Associates, Inc. 70 Willow Road Suite 100 Menlo Park, CA 94025 Facsimile: (650) 326-4933 Attn: Michael C. Child With a copy to: Goodwin, Procter, & Hoar LLP Exchange Place Boston, MA 02025 Facsimile: (617) 523-1231 Attn: John R. LeClaire, P.C. |
If to any other holder of Registrable Securities:
At such Person's address for notice as set forth in the books and records of the Company.
or, as to each of the foregoing, at such other address as shall be designated by such Person in a written notice to other parties complying as to delivery with the terms of this subsection (a). All such notices, requests, demands and other communications shall, when mailed, telegraphed or sent, respectively, be effective (i) two days after being deposited in the mails or (ii) one day after being delivered to the telegraph company, deposited with the express overnight courier service or sent by electronic facsimile transmission, respectively, addressed as aforesaid.
(e) This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of New York (without giving effect to principles of conflicts of law). All actions and proceedings arising out of or relative to this Agreement shall be heard and determined in a Massachusetts state or federal court sitting in the City of Boston. The parties hereby irrevocably submit to the exclusive jurisdiction of any Massachusetts state or federal court sitting in the City of Boston in any action or proceeding arising out of or relating to this Agreement, and hereby irrevocably agree that all claims in respect of such action or proceeding may be heard and determined in such Massachusetts state or federal court. The parties hereby irrevocably waive, to the fullest extent they may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The parties agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH PARTY HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR PASSED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE.
(f) It is specifically understood and agreed that any breach of the provisions of this Agreement by any party subject hereto will result in irreparable injury to the other parties hereto, that the remedy at law alone will be an inadequate remedy for such breach, and that, in addition to any other legal or equitable remedies which they may have, such other parties may enforce their respective rights by actions for specific performance (to the extent permitted by law) and the Company may refuse to recognize any unauthorized transferee as one of its stockholders for any purpose, including, without limitation, for purposes of dividend and voting rights, until the relevant party or parties have complied with all applicable provisions of this Agreement.
(g) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
(h) If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein.
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed as of the date first set forth above.
THE COMPANY: IPG PHOTONICS CORPORATION By: /s/ Timothy P.V. Mammen ------------------------- Name: Timothy P.V. Mammen Title: Vice President |
Signature page to Registration Rights Agreement
INVESTORS: TA IX, L.P. By: TA Associates IX LLC, its General Partner By: TA Associates, Inc., its Manager By: *** ---------------------------------- Name: Title: TA/ADVENT VIII L.P. By: TA Associates VIII LLC, its General Partner By: TA Associates, Inc., its General Partner By: *** ---------------------------------- Name: Title: TA/ATLANTIC AND PACIFIC IV L.P. By: TA Associates AP IV L.P., its General Partner By: TA Associates, Inc., its General Partner By: *** ---------------------------------- Name: Title: TA EXECUTIVES FUND LLC By: TA Associates, Inc., its Manager By: *** ---------------------------------- Name: Title: TA INVESTORS LLC By: TA Associates, Inc., its Manager By: *** ---------------------------------- Name: |
Title:
/s/ Kenneth T. Schiciano ----------------------------------- Name: Kenneth T. Schiciano Title: Authorized Signatory |
Signature page to Registration Rights Agreement
MERRILL LYNCH KECALP L.P. 1999
By: KECALP Inc., its General Partner
By: /s/ Margaret Monaco ----------------------------------- Name: Margaret T. Monaco Title: Vice President |
KECALP INC.
By: /s/ Margaret Monaco ---------------------------------- Name: Margaret T. Monaco Title: Vice President |
KECALP INC., as Nominee for Merrill Lynch KECALP International L.P. 1999
By: /s/ Margaret Monaco ----------------------------------- Name: Margaret T. Monaco Title: Vice President |
ML IBK POSITIONS, INC.
By: /s/ Joseph Valenti ----------------------------------- Name: Joseph S. Valenti Title: Vice President |
Signature page to Registration Rights Agreement
As of August 31, 2000 BAYVIEW 2000, LP By: Bayview 2000, GP, LLC, its General Partner By: /s/ Dana Welch ----------------------------------- Name: Dana Welch Title: Authorized Signatory |
Signature page to Registration Rights Agreement
As of August 31, 2000 THE SOG FUND, LP By: The Special Opportunities Group LLC, its General Partner By: /s/ Christopher Miller ----------------------------------- |
Name: Christopher G. Miller Title: Chief Executive Officer
Signature page to Registration Rights Agreement
As of August 31, 2000 THE SOG FUND II, LP By: The Special Opportunities Group LLC, its General Partner By: /s/ Christopher Miller ----------------------------------- Name: Christopher G. Miller Title: Chief Executive Officer |
Signature page to Registration Rights Agreement
As of August 31, 2000 WINSTON/THAYER PARTNERS, L.P.
By: /s/ Scott Andrews ----------------------------------- Name: A. Scott Andrews Title: Managing Partner |
Signature page to Registration Rights Agreement
As of Oct 6, 2000 APAX EUROPE IV - A, L.P. By: APAX Europe IV GP, L.P., its Managing General Partner By: APAX Europe IV GP Co. Limited, its Managing General Partner By: /s/ C. A. E. Helyar ----------------------------------- Name: C. A. E. Helyar Title: Director By: /s/ D. J. Banks ----------------------------------- Name: D.J. Banks Title: for and on behalf of INTERNATIONAL PRIVATE EQUITY SERVICES LIMITED AS SECRETARY APAX EUROPE IV - B, L.P. By: APAX Europe IV GP, L.P., its Managing General Partner By: APAX Europe IV GP Co. Limited, its Managing |
General Partner
By: /s/ C. A. E. Helyar ----------------------------------- Name: C. A. E. Helyar Title: Director By: /s/ D. J. Banks ----------------------------------- Name: D.J. Banks Title: for and on behalf of INTERNATIONAL PRIVATE EQUITY SERVICES LIMITED AS SECRETARY |
Signature page to Registration Rights Agreement
APAX EUROPE IV - C GMBH & CO., KG
By: APAX Europe IV GP, L.P., its Managing
General Partner
By: APAX Europe IV GP Co. Limited, its Managing
General Partner
By: /s/ C. A. E. Helyar ----------------------------------- Name: C. A. E. Helyar Title: Director By: /s/ D. J. Banks ----------------------------------- Name: D.J. Banks Title: for and on behalf of INTERNATIONAL PRIVATE EQUITY SERVICES LIMITED AS SECRETARY |
APAX EUROPE IV - D, L.P.
By: APAX Europe IV GP, L.P., its Managing
General Partner
By: APAX Europe IV GP Co. Limited, its Managing
General Partner
By: /s/ C. A. E. Helyar ----------------------------------- Name: C. A. E. Helyar Title: Director By: /s/ D. J. Banks ----------------------------------- Name: D.J. Banks Title: for and on behalf of INTERNATIONAL PRIVATE EQUITY SERVICES LIMITED AS SECRETARY |
Signature page to Registration Rights Agreement
APAX EUROPE IV - E, L.P.
By: APAX Europe IV GP, L.P., its Managing General Partner
By: APAX Europe IV GP Co. Limited, its Managing General Partner
By: /s/ C. A. E. Helyar ----------------------------------- Name: C. A. E. Helyar Title: Director By: /s/ D. J. Banks ----------------------------------- Name: D.J. Banks Title: for and on behalf of INTERNATIONAL PRIVATE EQUITY SERVICES LIMITED AS SECRETARY |
APAX EUROPE IV - F, C.V.
By: APAX Europe IV GP, L.P., its Managing
General Partner
By: APAX Europe IV GP Co. Limited, its Managing
General Partner
By: /s/ C. A. E. Helyar ----------------------------------- Name: C. A. E. Helyar Title: Director By: /s/ D. J. Banks ----------------------------------- Name: D.J. Banks Title: for and on behalf of INTERNATIONAL PRIVATE EQUITY SERVICES LIMITED AS SECRETARY |
Signature page to Registration Rights Agreement
APAX EUROPE IV - G, C.V.
By: APAX Europe IV GP, L.P., its Managing
General Partner
By: APAX Europe IV GP Co. Limited, its Managing
General Partner
By: /s/ C. A. E. Helyar ----------------------------------- Name: C. A. E. Helyar Title: Director By: /s/ D. J. Banks ----------------------------------- Name: D.J. Banks Title: for and on behalf of INTERNATIONAL PRIVATE EQUITY SERVICES LIMITED AS SECRETARY |
APAX EUROPE IV - H, GMBH & CO. K.G.
By: APAX Europe IV GP, L.P., its Attorney
By: APAX Europe IV GP Co. Limited, its Managing
General Partner
By: /s/ C. A. E. Helyar ----------------------------------- Name: C. A. E. Helyar Title: Director By: /s/ D. J. Banks ----------------------------------- Name: D.J. Banks Title: for and on behalf of INTERNATIONAL PRIVATE EQUITY SERVICES LIMITED AS SECRETARY |
Signature page to Registration Rights Agreement
As of December 6, 2000 MARCONI CAPITAL LIMITED By: /s/ M. Ablett ----------------------------------- Name: Mark Ablett Title: Managing Partner |
Address: c/o Marconi Ventures 890 Winter Street, Suite 310 Waltham, MA 02454-1204 Fax: 781-522-7477 Attn: Jim Goren
AMENDMENT
THIS AMENDMENT, dated as of July 31, 2006 (this "Amendment"), is made and entered into by and among IPG Photonics Corporation, a Delaware corporation (the "Company"), the persons designated as Investors on the signature pages hereto and any assignees or transferees thereof (each, an "Investor" and collectively, the "Investors"). Capitalized terms used herein but otherwise not defined shall have the meaning given to such terms in the Series B Registration Rights Agreement (as defined below).
WHEREAS, the Investors and the Company have entered into that certain Registration Rights Agreement, dated as of August 30, 2000 (the "Series B Registration Rights Agreement"); and
WHEREAS, the Investors and the Company desire to amend certain provisions of the Series B Registration Rights Agreement;
NOW, THEREFORE, in consideration of the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Amendment to Section 4. Section 4 of the Series B Registration Rights Agreement shall be amended and restated to read as follows:
"Piggy-Back Registration. If the Company at any time proposes to register any of its Common Stock under the Securities Act for sale to the public either for its own account or for the account of another Person other than the Investors (except pursuant to a demand by the Investors under Section 2 hereof, which demand registration shall be governed by the terms of said Section 2, and except with respect to registration statements on Forms S-4, S-8 or any other form not available for registering the Registrable Securities for sale to the public), each such time it will promptly give written notice to each holder of Registrable Securities of its intention to effect such registration. Upon the written request of any such holder of Registrable Securities given within thirty (30) days after receipt by such holder of such notice, the Company will, subject to the limits contained in this Section 4, use its commercially reasonable best efforts to cause all Registrable Securities of such holder that such holder so requests to be registered under the Securities Act and qualified for sale under any state blue sky law, all to the extent required to permit such sale or other disposition of said Registrable Securities; provided, however, that in connection with a Qualified Public Offering (as defined in Article Fourth, Section B.6.2 of the Amended and Restated Certificate of Incorporation) that is consummated on or before February 15, 2007, the Investors shall not have any contractual, incidental or "Piggy-Back"
registration rights under this Section 4, except that, if and to the
extent that, the Company shall not repurchase the Warrants (as
defined in Article Fourth, Section B.6.2 of the Amended and Restated
Certificate of Incorporation) in connection with such Qualified
Public Offering and the holders of the Warrants are permitted to
exercise all of the outstanding Warrants on a net exercise basis,
the Investors shall be permitted to exercise their rights under this
Section 4 with respect to the Registrable Securities issuable upon
such exercise of the Warrants in such Qualified Public Offering;
provided, further, that if the Company is advised in writing in good
faith by the managing underwriter of the Company's securities being
offered in an underwritten public offering pursuant to such
registration statement that the amount to be sold by Persons other
than the Company (collectively, "Selling Stockholders") is greater
than the amount which can be offered without adversely affecting the
marketability of the offering, the Company may reduce the amount
offered for the accounts of Selling Stockholders (including any
holders of Registrable Securities) to a number reasonably deemed
satisfactory by such managing underwriter; and provided, further,
that the securities to be excluded shall be determined in the
following sequence: (i) first, securities held by any Persons not
having any contractual, incidental or "Piggy-Back" registration
rights, (ii) second, securities held by any Persons having
contractual, incidental or "Piggy-Back" registration rights pursuant
to an agreement which is not this Agreement and Registrable
Securities held by the Investors and (iii) securities sought to be
registered by the Company. If there is a reduction in the number of
shares of Common Stock or Registrable Securities to be registered
pursuant to clauses (i) or (ii) above, such reduction shall be made
within each tranche on a pro rata basis (based upon the aggregate
number of shares of Common Stock or Registrable Securities held by
the holders in each such tranche and subject to the priorities set
forth in the preceding sentence)."
2. No Waiver. Nothing in this Amendment shall constitute a waiver by the Stockholders or the Company of any breach or default on the part of the other party to the Series B Registration Rights Agreement.
3. Governing Law. This Amendment shall be construed and enforced in accordance with and governed by the laws of the State of New York (without giving effect to the principles of conflicts of law).
4. No Other Agreements. This Amendment constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes and preempts all prior agreements, understandings or
representations, both written and oral, between the parties with respect to the subject matter hereof.
5. Effect. Except as amended hereby, the Series B Registration Rights Agreement shall remain in full force and effect in accordance with its terms.
6. Counterparts. The parties may execute multiple counterparts of this Amendment. Each executed counterpart shall be deemed an original, but all of them together represent one and the same agreement.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto caused this Amendment to be duly executed as of this 31st day of July, 2006.
COMPANY:
IPG PHOTONICS CORPORATION
By: /s/ Valentin P. Gapontsev ---------------------------------------- Name: Valentin P. Gapontsev Title: Chairman & CEO |
INVESTORS:
TA IX, L.P.
By: TA Associates IX LLC, Its General Partner
By: TA Associates, Inc., its Manager
By: /s/ Michael C. Child ---------------------------------------- Name: Michael C. Child Title: Managing Director |
TA/ADVENT VIII L.P.
By: TA Associates VIII LLC,
Its General Partner
By: TA Associates, Inc., its Manager
By: /s/ Michael C. Child ---------------------------------------- Name: Michael C. Child Title: Managing Director |
TA/ATLANTIC AND PACIFIC IV L.P.
By: TA Associates AP IV L.P., Its General Partner
By: TA Associates, Inc., its Manager
By: /s/ Michael C. Child ---------------------------------------- Name: Michael C. Child Title: Managing Director |
TA EXECUTIVES FUND LLC
By: TA Associates, Inc., its Manager
By: /s/ Michael C. Child ---------------------------------------- Name: Michael C. Child Title: Managing Director |
TA INVESTORS LLC
By: TA Associates, Inc., its Manager
By: /s/ Michael C. Child ---------------------------------------- Name: Michael C. Child Title: Managing Director By: /s/ Michael C. Child ---------------------------------------- Name: Michael C. Child Title: Authorized Signatory |
Exhibit 4.3
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is dated as of August 13, 2003 by and among IPG Photonics Corporation, a Delaware corporation (the "Company"), and JDS UNIPHASE CORPORATION, a Delaware corporation, and any assignees or transferees thereof (each, a "Stockholder" and collectively, the "Stockholders").
WHEREAS, it is a condition to the Subscription Agreement between the Company and the Stockholder, dated as of August 13, 2003 (the "Subscription Agreement") that the Stockholder enter into this Agreement with the Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises of the parties herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Stockholders hereby covenant and agree with each other as follows:
1. Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings:
"Board of Directors" shall mean the Board of Directors of the Company.
"Commission" shall mean the United States Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act and the Exchange Act.
"Common Stock" shall mean the Common Stock and any other common equity securities issued by the Company, and any other shares of stock issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares, recapitalization, merger, consideration or other corporate reorganization).
"Company" shall refer to the Company and any successor or successors thereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
"Majority Interest" shall mean the Stockholders holding not less than a majority in interest of the Registrable Securities held by all Stockholders (provided, however, that prior to any IPO (as defined hereinafter), a Majority Interest shall mean Stockholders holding not less than a Majority of the Registrable Securities referred to in clause (i) of the definition thereof).
"Person" shall mean an individual, a corporation, an association, a joint venture, a partnership, a limited liability company, an estate, a trust, an unincorporated organization, and any other entity or organization, governmental or otherwise.
"Registrable Securities" shall mean (i) any shares of Common Stock held by the Stockholders or their transferees, or subject to acquisition by any Stockholder or their transferees upon conversion of the Series D Preferred Stock (it being understood that for purposes of this Agreement, a Person will be deemed to be a holder of Registrable Securities whenever such Person has the right to then acquire or obtain from the Company any Registrable Securities, whether or not such acquisition has actually been effected) and (ii) any other securities issued or issuable with respect to any such shares described in clause (i) by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization; provided, however, that notwithstanding anything to the contrary contained herein, "Registrable Securities" shall not at any time include any securities (i) registered and sold pursuant to the Securities Act, (ii) sold to the public pursuant to Rule 144 promulgated under the Securities Act or (iii) which could then be sold in their entirety pursuant to Rule 144(k) promulgated under the Securities Act without limitation or restriction.
"Registration Expenses" shall mean the expenses so described in
Section 6 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any similar successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
"Series D Preferred Stock" shall mean the Series D Convertible Preferred Stock, par value $.0001 per share, of the Company.
2. Demand Registrations.
(a) At any time after the earlier of (i) the 3rd anniversary of the date hereof or (ii) the date of the Company's initial public offering of its Common Stock pursuant to an effective registration under the Securities Act (the "IPO"), a Majority Interest of the Stockholders may notify the Company that they intend to offer or cause to be offered for public sale, and request that the Company register under the Securities Act for public sale, all or any portion of the Registrable Securities held by the Stockholders in the manner specified in such notice; provided, however, that in the case of such a request pursuant to clause (ii) above, such registration may not become effective prior to the date which is the earlier of six (6) months after the date of the Company's IPO and the date that any applicable Holdback Period (as defined hereinafter) or other lockup period applicable to such IPO expires. Upon receipt of such request, the Company shall promptly deliver notice of such request to all Persons holding Registrable Securities who shall then have thirty (30) days to notify the Company in writing of their desire to have Registrable Securities held by them included in such registration (which response shall specify the number of Registrable Securities proposed to be included in such registration). If the request for registration contemplates an underwritten public offering, the Company shall state such in the written notice and in such event the right of any Person to
include Registrable Securities in such registration shall be conditioned upon
such Person's participation in such underwritten public offering and the
inclusion of such Person's Registrable Securities in the underwritten public
offering to the extent provided herein. The Company will use its commercially
reasonable best efforts to expeditiously effect the registration under the
Securities Act of all Registrable Securities of each holder who requested
inclusion of such holders Registrable Securities in such registration and to
qualify such Registrable Securities for sale under any state blue sky law;
provided, however, that the Company shall not be required to effect more than
two (2) registrations pursuant to requests under this Section 2(a).
Notwithstanding anything to the contrary contained herein, no request may be
made under this Section 2 within sixty (60) days after the effective date of a
registration statement filed by the Company covering a firm commitment
underwritten public offering. The Company may postpone the filing or the
effectiveness of any registration statement required to be filed pursuant to
this Section 2 for a reasonable time period, provided that such postponements
shall not exceed sixty (60) days in the aggregate during any twelve (12) month
period, if (i) the Company has been advised by legal counsel that such filing or
effectiveness would require disclosure of a material financing, acquisition or
other corporate transaction, and the Board of Directors determines in good faith
that such disclosure is not in the best interests of the Company and its
stockholders or (ii) the Company is then in possession of material non-public
information the disclosure of which the Board of Directors has determined would
have a material adverse effect upon the Company or its then current business
plans. A registration will not count as a requested registration under this
Section 2(a) unless and until the registration statement relating to such
registration has been declared effective by the Commission at the request of the
initiating holders; provided, however, that a majority in interest of the
participating holders of Registrable Securities may request, in writing, that
the Company withdraw a registration statement which has been filed under this
Section 2(a) but not yet been declared effective, and a majority in interest of
such holders may thereafter request the Company to reinstate such Registration
Statement, if permitted under the Securities Act, or to file another
registration statement, in accordance with the procedures set forth herein and
without reduction in the number of demand registrations permitted under this
Section 2(a);
(b) If a requested registration involves an underwritten public offering and the managing underwriter of such offering determines in good faith that the number of securities sought to be offered should be limited due to market conditions, then the number of securities to be included in such underwritten public offering shall be reduced to a number, reasonably deemed satisfactory by such managing underwriter, provided that the securities to be excluded shall be determined in the following sequence: (i) first, securities held by any other Persons (other than Persons holding Registrable Securities) having contractual, incidental or "Piggy-Back" registration rights, (ii) second, securities sought to be registered by the Company and (iii) third, Registrable Securities held by the Stockholders, it being understood that no shares shall be registered for the account of the Company or any shareholder other than the Stockholders unless all Registrable Securities for which Stockholders have requested registration have been registered. If there is a reduction in the number of shares of Common Stock or Registrable Securities to be registered pursuant to clauses (i), (ii) or (iii) above, such reduction shall be made within each tranche on a pro rata basis (based upon the aggregate number of shares of Common Stock or
Registrable Securities held by the holders in each such tranche and subject to the priorities set forth in the preceding sentence);
(c) With respect to a request for registration pursuant to Section 2(a) which is for an underwritten public offering, the managing underwriter shall be chosen by the Company, subject to the Stockholders' consent, which consent shall not be unreasonably withheld or delayed. The Company may not cause any other registration of securities for sale for its own account (other than a registration effected solely to implement an employee benefit plan or a transaction to which Rule 145 of the Securities Act is applicable) to become effective within one hundred eighty (180) days following the effective date of any registration required pursuant to this Section 2.
3. Form S-3. After the first public offering of its securities registered
under the Securities Act, the Company shall use its best efforts to qualify and
remain qualified to register securities on Form S-3 (or any successor form)
under the Securities Act. A Stockholder or Stockholders holding Registrable
Securities anticipated to have an aggregate sale price (net of underwriting
discounts and commissions, if any) in excess of $500,000 shall have the right,
on one or more occasions, to request registration on Form S-3 (or any successor
form) for the Registrable Securities held by such requesting Stockholder or
Stockholders. Such requests shall be in writing and shall state the number of
shares of Registrable Securities to be disposed of and the intended method of
disposition of such securities by such holder or holders. The Company shall give
notice to all other holders of Registrable Securities of the receipt of a
request for registration pursuant to this Section 3, and such other holders of
Registrable Securities shall then have thirty (30) days to notify the Company in
writing of their desire to participate in the registration, subject to the
limitations set forth in Section 4. The Company may postpone the filing or the
effectiveness of any registration statement pursuant to this Section 3 for a
reasonable period of time, provided that such postponements shall not exceed
forty-five (45) days in the aggregate during any twelve (12) month period, if
(a) the Company has been advised by legal counsel that such filing or
effectiveness would require disclosure of a material financing, acquisition or
other corporate transaction, and the Board of Directors of the Company
determines in good faith that such disclosure is not in the best interests of
the Company and its stockholders, (b) the Company is then in possession of
material non-public information the disclosure of which the Board of Directors
has determined would have a material adverse effect upon the Company or its then
current business plans, (c) the managing underwriter determines in good faith
that an audit (other than the Company's regular year-end audit) would be
required to successfully market such offering, or (d) the Company's President
certifies in writing that the Company is then currently engaged in discussions
with its managing underwriter concerning a registration statement that would be
subject to Section 4 hereof.
4. Piggy-Back Registration. If the Company at any time proposes to register any of its Common Stock under the Securities Act for sale to the public either for its own account or for the account of another Person other than the Stockholders (except pursuant to a demand by the Stockholders under Section 2 hereof, which demand registration shall be governed by the terms of said Section 2, and except with respect to registration statements on Forms S-4, S-8 or any other form not available for registering the Registrable Securities for sale to the public), each such time it will promptly give written notice to each holder of Registrable Securities of its intention to
effect such registration. Upon the written request of any such holder of
Registrable Securities given within thirty (30) days after receipt by such
holder of such notice, the Company will, subject to the limits contained in this
Section 4, use its commercially reasonable best efforts to cause all Registrable
Securities of such holder that such holder so requests to be registered under
the Securities Act and qualified for sale under any state blue sky law, all to
the extent required to permit such sale or other disposition of said Registrable
Securities; provided, however, that if the Company is advised in writing in good
faith by the managing underwriter of the Company's securities being offered in
an underwritten public offering pursuant to such registration statement that the
amount to be sold by Persons other than the Company (collectively, "Selling
Stockholders") is greater than the amount which can be offered without adversely
affecting the marketability of the offering, the Company may reduce the amount
offered for the accounts of Selling Stockholders (including any holders of
Registrable Securities) to a number reasonably deemed satisfactory by such
managing underwriter; and provided, further, that the securities to be excluded
shall be determined in the following sequence: (i) first, securities held by any
Persons not having any contractual, incidental or "Piggy-Back" registration
rights, (ii) second, securities held by any Persons having contractual,
incidental or "Piggy-Back" registration rights pursuant to an agreement which is
not this Agreement and Registrable Securities held by the Stockholders and (iii)
third, securities sought to be registered by the Company. If there is a
reduction in the number of shares of Common Stock or Registrable Securities to
be registered pursuant to clauses (i) or (ii) above, such reduction shall be
made within each tranche on a pro rata basis (based upon the aggregate number of
shares of Common Stock or Registrable Securities held by the holders in each
such tranche and subject to the priorities set forth in the preceding sentence).
5. Registration Procedures. If and whenever the Company is required by the provisions of this Agreement to effect the registration of any of its securities under the Securities Act, the Company will, as expeditiously as possible:
(a) use its commercially reasonable best efforts diligently to prepare and file with the Commission a registration statement on the appropriate form under the Securities Act with respect to such securities, which form shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the Commission to be filed therewith, and use its reasonable best efforts to cause such registration statement to become and remain effective until completion of the proposed offering (but not for more than one hundred eighty (180) days);
(b) use its commercially reasonable best efforts to prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until the completion of the offering (but not for more than one hundred eighty (180) days) and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such registration statement whenever the seller or sellers of such securities shall desire to sell or otherwise dispose of the same, but only to the extent provided in this Agreement;
(c) furnish to each selling holder and the underwriters, if any, such number of copies of such registration statement, any amendments thereto, any documents incorporated by reference therein, the prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as such selling holder may reasonably request in order to facilitate the public sale or other disposition of the securities owned by such selling holder;
(d) use its commercially reasonable best efforts to register or qualify the securities covered by such registration statement under and to the extent required by such other securities or state blue sky laws of such jurisdictions as each selling holder shall reasonably request, and do any and all other acts and things which may be necessary under such securities or blue sky laws to enable such selling holder to consummate the public sale or other disposition in such jurisdictions of the securities owned by such selling holder, except that the Company shall not for any such purpose be required to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified;
(e) within a reasonable time before each filing of the registration statement or prospectus or amendments or supplements thereto with the Commission, furnish to counsel selected by the holders of Registrable Securities copies of such documents proposed to be filed, which documents shall be subject to the reasonable approval of such counsel;
(f) promptly notify each selling holder of Registrable Securities, such selling holders' counsel and any underwriter and (if requested by any such Person) confirm such notice in writing, of the happening of any event which makes any statement made in the registration statement or related prospectus untrue or which requires the making of any changes in such registration statement or prospectus so that they will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances under which they were made not misleading; and, as promptly as practicable thereafter, prepare and file with the Commission and furnish a supplement or amendment to such prospectus so that, as thereafter deliverable to the purchasers of such Registrable Securities, such prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(g) use its commercially reasonable best efforts to prevent the issuance of any order suspending the effectiveness of a registration statement, and if one is issued use its commercially reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a registration statement at the earliest possible moment;
(h) if requested by the managing underwriter or underwriters (if any), any selling holder, or such selling holder's counsel, promptly incorporate in a prospectus supplement or post-effective amendment such information as such Person requests to be included therein with respect to the selling holder or the securities being sold, including, without limitation, with respect to the securities being sold by such selling holder to such underwriter or underwriters, the purchase price being paid therefor by such underwriter or underwriters and with respect to any other terms of an
underwritten offering of the securities to be sold in such offering, and promptly make all required filings of such prospectus supplement or post-effective amendment;
(i) make available to each selling holder, any underwriter participating in any disposition pursuant to a registration statement, and any attorney, accountant or other agent or representative retained by any such selling holder or underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the "Records"), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information requested by any such Inspector in connection with such registration statement subject, in each case, to such confidentiality agreements as the Company shall reasonably request;
(j) enter into any reasonable underwriting agreement required by the proposed underwriter(s) for the selling holders, if any, and use its reasonable best efforts to facilitate the public offering of the securities;
(k) request that each prospective selling holder be furnished a signed counterpart, addressed to the prospective selling holder, of (i) an opinion of counsel for the Company, dated the effective date of the registration statement, and (ii) if and to the extent permitted by applicable professional standards, a "comfort" letter signed by the independent public accountants who have certified the Company's financial statements included in the registration statement, covering substantially the same matters with respect to the registration statement (and the prospectus included therein) and (in the case of the accountants' letter) with respect to events subsequent to the date of the financial statements, as are customarily covered (at the time of such registration) in opinions of the Company's counsel and in accountants' letters delivered to the underwriters in underwritten public offerings of securities;
(l) use its commercially reasonable best efforts to cause the securities covered by such registration statement to be listed on the securities exchange or quoted on the quotation system on which the Common Stock is then listed or quoted (or, if the Common Stock is not yet listed or quoted, then on such exchange or quotation system as the selling holders of Registrable Securities and the Company shall determine);
(m) otherwise use its commercially reasonable best efforts to comply with all applicable rules and regulations of the Commission and make generally available to its security holders, in each case as soon as reasonably practicable, an earnings statement of the Company (which need not be audited) which will satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any comparable successor provisions); and
(n) otherwise cooperate with the underwriter(s), the Commission and other regulatory agencies and take all reasonable actions and execute and deliver or cause to be executed and delivered all documents reasonably necessary to effect the registration of any securities under this Agreement.
6. Expenses. All reasonable expenses incurred by the Company and the Stockholders in effecting the registrations provided for in Section 2,
Section 3 and Section 4, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company and one counsel for the Stockholders as a group (selected by a Majority Interest of the Stockholders who participate in the registration), underwriting expenses (other than commissions or discounts), expenses of any audits incident to or required by any such registration and expenses of complying with the securities or blue sky laws of any jurisdiction pursuant to Section 5(d) hereof (all of such expenses referred to as "Registration Expenses"), shall be paid by the Company.
7. Indemnification.
(a) The Company shall indemnify and hold harmless the selling holder of Registrable Securities, each underwriter (as defined in the Securities Act), and each other Person who participates in the offering of such securities and each other Person, if any, who controls (within the meaning of the Securities Act) such seller, underwriter or participating Person (individually and collectively, the "Indemnified Person") against any losses, claims, damages or liabilities (collectively, the "liability"), joint or several, to which such Indemnified Person may become subject under the Securities Act or any other statute or at common law, insofar as such liability (or actions in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation by the Company of the Securities Act, any state securities or "blue sky" laws or any rule or regulation thereunder in connection with such registration; provided, however, that the Company shall not be liable to any Indemnified Person in any such case to the extent that any such liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, preliminary or final prospectus, or amendment or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person specifically for use therein; provided, further, that the foregoing indemnity shall not inure to the benefit of any underwriter, with respect to any preliminary prospectus, from whom the person asserting any losses, claims, damages and liabilities and judgments purchased Registrable Securities or any Person controlling such underwriter, if a copy of the prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such underwriter to such Person, if required by law so to have been delivered, or prior to a written confirmation of the sale of the Registrable Securities to such Person, and if the prospectus (as so amended and supplemented) would have cured the defect giving rise to such liability, unless such failure to deliver the prospectus (as so amended and supplemented) was a result of noncompliance by the Company with Section 5(c) hereof. The Company shall reimburse each such Indemnified Person in connection with investigating or defending any such liability as expenses in connection with the same are incurred.
(b) Each selling holder of any securities included in such registration being effected shall indemnify and hold harmless each other selling holder of any securities, the Company, its directors and officers,
each underwriter and each other Person, if any, who controls the Company or such underwriter (individually and collectively also the "Indemnified Person"), against any liability, joint or several, to which any such Indemnified Person may become subject under the Securities Act or any other statute or at common law, insofar as such liability (or actions in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which securities were registered under the Securities Act at the request of such selling holder, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or (ii) any omission or alleged omission by such selling holder to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in the case of (i) and (ii) to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in such registration statement, preliminary or final prospectus, amendment or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by such selling holder specifically for use therein. Such selling holder shall reimburse any Indemnified Person for any fees incurred in investigating or defending any such liability; provided, however, that such selling holder's obligations hereunder shall be limited to an amount equal to the proceeds to such selling holder of the securities sold in any such registration.
(c) Indemnification similar to that specified in Section 7(a) and
Section 7(b) shall be given by the Company and each selling holder (with such
modifications as may be appropriate) with respect to any required registration
or other qualification of their securities under any federal or state law or
regulation of governmental authority other than the Securities Act.
(d) If the indemnification provided for in this Section 7 for any reason is held by a court of competent jurisdiction to be unavailable to an Indemnified Person in respect of any losses, claims, damages, expenses or liabilities referred to therein, then each Indemnifying Party under this Section 7, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, expenses or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, the selling holders and the underwriters from the offering of the Registrable Securities 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, the other selling holders and the underwriters in connection with the statements or omissions which resulted in such losses, claims, damages, expenses or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company, the selling holders and the underwriters shall be deemed to be in the same respective proportions that the net proceeds from the offering (before deducting expenses) received by the Company and the selling holders and the underwriting discount received by the underwriters, in each case as set forth in the table on the cover page of the applicable prospectus, bear to the aggregate public offering price of the Registrable Securities. The relative fault of the Company, the selling holders and the underwriters 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, the selling holders or the underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
The Company, the selling holders and the underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata or per capita allocation or by any other method of allocation which does not take into account the equitable considerations referred to in the immediately preceding paragraph. In no event, however, shall a selling holder be required to contribute any amount under this Section 7(d) in excess of the lesser of (i) that proportion of the total of such losses, claims, damages or liabilities indemnified against equal to the proportion of the total Registrable Securities sold under such registration statement which are being sold by such selling holder or (ii) the net proceeds received by such selling holder from its sale of Registrable Securities under such registration statement. No person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not found guilty of such fraudulent misrepresentation.
(e) Promptly after receipt by an Indemnified Person of notice of the commencement of any action involving a claim referred to in the preceding paragraphs of this Section, such Indemnified Person will, if a claim in respect thereof is made against an indemnifying party, give written notice to the latter of the commencement of such action.
(f) The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person or any officer, director or controlling person of such Indemnified Person and will survive the transfer of securities.
8. Holdback Agreement. If the Company shall consummate a Qualified IPO (as defined in the Company's Certificate of Designation of the Certificate of Incorporation describing the rights of the Series D Preferred Stock) and the managing underwriter for such registration shall request, the Stockholders shall not sell, make any short sale of, grant any option for the purchase of, or otherwise dispose of any Registrable Securities, the shares of Series D Preferred Stock or the Convertible Promissory Note then held by them (other than those shares of Common Stock included in such registration) without the prior written consent of the Company for a period designated by the Company in writing to the Stockholders, which period shall not begin more than ten (10) days prior to the effectiveness of the registration statement pursuant to which such public offering shall be made and shall not last more than one hundred eighty (180) days after the effective date of such registration statement (the "Holdback Period"); provided that the Stockholders shall be bound by this provision only if, and to the extent, the executive officers of the Company (except as set forth in the proviso below in this Section 8) owning Common Stock shall be bound by the same provision; provided, further, that if any executive officer, with the exception of Dr. Valentin P. Gapontsev with respect to sales of his shares of Common Stock made in order to satisfy his past or future tax obligations relating to a 1999 reorganization of the Company, is permitted to sell any shares of Common Stock prior to the expiration of the Holdback Period, then the Stockholders shall also be permitted to do so.
9. Underwriting Agreement. Notwithstanding the provisions of Sections 5, 8 and 13, to the extent that the Company and the Stockholders selling Registrable Securities in a proposed registration shall enter into an underwriting or similar agreement, which agreement contains provisions covering one or more issues addressed in such Sections, the provisions contained in such Sections addressing such issue or issues shall be superseded with respect to such registration by such other agreement.
10. Compliance with Rule 144. In the event that the Company (i) registers a class of securities under Section 12 of the Exchange Act or (ii) shall commence to file reports under Section 13 or 15(d) of the Exchange Act, the Company will use its best efforts thereafter to file with the Commission such information as is required under the Exchange Act for so long as there are holders of Registrable Securities, and in such event, the Company shall use its best efforts to take all action as may be required as a condition to the availability of Rule 144 under the Securities Act (or any comparable successor rules). After the occurrence of the first underwritten public offering of Common Stock pursuant to an offering registered under the Securities Act on Form S-1 or Form SA-1 (or any comparable successor forms), subject to the limitations on transfers imposed by this Agreement, the Company shall use its reasonable best efforts to facilitate and expedite transfers of Registrable Securities pursuant to Rule 144 under the Securities Act, which efforts shall include timely notice to its transfer agent to expedite such transfers of Registrable Securities.
11. Amendments. The provisions of this Agreement may be amended, and the Company may take any action herein prohibited or omit to perform any act herein required to be performed by it, only with the written consent of the Company and a Majority Interest of the Stockholders.
12. Transferability of Registration Rights. The registration rights set forth in this Agreement are transferable to each permitted transferee of Registrable Securities under the stockholders agreement with the Stockholder; provided, however, that the Company is given notice by the Stockholder at the time of or within a reasonable time after the transfer, stating the name and address of the transferee and identifying the securities with respect to which such registration rights are being assigned. Subject to the foregoing provision, this Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns; provided, further, that the registration rights granted in this Agreement shall not be transferred to Persons who received Registrable Securities pursuant to a registration statement under the Securities Act or pursuant to a transaction under Rule 144 or any successor provision thereto. Each subsequent holder of Registrable Securities must consent in writing to be bound by the terms and conditions of this Agreement in order to acquire the rights granted pursuant to this Agreement.
13. Damages. The Company recognizes and agrees that each holder of Registrable Securities will not have an adequate remedy if the Company fails to comply with the terms and provisions of this Agreement and that damages will not be readily ascertainable, and the Company expressly agrees that, in the event of such failure, it shall not oppose an application by any holder of Registrable Securities or any other Person entitled to the benefits of this Agreement requiring specific performance of any and all provisions hereof or enjoining the Company from continuing to commit any such breach of this Agreement.
14. Information by Holder. Each Stockholder selling Registrable Securities in a proposed registration shall furnish to the Company such written information regarding such holder and the distribution proposed by such Stockholder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Agreement.
15. Miscellaneous.
(a) This Agreement shall bind and inure to the benefit of the Company and the Stockholders and their respective successors and assigns.
(b) This Agreement shall terminate and be of no further force or effect upon the date on which there remains no Registrable Securities outstanding. The indemnification provisions of Section 7 shall survive the termination of this Agreement.
(c) This Agreement contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior arrangements or understandings with respect hereto.
(d) All notices, requests, demands and other communications provided for hereunder shall be in writing and mailed (by first class registered or certified mail, postage prepaid), telegraphed, sent by express overnight courier service or electronic facsimile transmission (with a copy by mail), or delivered to the applicable party at the addresses indicated below:
If to the Stockholder: JDS Uniphase Corporation
1768 Automation Parkway San Jose, California 95131 Attention: General Counsel Facsimile No.: (408) 546-4350 If to the Company: IPG Photonics Corporation 50 Old Webster Road Oxford, MA 01540 Attention: General Counsel Facsimile No.: (508) 373-1123 |
Or, as to each of the foregoing, at such other address as shall be designated by such Person in a written notice to other parties complying as to delivery with the terms of this subsection (a). All such notices, requests, demands and other communications shall, when mailed, telegraphed or sent, respectively, be effective (i) two days after being deposited in the mails or (ii) one day after being delivered to the telegraph company, deposited with the express overnight courier service or sent by electronic facsimile transmission, respectively, addressed as aforesaid.
(e) This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of New York (without giving effect to principles of conflicts of law). TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH PARTY HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR PASSED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE.
(f) It is specifically understood and agreed that any breach of the provisions of this Agreement by any party subject hereto will result in irreparable injury to the other parties hereto, that the remedy at law alone will be an inadequate remedy for such breach, and that, in addition to any other legal or equitable remedies which they may have, such other parties may enforce their respective rights by actions for specific performance (to the extent permitted by law) and the Company may refuse to recognize any unauthorized transferee as one of its stockholders for any purpose, including, without limitation, for purposes of dividend and voting rights, until the relevant party or parties have complied with all applicable provisions of this Agreement.
(g) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be executed by facsimile.
(h) If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein.
[The next page is the signature page]
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed as of the date first set forth above.
THE COMPANY: IPG PHOTONICS CORPORATION By: /s/ Valentin P. Gapontsev ----------------------------------------- By: Valentin P. Gapontsev Title: Chairman of the Board and Chief Executive Officer STOCKHOLDER: JDS UNIPHASE CORPORATION By: /s/ Christopher Dewees ----------------------------------------- Name: Christopher Dewees Title: Senior Vice President |
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
THIS AMENDMENT TO REGISTRATION RIGHTS AGREEMENT, dated as of July 31, 2006 (this "Amendment"), is made and entered into by and among IPG Photonics Corporation, a Delaware corporation (the "Company"), and JDS Uniphase Corporation, a Delaware corporation ("Stockholder"). Capitalized terms used herein but otherwise not defined shall have the meaning given to such terms in the Series D Registration Rights Agreement (as defined below).
WHEREAS, the Stockholders and the Company have entered into that certain Registration Rights Agreement, dated as of August 13, 2003 (the "Series D Registration Rights Agreement"); and
WHEREAS, the Stockholders and the Company desire to amend certain provisions of the Series D Registration Rights Agreement;
NOW, THEREFORE, in consideration of the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Amendment to Section 4. Section 4 of the Series D Registration Rights Agreement shall be amended by inserting the following sentence at the end of such Section:
Notwithstanding anything to the contrary in this Agreement, the Stockholders agree that they shall not be permitted to exercise their contractual registration rights under this Section 4 with respect to more than 20% of their Registrable Securities in connection with a Qualified IPO (as defined in Section 10 of the Certificate of Designation of Series D Preferred Stock) and the Stockholders agree that they shall not have any contractual, incidental or other registration rights with respect to their Registrable Securities in excess of such 20% of Registrable Securities in connection with a Qualified IPO, provided that such Qualified IPO is consummated on or before February 15, 2007, and in the event that the Qualified IPG shall not occur by the close of business on February 15, 2007, this sentence shall be null and void.
2. No Waiver. Nothing in this Amendment shall constitute a waiver by the Stockholders or the Company of any breach or default on the part of the other party to the Series D Registration Rights Agreement.
3. Governing Law. This Amendment shall be construed and enforced in accordance with and governed by the laws of the State of New York (without giving effect to principles of conflicts of law).
4. No Other Agreements. This Amendment constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes and preempts all prior agreements, understandings or representations, both written and oral, between the parties with respect to the subject matter hereof.
5. Effect. Except as amended hereby, the Series D Registration Rights Agreement shall remain in full force and effect in accordance with its terms.
6. Counterparts. The parties may execute multiple counterparts of this Amendment. Each executed counterpart shall be deemed an original, but all of them together represent one and the same agreement.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto caused this Amendment to be duly executed as of the day first written above.
THE COMPANY: IPG PHOTONICS CORPORATION
By: /s/ Timothy P.V. Mammen ----------------------------------------- Name: Timothy P.V. Mammen Title: Vice President and Chief Financial Officer |
STOCKHOLDER: JDS UNIPHASE CORPORATION
By: /s/ Matt Fawcett ----------------------------------------- Name: Matt Fawcett Title: Vice President and General Counsel |
EXHIBIT 10.1
IPG PHOTONICS CORPORATION
2000 INCENTIVE COMPENSATION PLAN
(As Amended and Restated Effective February 28, 2006)
IPG Photonics Corporation, USA, Inc. (the "Company") originally established the IPG Photonics Corporation 2000 Incentive Compensation Plan (the "Plan") effective April 12, 2000. The Company amended the Plan effective November 28, 2000, and effective June 12, 2005. The Company has adopted this amendment and restatement of the Plan effective February 28, 2006. The Plan permits the award of Stock Options, Stock Awards, Performance Shares, Performance Units, Stock Units, Cash, and SARs.
1. DEFINITIONS
The following terms shall have the following meanings unless the context indicates otherwise:
1.1. "Affiliate" shall mean a corporation which, for purposes of Section 422 of the Code, is a Parent or Subsidiary of the Company within the meaning of Sections 424(e) and 424(f) of the Code
1.2. "Award" shall mean a Stock Option, a SAR, a Stock Award, a Stock Unit, a Performance Share, a Performance Unit, or a Cash Award.
1.3. "Award Agreement" shall mean a written agreement between the Company and a Participant that establishes the terms, conditions, restrictions and/or limitations applicable to an Award, in addition to those established by the Plan and by the Committee.
1.4. "Board" shall mean the Board of Directors of the Company.
1.5. "Cash Award" shall mean a grant by the Committee to a Participant of an award of cash as described in Section 11 below.
1.6. "Cause" shall have the meaning set forth in any employment, consulting, or other written agreement between the Participant and the Company, a Group Company or Affiliate. If there is no employment, consulting, or other written agreement between the Participant and the Company, a Group Company or Affiliate, or if such agreement does not define "Cause," then "Cause" shall have the meaning specified in the Award Agreement; provided, that if the Award Agreement does not so specify, "Cause" shall mean, as determined by the Committee in its sole discretion, the Participant: (i) engages in conduct that cause financial or reputational injury to the Company a Group Company or Affiliate; (ii) engages in any act of dishonesty or misconduct that results in damage to the Company, a Group Company or Affiliate, or their business or reputation or that the Committee determines to adversely affect the value, reliability or performance of the Participant to the Company, a Group Company or Affiliate; (iii) refuses or fails to substantially comply with the human resources rules, policies, directions and/or restrictions relating to harassment and/or discrimination, or with compliance or risk management rules, policies, directions and/or restrictions of the Company, a Group Company or Affiliate; (iv) fails to cooperate with the Company, a Group Company or Affiliate in any internal investigation or administrative, regulatory or judicial proceeding; or (v) continuously fails to perform his or her duties to the Company, a Group
Company or Affiliate (which may include any sustained and unexcused absence of the Participant from the performance of such duties, which absence has not been certified in writing as due to physical or mental illness or Disability), after a written demand for performance has been delivered to the Participant identifying the manner in which the Participant has failed to substantially perform his or her duties. If any part of the definition of Cause set forth in clauses (i) through (v) above is deemed applicable to a Participant, this shall not preclude or prevent the reliance by the Company or the Committee on any other part of the preceding sentence that also may be applicable. Unless otherwise defined in the Participant's employment or other agreement, an act or omission is "willful" for this purpose if it was knowingly done, or knowingly omitted to be done, by the Participant not in good faith and without reasonable belief that the act or omission was in the best interest of the Company.
1.7. "Change in Control of the Company" shall mean the occurrence of any one or more of the following:
(a) Any "person" (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), including a "group" (as defined in Section 13(d)(3) of the Exchange Act), other than (i) the Company, (ii) any wholly-owned subsidiary of the Company, or (iii) any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate, becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company having fifty percent (50%) or more of the combined voting power of the then-outstanding securities of the Company that may be cast for the election of directors of the Company (other than as a result of an issuance of securities initiated by the Company in the ordinary course of business) (the "Company Voting Securities"); provided, however, that the event described in this paragraph (a) shall not be deemed to be a Change in Control by virtue of any underwriter temporarily holding securities pursuant to an offering of such securities;
(b) During any period of two consecutive years, individuals who at the beginning of any such period constitute the Board (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board, unless the election, or the nomination for election by the stockholders of the Company, of each new director of the Company during such period was approved by a vote of at least two-thirds of the Incumbent Directors then still in office;
(c) As the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of all or substantially all of the assets or contested election, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then-outstanding securities of the Company or any successor corporation or entity entitled to vote generally in the election of the directors of the Company or such other corporation or entity after such transaction is held in the aggregate by the holders of the securities of the Company entitled to vote generally in the election of directors of the Company immediately prior to such transaction; or
(d) The shareholders of the Company approve a plan of complete liquidation of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires beneficial ownership of more than fifty percent (50%) of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, however, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control transaction shall then occur.
1.8. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.
1.9. "Committee" shall mean (i) the Board or (ii) a committee or subcommittee of the Board appointed by the Board from among its members. The Committee may be the Board's Compensation Committee. Unless the Board determines otherwise, the Committee shall be comprised solely of not less than two members who each shall qualify as:
(a) a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3) (or any successor rule) under the Exchange Act, and
(b) an "outside director" within the meaning of Code Section 162(m) and the Treasury Regulations thereunder.
1.10. "Common Stock" shall mean the voting, common stock, $0.0001 par value per share, of the Company.
1.11. "Company" shall mean IPG Photonics Corporation USA, a Delaware corporation.
1.12. "Disability" means the total and permanent disability of a Participant (incurred while in the active service of the Company, an Affiliate or a Group Company) based on proof satisfactory to the Committee. Total and permanent disability shall be as defined in the Company's long-term disability plan, if any, or as otherwise provided by the Company.
1.13. "Dividend Equivalent Right" shall mean the right to receive an amount equal to the amount of any dividend paid with respect to a share of Common Stock multiplied by the number of shares of Common Stock underlying or with respect to a Stock Option, a SAR, a Stock Unit or a Performance Unit, and which shall be payable in cash, in Common Stock, in the form of Stock Units or Performance Units, or a combination of any or all of the foregoing.
1.14. "Effective Date" shall mean the date on which the Plan is adopted by the Board.
1.15. "Employee" shall mean an employee of the Company or any Affiliate, as described in Treasury Regulation Section 1.421-7(h).
1.16. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time, including applicable regulations thereunder.
1.17. "Fair Market Value of the Common Stock" shall mean:
(a) if the Common Stock is readily tradeable on a national securities exchange or other market system, the closing price of the Common Stock on the date of calculation (or on the last preceding trading date if Common Stock was not traded on such date), or
(b) if the Common Stock is not readily tradeable on a national securities exchange or other market system, the value as determined in good faith by the Board.
1.18. "Group Company" shall mean any business entity deemed by the Board to be a member of the IPG Group, including, but not limited to, any business entity that has a significant financial interest in the Company and any business entity in which the Company has a significant financial interest, such entities to be referred to collectively as the "Group Companies".
1.19. "Group Employee" shall mean any employee of a Group Company who is not an Employee.
1.20. "Independent Contractor" shall mean a person (other than a person who is an Employee, Group Employee or a Nonemployee Director) or an entity that renders services to the Company, an Affiliate or a Group Company.
1.21. "IPO" shall mean the first date that the Common Stock is registered under the Securities Act of 1934 and offered for sale to the public.
1.22. "ISO" shall mean an "incentive stock option" as such term is used in
Section 422 of the Code.
1.23. "Nonemployee Director" shall mean a member of the Board who is not an Employee.
1.24. "Nonqualified Stock Option" shall mean a Stock Option that does not qualify as an ISO.
1.25. "Nonvoting Stock" shall mean the capital stock of any class or classes having no voting power to elect the directors of a corporation.
1.26. "Parent" shall mean a corporation or any other business entity which directly or indirectly has an ownership interest of 50 percent or more of the Voting Stock of the Company.
1.27. "Participant" shall mean any Employee, Group Employee, Nonemployee Director or Independent Contractor to whom an Award has been granted by the Committee under the Plan.
1.28. "Performance-Based Award" shall mean an Award subject to the achievement of certain performance goals as described in Section 12 below.
1.29. "Performance Share" shall mean the grant by the Committee to a Participant of an Award as described in Section 10.1 below.
1.30. "Performance Unit" shall mean the grant by the Committee to a Participant of an Award as described in Section 10.2 below.
1.31. "Plan" shall mean the IPG Photonics 2000 Incentive Compensation Plan, as amended.
1.32. "Recapitalization" shall mean any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the Company's outstanding shares of capital stock as a class without the Company's receipt of consideration.
1.33. "Reorganization" shall mean any of the following: (a) a merger or consolidation in which the Company is not the surviving entity; (b) a sale, transfer or other disposition of all or substantially all of the Company's assets; (c) a reverse merger in which the Company is the surviving entity but in which the Company's outstanding voting securities are transferred in whole or in part to a person or persons different from the persons holding those securities immediately prior to the merger; or (d) any transaction effected primarily to change the state in which the Company is incorporated or to create a holding company structure.
1.34. "Retirement" means retirement from active employment or other service with the Company pursuant to the normal or early retirement policy and procedures of the Company.
1.35. "SAR" shall mean a grant by the Committee to a Participant of a stock appreciation right as described in Section 8 below.
1.36. "Stock" shall mean the shares of capital stock of the Company.
1.37. "Stock Award" shall mean a grant by the Committee to a Participant of an Award of Common Stock as described in Section 9.1 below.
1.38. "Stock Option" shall mean a grant by the Committee to a Participant of an option to purchase Common Stock as described in Section 7 below.
1.39. "Stock Unit" shall mean a grant by the Committee to a Participant of an Award as described in Section 9.2 below.
1.40. "Subsidiary" shall mean a corporation of which the Company directly or indirectly owns 50 percent or more of the Voting Stock or any other business entity in which the Company directly or indirectly has an ownership interest of 50 percent or more.
1.41. "Treasury Regulations" shall mean the regulations promulgated under the Code by the United States Department of the Treasury, as amended from time to time.
1.42. "Vest" shall mean:
(a) with respect to Stock Options and SARs, when the Stock Option or SAR (or a portion of such Stock Option or SAR) first becomes exercisable and remains exercisable subject to the terms and conditions of such Stock Option or SAR; or
(b) with respect to Awards other than Stock Options and SARs, when the Participant has:
(i) an unrestricted right, title and interest to receive the compensation (whether payable in Common Stock, cash or a combination of both) attributable to an Award (or a portion of such Award) or to otherwise enjoy the benefits underlying such Award; and
(ii) a right to transfer an Award subject to no Company-imposed restrictions or limitations other than restrictions and/or limitations imposed by Section 14 below.
1.43. "Vesting Date" shall mean the date or dates on which an Award Vests.
1.44. "Voting Stock" shall mean the capital stock of any class or classes having general voting power under ordinary circumstances, in the absence of contingencies, to elect the directors of a corporation.
2. PURPOSE AND TERM OF PLAN
2.1. Purpose. The purpose of the Plan is to motivate certain Employees, Group Employees, Nonemployee Directors and Independent Contractors to put forth maximum efforts toward the growth, profitability, and success of the Company, Affiliates and Group Companies by providing incentives to such Employees, Group Employees, Nonemployee Directors and Independent Contractors through cash payments and/or through the ownership and performance of the Common Stock. In addition, the Plan is intended to provide incentives which will attract and retain highly qualified individuals as Employees, Group Employees and Nonemployee Directors and to assist in aligning the interests of such Employees, Group Employees and Nonemployee Directors with those of the Company's stockholders.
2.2. Term. The Plan shall be effective as of the Effective Date; provided, however, that the Plan shall be approved by the stockholders of the Company at an annual meeting or any special meeting of stockholders of the Company within 12 months before or after the Effective Date, and such approval by the stockholders of the Company shall be a condition to the right of each Participant to receive Awards hereunder. Any Award granted under the Plan prior to the approval by the stockholders of the Company shall be effective as of the date of grant (unless the Committee specifies otherwise at the time of grant), but no such Award may Vest, be paid out, or otherwise be disposed of prior to such stockholder approval. If the stockholders of the Company fail to approve the Plan in accordance with this Section 2.2, any Award granted under the Plan shall be cancelled. The Plan shall terminate on the 10th anniversary of the Effective Date, unless sooner terminated by the Board under Section 16.1 below.
3. ELIGIBILITY AND PARTICIPATION
3.1. Eligibility. All Employees, Group Employees, Nonemployee Directors and Independent Contractors shall be eligible to participate in the Plan and to receive Awards.
3.2. Participation. Participants shall consist of such Employees, Group Employees, Nonemployee Directors and Independent Contractors as the Committee in its sole discretion designates to receive Awards under the Plan. Awards under the Plan shall be made on a one time basis for Participants and designation of a Participant in any year shall not require the Committee to designate such person or entity to receive an Award in any other year or, once designated, to receive the same type or amount of Award as granted to the Participant in any other year. The Committee shall consider such factors as it deems pertinent in selecting Participants and in determining the type and amount of their respective Awards.
4. ADMINISTRATION
4.1. Responsibility. The Committee shall have the responsibility, in its sole discretion, to control, operate, manage and administer the Plan in accordance with its terms.
4.2. Award Agreement. Each Award granted under the Plan shall be evidenced by an Award Agreement which shall be signed by the Committee and the Participant; provided, however, that in the event of any conflict between a provision of the Plan and any provision of an Award Agreement, the provision of the Plan shall prevail.
4.3. Authority of the Committee. The Committee shall have all the discretionary authority that may be necessary or desirable to enable it to discharge its responsibilities with respect to the Plan, including but not limited to the following:
(a) to determine eligibility for participation in the Plan;
(b) to determine eligibility for and the type and size of an Award granted under the Plan;
(c) to supply any omission, correct any defect, or reconcile any inconsistency in the Plan in such manner and to such extent as it shall deem appropriate in its sole discretion to carry the same into effect;
(d) to issue administrative guidelines as an aid to administer the Plan and make changes in such guidelines as it, from time to time, deems proper;
(e) to make rules for carrying out and administering the Plan and make changes in such rules as it, from time to time, deems proper;
(f) to the extent permitted under the Plan, grant waivers of Plan terms, conditions, restrictions, and limitations;
(g) to accelerate the Vesting of any Award when such action or actions would be in the best interest of the Company;
(h) to grant an Award in replacement of Awards previously granted under this Plan or any other executive compensation plan of the Company; and
(i) to take any and all other actions it deems necessary or desirable for the proper operation or administration of the Plan.
4.4. Action by the Committee. The Committee may act only by a majority of its members. A determination of the Committee may be made, without a meeting, by a writing signed by all members of the Committee. In addition, the Committee may authorize any one or more of its members to execute and deliver documents on behalf of the Committee. Meetings of the Committee may be held telephonically or via video conference, and participation via telephone or video conference shall have the same force and effect as physical presence at any Committee meeting.
4.5. Delegation of Authority. The Committee may delegate to one or more of its members, or to one or more agents, such administrative duties as it may
deem advisable; provided, however, that any such delegation shall be in writing. In addition, the Committee, or any person to whom it has delegated duties under this Section 4.5, may employ one or more persons to render advice with respect to any responsibility the Committee or such person may have under the Plan. The Committee may employ such legal or other counsel, consultants and agents as it may deem desirable for the administration of the Plan and may rely upon any opinion or computation received from any such counsel, consultant or agent. Expenses incurred by the Committee in the engagement of such counsel, consultant or agent shall be paid by the Company, or the Affiliate or Group Company whose employees have benefited from the Plan, as determined by the Committee.
4.6. Determinations and Interpretations by the Committee. All determinations and interpretations made by the Committee shall be binding and conclusive on all Participants and their heirs, successors, and legal representatives.
4.7. Liability. No member of the Board, no member of the Committee and no Employee or Group Employee shall be liable for any act or failure to act hereunder, except in circumstances involving his or her bad faith, gross negligence or willful misconduct, or for any act or failure to act hereunder by any other member or employee or by any agent to whom duties in connection with the administration of the Plan have been delegated.
4.8. Indemnification. Each person who is or has been a member of the Committee or the Board, and any individual or individuals to whom the Committee has delegated authority under this Section 4, will be indemnified and held harmless by the Company, Group Company and Affiliates from and against any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or as a result of any claim, action, suit or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken, or failure to act with respect to their duties on behalf of, under the Plan, except in circumstances involving such person's bad faith, gross negligence or willful misconduct. Each such person will also be indemnified and held harmless by the Company, Group Company and Affiliates from and against any and all amounts paid by him or her in a settlement approved by the Company, or paid by him or her in satisfaction of any judgment, of or in a claim, action, suit or proceeding against him or her and described in the previous sentence, so long as he or she gives the Company an opportunity, at its own expense, to handle and defend the claim, action, suit or proceeding before he or she undertakes to handle and defend it. The foregoing right of indemnification will not be exclusive of any other rights of indemnification to which a person who is or has been a member of the Committee or the Board may be entitled under the Articles of Incorporation or By-Laws of the Company, Group Company or Affiliate, as a matter of law, agreement or otherwise, or any power that the Company may have to indemnify him or her or hold him or her harmless.
5. SHARES SUBJECT TO PLAN
5.1. Available Shares. The aggregate number of shares of Common Stock which shall be available under the Plan during its term shall be 8,750,000 shares, subject to any adjustments made in accordance with Section 5.2 below. Such shares of Common Stock may be either authorized but unissued shares, shares of issued stock held in the Company's treasury, or a combination of both, at the discretion of the Company. Any shares of
Common Stock underlying an Award which terminate by expiration, forfeiture, cancellation or otherwise without the issuance of such shares shall again be available under the Plan. Awards that are payable only in cash are not subject to this Section 5.1.
5.2. Adjustment to Shares. If there is any change in the Common Stock of the
Company, through merger, consolidation, Reorganization, recapitalization,
stock dividend, stock split, reverse stock split, split-up, split-off,
spin-off, combination of shares, exchange of shares, dividend in kind or
other like change in capital structure or distribution (other than normal
cash dividends) to stockholders of the Company, an adjustment shall be made
to each outstanding Award so that each such Award shall thereafter be with
respect to or exercisable for such securities, cash and/or other property
as would have been received in respect of the Common Stock subject to such
Award had such Award been paid, distributed or exercised in full
immediately prior to such change or distribution. Such adjustment shall be
made successively each time any such change or distribution shall occur. In
addition, in the event of any such change or distribution, in order to
prevent dilution or enlargement of Participants' rights under the Plan, the
Committee shall have the authority to adjust, in an equitable manner, the
number and kind of shares that may be issued under the Plan, the number and
kind of shares subject to outstanding Awards, the exercise price applicable
to outstanding Stock Options, and the Fair Market Value of the Common Stock
and other value determinations applicable to outstanding Awards.
Appropriate adjustments may also be made by the Committee in the terms of
any Awards granted under the Plan to reflect such changes or distributions
and to modify any other terms of outstanding Awards on an equitable basis,
including modifications of performance goals and changes in the length of
performance periods; provided, however, that any such modifications and/or
changes to Performance-Based Awards does not disqualify compensation
attributable to such Awards as "performance-based compensation" under Code
Section 162(m). In addition, the Committee is authorized to make
adjustments to the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events affecting the
Company or the financial statements of the Company, or in response to
changes in applicable laws, regulations, or accounting principles.
Notwithstanding anything contained in the Plan, any adjustment with respect
to an ISO due to a change or distribution described in this Section 5.2
shall comply with the rules of Code Section 424(a), and in no event shall
any adjustment be made which would render any ISO granted hereunder to be
disqualified as an incentive stock option for purposes of Code Section 422.
6. MAXIMUM INDIVIDUAL AWARDS
6.1. Maximum Aggregate Number of Shares Underlying Stock-Based Awards Granted Under the Plan to Any Single Participant in Any Calendar Year. The maximum aggregate number of shares of Common Stock underlying all Awards measured in shares of Common Stock (whether payable in Common Stock, cash or a combination of both) that may be granted to any single Participant in any calendar year shall be 2,000,000 shares, subject to adjustment as provided in Section 5.2 above. For purposes of the preceding sentence, such Awards that are cancelled or repriced shall continue to be counted in determining such maximum aggregate number of shares of Common Stock that may be granted to any single Participant in any calendar year.
7. STOCK OPTIONS
7.1. In General. The Committee may, in its sole discretion, grant Stock Options to Employees, Group Employees, Nonemployee Directors and/or Independent Contractors on or after the Effective Date. The Committee shall, in its sole discretion, determine the Employees, Group Employees, Nonemployee Directors and Independent Contractors who will receive Stock Options and the number of shares of Common Stock underlying each Stock Option. With respect to Employees who become Participants, the Committee may grant such Participants ISOs or Nonqualified Stock Options or a combination of both. With respect to Group Employees, Nonemployee Directors and Independent Contractors who become Participants, the Committee may grant such Participants only Nonqualified Stock Options. Each Stock Option shall be subject to such terms and conditions consistent with the Plan as the Committee may impose from time to time. In addition, each Stock Option shall be subject to the terms and conditions set forth in Sections 7.2 through 7.8 below.
7.2. Exercise Price. The Committee shall specify the exercise price of each Stock Option in the Award Agreement; provided, however, that (i) the exercise price of an ISO shall not be less than 100 percent of the Fair Market Value of the Common Stock on the date of grant, and (ii) the exercise price of a Nonqualified Stock Option shall not be less than 100 percent of the Fair Market Value of the Common Stock on the date of grant unless the Committee in its sole discretion and due to special circumstances determines otherwise on the date of grant.
7.3. Term of Stock Option. The Committee shall specify the term of each Stock
Option in the Award Agreement; provided, however, that (i) no ISO shall be
exercisable after the 10th anniversary of the date of grant of such ISO and
(ii) no Nonqualified Stock Option shall be exercisable after the 10th
anniversary of the date of grant of such Nonqualified Stock Option. Each
Stock Option shall terminate at such earlier times and upon such conditions
or circumstances as the Committee shall, in its sole discretion, set forth
in the Award Agreement on the date of grant.
7.4. Vesting Date. The Committee shall specify in the Award Agreement the Vesting Date for each Stock Option. The Committee may grant Stock Options that are Vested, either in whole or in part, on the date of grant. If the Committee fails to specify a Vesting Date in the Award Agreement, 25 percent of such Stock Option shall become exercisable on each of the first 4 anniversaries of the date of grant and shall remain exercisable following such anniversary date until the Stock Option expires in accordance with its terms under the Award Agreement or under the terms of the Plan. The Vesting of a Stock Option may be subject to such other terms and conditions as shall be determined by the Committee, including, without limitation, accelerating the Vesting if certain performance goals are achieved.
7.5. Exercise of Stock Options. The Stock Option exercise price may be paid in cash or, in the sole discretion of the Committee, by delivery to the Company of shares of Common Stock then owned by the Participant, or by the Company's withholding a portion of the shares of Common Stock for which the Stock Option is exercisable, or by a combination of these methods. If the Common Stock is readily tradeable on a national securities exchange or other market system, payment may also be made by delivering a properly executed exercise notice to the Company and delivering a copy of
irrevocable instructions to a broker directing the broker to promptly deliver to the Company the amount of sale or loan proceeds to pay the exercise price. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms. The Committee may prescribe any other method of paying the exercise price that it determines to be consistent with applicable law and the purpose of the Plan, including, without limitation, in lieu of the delivery to the Company of shares of Common Stock then owned by the Participant, providing the Company with a notarized statement attesting to the number of shares owned by the Participant, where, upon verification by the Company, the Company would issue to the Participant only the number of incremental shares to which the Participant is entitled upon exercise of the Stock Option. In determining which methods a Participant may utilize to pay the exercise price, the Committee may consider such factors as it determines are appropriate; provided, however, that with respect to ISOs, all such discretionary determinations shall be made by the Committee at the time of grant and specified in the Award Agreement.
7.6. Restrictions Relating to ISOs. In addition to being subject to the terms
and conditions of this Section 7, ISOs shall comply with all other
requirements under Code Section 422. Accordingly, ISOs may be granted only
to Participants who are employees (as described in Treasury Regulation
Section 1.421-7(h)) of the Company or of any "Parent Corporation" (as
defined in Code Section 424(e)) or of any "Subsidiary Corporation" (as
defined in Code Section 424(f)) on the date of grant. The aggregate market
value (determined as of the time the ISO is granted) of the Common Stock
with respect to which ISOs (under all option plans of the Company and of
any Parent Corporation and of any Subsidiary Corporation) are exercisable
for the first time by a Participant during any calendar year shall not
exceed $100,000. For purposes of the preceding sentence, (i) ISOs shall be
taken into account in the order in which they are granted and (ii) ISOs
granted before 1987 shall not be taken into account. ISOs shall not be
transferable by the Participant other than by will or the laws of descent
and distribution and shall be exercisable, during the Participant's
lifetime, only by such Participant. The Committee shall not grant ISOs to
any Employee who, at the time the ISO is granted, owns stock possessing
(after the application of the attribution rules of Code Section 424(d))
more than 10 percent of the total combined voting power of all classes of
stock of the Company or of any Parent Corporation or of any Subsidiary
Corporation unless the exercise price of the ISO is fixed at not less than
110 percent of the Fair Market Value of the Common Stock on the date of
grant and the exercise of such ISO is prohibited by its terms after the 5th
anniversary of the ISO's date of grant. In addition, no ISO shall be issued
to a Participant in tandem with a Nonqualified Stock Option issued to such
Participant in accordance with Treasury Regulation Section 14a.422A-1,
Q/A-39.
7.7. Additional Terms and Conditions. The Committee may, by way of the Award Agreements or otherwise, establish such other terms, conditions, restrictions and/or limitations, if any, of any Stock Option, provided they are not inconsistent with the Plan, including, without limitation, the requirement that the Participant not engage in competition with the Company, an Affiliate or a Group Company.
7.8. Conversion Stock Options. The Committee may, in its sole discretion, grant a Stock Option to any holder of an option (hereinafter referred to
as an "Original Option") to purchase shares of the stock of any corporation:
(a) the stock or assets of which were acquired, directly or indirectly, by the Company, an Affiliate or Group Company, or
(b) which was merged with and into the Company, an Affiliate or Group Company,
so that the Original Option is converted into a Stock Option (hereinafter referred to as a "Conversion Stock Option"); provided, however, that such Conversion Stock Option as of the date of its grant (the "Conversion Stock Option Grant Date") shall have the same economic value as the Original Option as of the Conversion Stock Option Grant Date. In addition, unless the Committee, in its sole discretion determines otherwise, a Conversion Stock Option which is converting an Original Option intended to qualify as an ISO shall have the same terms and conditions as applicable to the Original Option in accordance with Code Section 424 and the Treasury Regulations thereunder so that the conversion (x) is treated as the issuance or assumption of a stock option under Code Section 424(a) and (y) is not treated as a modification, extension or renewal of a stock option under Code Section 424(h).
7.9. Right to Call Options or Stock. Notwithstanding any other provision of this Plan and without regard to the completion of an IPO, any Stock Option granted under this Plan shall be subject to a right of call by the Committee in the event of termination of the Plan due to merger or acquisition of the Company. Prior to an IPO, any Stock held by a Participant as a result of an Award under this Plan, shall be subject to a right of call by the Committee in the event of termination of the Plan due to merger or acquisition of the Company, or upon the occurrence of Change in Control, whether or not the Plan is terminated. If the right to call the Stock is exercised by the Committee, the shares of Stock must be returned to the Company within seven (7) days of the call notice.
(a) Upon the call of Stock, the owner of Stock shall, unless otherwise
determined by the Committee pursuant to subsection (ii) below, be
entitled to receive from the Company an amount equal to the Fair
Market Value of the returned Stock. Upon the call of a Stock Option,
the Committee shall pay the optionee an amount equal to the excess of
(i) the Fair Market Value the number of shares of Stock subject to the
Option, over (y) the exercise price of such shares of Stock..
(b) The Company shall have the right to defer payment of the proceeds under this Section 7.9, and make such payment in the form of single lump sum or in installments over such periods as the Committee may determine in its discretion, subject to Code Section 409A.
8. SARS
8.1. In General. The Committee may, in its sole discretion, grant SARs to Employees, Group Employees, Nonemployee Directors, and/or Independent Contractors. A SAR is a right to receive a payment in cash, Common Stock or a combination of both, in an amount equal to the excess of (x) the Fair Market Value of the Common Stock, or other specified valuation, of a specified number of shares of Common Stock on the date the SAR is exercised over (y) the Fair Market Value of the Common Stock, or other
specified valuation (which shall be no less than the Fair Market Value of the Common Stock), of such shares of Common Stock on the date the SAR is granted, all as determined by the Committee; provided, however, that if a SAR is granted retroactively in tandem with or in substitution for a Stock Option, the designated Fair Market Value of the Common Stock in the Award Agreement may be the Fair Market Value of the Common Stock on the date such Stock Option was granted. Each SAR shall be subject to such terms and conditions, including, but not limited to, a provision that automatically converts a SAR into a Stock Option on a conversion date specified at the time of grant, as the Committee shall impose from time to time in its sole discretion and subject to the terms of the Plan.
9. STOCK AWARDS AND STOCK UNITS
9.1. Stock Awards. The Committee may, in its sole discretion, grant Stock Awards to Employees, Group Employees, Nonemployee Directors, and/or Independent Contractors as additional compensation or in lieu of other compensation for services to the Company, an Affiliate or a Group Company. A Stock Award shall consist of shares of Common Stock which shall be subject to such terms and conditions as the Committee in its sole discretion determines appropriate including, without limitation, restrictions on the sale or other disposition of such shares, the Vesting Date with respect to such shares, and the right of the Company to reacquire such shares for no consideration upon termination of the Participant's employment within specified periods. The Committee may require the Participant to deliver a duly signed stock power, endorsed in blank, relating to the Common Stock covered by such Stock Award and/or that the stock certificates evidencing such shares be held in custody or bear restrictive legends until the restrictions thereon shall have lapsed. With respect to shares of Common Stock subject to a Stock Award, the Participant shall have all of the rights of a holder of shares of Common Stock, including the right to receive dividends and to vote the shares, unless the Committee determines otherwise on the date of grant.
9.2. Stock Units. The Committee may, in its sole discretion, grant Stock Units to Employees, Group Employees, Nonemployee Directors, and Independent Contractors as additional compensation or in lieu of other compensation for services to the Company, an Affiliate or a Group Company. A Stock Unit is a hypothetical share of Common Stock represented by a notional account established and maintained (or caused to be established or maintained) by the Company for such Participant who receives a grant of Stock Units. Stock Units shall be subject to such terms and conditions as the Committee, in its sole discretion, determines appropriate including, without limitation, determinations of the Vesting Date with respect to such Stock Units and the criteria for the Vesting of such Stock Units. Subject to Section 9.3, a Stock Unit granted by the Committee shall provide for payment in shares of Common Stock at such time or times as the Award Agreement shall specify. The Committee shall determine whether a Participant who has been granted a Stock Unit shall also be entitled to a Dividend Equivalent Right.
9.3. Payout of Stock Units. Subject to a Participant's election to defer in accordance with Section 17.3 below, upon the Vesting of a Stock Unit, the shares of Common Stock representing the Stock Unit shall be distributed to the Participant, unless the Committee, in its sole discretion, provides for the payment of the Stock Unit in cash (or partly in cash and partly in
shares of Common Stock) equal to the value of the shares of Common Stock which would otherwise be distributed to the Participant.
10. PERFORMANCE SHARES AND PERFORMANCE UNITS
10.1. Performance Shares. The Committee may, in its sole discretion, grant Performance Shares to Employees, Group Employees, Nonemployee Directors, and/or Independent Contractors as additional compensation or in lieu of other compensation for services to the Company, an Affiliate or a Group Company. A Performance Share shall consist of a share or shares of Common Stock which shall be subject to such terms and conditions as the Committee, in its sole discretion, determines appropriate including, without limitation, determining the performance goal or goals which, depending on the extent to which such goals are met, will determine the number and/or value of the Performance Shares that will be paid out or distributed to the Participant granted Performance Shares. Performance goals may be based on, without limitation, Company-wide, divisional and/or individual performance, as the Committee, in its sole discretion, may determine, and may be based on the performance measures listed in Section 12.3 below.
10.2. Performance Units. The Committee may, in its sole discretion, grant Performance Units to Employees, Group Employees, Nonemployee Directors, and/or Independent Contractors as additional compensation or in lieu of other compensation for services to the Company, an Affiliate or Group Company. A Performance Unit is a hypothetical share of the value of the Company, represented by a notional account which shall be established and maintained (or caused to be established or maintained) by the Company for such Participant who receives a grant of Performance Units. Performance Units shall be subject to such terms and conditions as the Committee, in its sole discretion, determines appropriate including, without limitation, determining the performance goal or goals which, depending on the extent to which such goals are met, will determine the number and/or value of the Performance Units that will accrue to the Participant who has been granted Performance Units. Performance goals may be based on, without limitation, Company-wide, divisional and/or individual performance, as the Committee, in its sole discretion, may determine, and may be based on the performance measures listed in Section 12.3 below.
10.3. Adjustment of Performance Goals. With respect to any Performance Shares or Performance Units that are not intended to qualify as Performance-Based Awards (as described in Section 12 below), the Committee shall have the authority at any time to adjust, as it deems necessary or desirable, the performance goals for any outstanding Performance Shares or Performance Units unless, at the time of establishment of such performance goals, the Committee precludes its authority to make such adjustments.
10.4. Payout of Performance Shares or Performance Units. Subject to a Participant's election to defer distribution in accordance with Section 17.3 below, upon the Vesting of a Performance Share or a Performance Unit, the shares of Common Stock representing the Performance Share or the cash value of the Performance Unit shall be distributed to the Participant, unless the Committee, in its sole discretion, determines to make the payment for the Performance Share in cash, or the Performance Unit in shares of Common Stock (or partly in cash and partly in shares of Common Stock) equal to the value of the shares of Common Stock or cash which would otherwise be distributed to the Participant.
11. CASH AWARDS
11.1. In General. The Committee may, in its sole discretion, grant Cash Awards to Employees, Group Employees, Nonemployee Directors, and/or Independent Contractors as additional compensation or in lieu of other compensation for services to the Company, an Affiliate or Group Company. A Cash Award shall be subject to such terms and conditions as the Committee, in its sole discretion, determines appropriate including, without limitation, determining the Vesting Date with respect to such Cash Award, the criteria for the Vesting of such Cash Award, and the right of the Company to require the Participant to repay the Cash Award (with or without interest) upon termination of the Participant's employment within specified periods.
12. PERFORMANCE-BASED AWARDS
12.1. In General. The Committee, in its sole discretion, may designate Awards granted under the Plan as Performance-Based Awards (as defined below) if it determines that such compensation might not be tax deductible by the Company due to the deduction limitation imposed by Code Section 162(m). Accordingly, an Award granted under the Plan may be granted in such a manner that the compensation attributable to such Award is intended by the Committee to qualify as "performance-based compensation" (as such term is used in Code Section 162(m) and the Treasury Regulations thereunder) and thus be exempt from the deduction limitation imposed by Code Section 162(m) ("Performance-Based Awards").
12.2. Qualification of Performance-Based Awards. Awards shall qualify as Performance-Based Awards under the Plan only if:
(a) at the time of grant the Committee is comprised solely of two or more "outside directors" (as such term is used in Code Section 162(m) and the Treasury Regulations thereunder);
(b) with respect to either the granting or Vesting of an Award (other than
(i) a Nonqualified Stock Option or (ii) a SAR, which are granted with
an exercise price at or above the Fair Market Value of the Common
Stock on the date of grant), such Award is subject to the achievement
of a performance goal or goals based on one or more of the performance
measures specified in Section 12.3 below;
(c) the Committee establishes in writing (i) the objective
performance-based goals applicable to a given performance period, and
(ii) the individual employees or class of employees to which such
performance-based goals apply no later than 90 days after the
commencement of such performance period (but in no event after 25
percent of such performance period has elapsed);
(d) no compensation attributable to a Performance-Based Award will be paid to or otherwise received by a Participant until the Committee certifies in writing that the performance goal or goals (and any other material terms) applicable to such performance period have been satisfied; and
(e) after the establishment of a performance goal, the Committee shall not revise such performance goal (unless such revision will not disqualify compensation attributable to the Award as "performance-based compensation" under Code Section 162(m)) or increase the
amount of compensation payable with respect to such Award upon the attainment of such performance goal.
12.3. Performance Measures. The Committee may use the following performance measures (either individually or in any combination) to set performance goals with respect to Awards intended to qualify as Performance-Based Awards: net sales; pretax income before allocation of corporate overhead and bonus; budget; cash flow; earnings per share; net income; division, group or corporate financial goals; return on stockholders' equity; return on assets; attainment of strategic and operational initiatives; appreciation in and/or maintenance of the price of the Common Stock or any other publicly-traded securities of the Company; market share; gross profits; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; economic value-added models; comparisons with various stock market indices; increase in number of customers; and/or reductions in costs.
12.4. Stockholder Reapproval. As required by Treasury Regulation Section 1.162-27(e)(vi), the material terms of performance goals as described in this Section 12 shall be disclosed to and reapproved by the Company's stockholders no later than the first stockholder meeting that occurs in the 5th year following the year in which the Company's stockholders previously approved such performance goals.
13. CHANGE IN CONTROL
13.1. Accelerated Vesting. Notwithstanding any other provision of this Plan to the contrary, if there is a Change in Control of the Company, the Committee, in its sole discretion, may take such actions as it deems appropriate with respect to outstanding Awards, including, without limitation, accelerating the Vesting Date and/or payout of such Awards; provided, however, that such action shall not conflict with any provision contained in an Award Agreement unless such provision is amended in accordance with Section 16.3 below.
13.2. Cashout. The Committee, in its sole discretion, may determine that, upon the occurrence of a Change in Control of the Company, all or a portion of certain outstanding Awards shall terminate within a specified number of days after notice to the holders, and each such holder shall receive an amount equal to the value of such Award on the date of the Change in Control, and with respect to each share of Common Stock subject to a Stock Option or SAR, an amount equal to the excess of the Fair Market Value of such shares of Common Stock immediately prior to the occurrence of such Change in Control of the Company over the exercise price per share of such Stock Option or SAR. Such amount shall be payable in cash, in one or more kinds of property (including the property, if any, payable in the transaction) or in a combination thereof, as the Committee, in its sole discretion, shall determine.
13.3. Assumption or Substitution of Awards. Notwithstanding anything contained in the Plan to the contrary, the Committee may, in its sole discretion, provide that an Award may be assumed by any entity which acquires control of the Company or may be substituted by a similar award under such entity's compensation plans.
14. TERMINATION OF EMPLOYMENT
14.1. Termination of Employment Due to Death or Disability. Subject to any written agreement between the Company, an Affiliate or a Group Company and a Participant, if a Participant's employment is terminated due to death or disability:
(a) all non-Vested portions of Awards held by the Participant on the date of the Participant's death or the date of the termination of his or her employment, as the case may be, shall immediately become vested; and
(b) all Vested portions of Stock Options and SARs held by the Participant on the date of the Participant's death or the date of the termination of his or her employment, as the case may be, shall remain exercisable until the earlier of:
(i) the end of the 12-month period following the date of the Participant's death or the date of the termination of his or her employment, as the case may be, or
(ii) the date the Stock Option or SAR would otherwise expire.
14.2. Termination of Employment for Cause. Subject to any written agreement between the Company, an Affiliate or Group Company and a Participant, if a Participant's employment is terminated by the Company, the Affiliate or the Group Company, as the case may be, for Cause, all Awards held by the Participant on the date of the termination of employment, whether Vested or non-Vested, shall immediately be forfeited by the Participant as of such date, and, in the event a Participant's employment is terminated by the Company, an Affiliate or Group Company for Cause prior to an IPO, the Company shall have the right to call any Stock received by the Participant as a result of the exercise of Stock Options under the Plan and the Participant shall be entitled to receive from the Company an amount equal to the exercise price paid for such Stock. A Participant's Service shall be deemed to have terminated for Cause if, after the Participant's Service has terminated, facts and circumstances are discovered that would have justified a termination for Cause.
14.3. Other Terminations of Employment. Subject to any written agreement between the Company, an Affiliate or Group Company and a Participant, if a Participant's employment is terminated for any reason other than for Cause or other than due to death or disability:
(a) all non-Vested portions of Awards held by the Participant on the date of the termination of his or her employment shall immediately be forfeited by such Participant as of such date; and
(b) all Vested portions of Stock Options and/or SARs held by the Participant on the date of the termination of his or her employment shall remain exercisable until the earlier of (i) the end of the 90-day period following the date of the termination of the Participant's employment or (ii) the date the Stock Option or SAR would otherwise expire.
14.4. ISOs. Notwithstanding anything contained in the Plan to the contrary, (i) the provisions contained in this Section 14 shall be applied to an ISO only if the application of such provision maintains the treatment of such
ISO as an ISO and (ii) the exercise period of an ISO in the event of a
termination of the Participant's employment due to disability provided in
Section 14.1 above shall be applied only if the Participant is "permanently
and totally disabled" (as such term is defined in Code Section 22(e)(3)).
14.5. Leave of Absence. A Participant shall not cease to be an Employee for purposes of this Plan solely on account of a Leave of Absence. For purposes of ISOs, 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, on the one hundred eighty-first (181st) day of such leave any ISO held by the Participant shall cease to be treated as an ISO and shall be treated for tax purposes as a Nonqualified Stock Option. Notwithstanding anything in the Plan to the contrary, the Committee, in its sole discretion, reserves the right to designate a Participant's leave of absence as "Personal Leave;" provided that military leaves and approved family or medical leaves shall not be considered Personal Leave. No Awards shall be made to a Participant during Personal Leave. A Participant's un-Vested Awards shall remain un-Vested during such Personal Leave and the time spent on such Personal Leave shall not count towards the vesting of such Awards. A Participant's Vested Stock Options that may be exercised shall remain exercisable upon commencement of Personal Leave until the earlier of (i) a period of one year from the date of commencement of such Personal Leave; or (ii) the remaining exercise period of such Stock Options. Notwithstanding the foregoing, if a Participant returns to the Company from a Personal Leave of less than one year and the Participant's Stock Options have not lapsed, the Stock Options shall remain exercisable for the remaining exercise period as provided at the time of grant and subject to the conditions contained herein.
15. TAXES
15.1. Withholding Taxes. With respect to Employees and Group Employees, the Company, or the applicable Affiliate or Group Company, may require a Participant who has become vested in his or her Stock Award, Stock Unit, Performance Share or Performance Unit granted hereunder, or who exercises a Stock Option or SAR granted hereunder, to reimburse the corporation which employs such Employee or Group Employee for any taxes required by any governmental regulatory authority to be withheld or otherwise deducted and paid by such corporation or entity in respect of the issuance or disposition of such shares or the payment of any amounts. In lieu thereof, the corporation which employs such Employee or Group Employee shall have the right to withhold the amount of such taxes from any other sums due or to become due from such corporation to the Employee or Group Employee upon such terms and conditions as the Committee shall prescribe. The corporation that employs the Employee or Group Employee may, in its discretion, hold the stock certificate to which such Employee or Group Employee is entitled upon the vesting of a Stock Award, Stock Unit, Performance Share or Performance Unit or the exercise of a Stock Option or SAR as security for the payment of such withholding tax liability, until cash sufficient to pay that liability has been accumulated.
15.2. Use of Common Stock to Satisfy Withholding Obligation. With respect to Employees and Group Employees, at any time that the Company or an Affiliate or Group Company that employs such Employee or Group Employee
becomes subject to a withholding obligation under applicable law with respect to the vesting of a Stock Award, Stock Unit, Performance Share or Performance Unit or the exercise of a Nonqualified Stock Option (the "Tax Date"), except as set forth below, a holder of such Award may elect to satisfy, in whole or in part, the holder's related personal tax liabilities (an "Election") by (i) directing the Company, the Affiliate or the Group Company that employs such Employee or Group Employee to withhold from shares issuable in the related vesting or exercise either a specified number of shares, or shares of Common Stock having a specified value (in each case equal to the related minimum statutory personal withholding tax liabilities with respect to the applicable taxing jurisdiction in order to comply with the requirements for a "fixed plan" under Accounting Principles Board Opinion No. 25), (ii) tendering shares of Common Stock previously issued pursuant to the exercise of a Stock Option or other shares of the Common Stock owned by the holder, or (iii) combining any or all of the foregoing Elections in any fashion. An Election shall be irrevocable. The withheld shares and other shares of Common Stock tendered in payment shall be valued at their Fair Market Value of the Common Stock on the Tax Date. The Committee may disapprove any Election, suspend or terminate the right to make Elections or provide that the right to make Elections shall not apply to particular shares or exercises. The Committee may impose any additional conditions or restrictions on the right to make an Election as it shall deem appropriate, including conditions or restrictions with respect to Section 16 of the Exchange Act.
15.3. No Guarantee of Tax Consequences. No person connected with the Plan in any capacity, including, but not limited to, the Company, an Affiliate or a Group Company and their directors, officers, agents and employees makes any representation, commitment, or guarantee that any tax treatment, including, but not limited to, federal, state and local income, estate and gift tax treatment, will be applicable with respect to amounts deferred under the Plan, or paid to or for the benefit of a Participant under the Plan, or that such tax treatment will apply to or be available to a Participant on account of participation in the Plan.
16. AMENDMENT AND TERMINATION
16.1. Termination of Plan. The Board may suspend or terminate the Plan at any time with or without prior notice; provided, however, that no action authorized by this Section 16.1 shall reduce the amount of any outstanding Award or change the terms and conditions thereof without the Participants' consent.
16.2. Amendment of Plan. The Board may amend the Plan at any time with or
without prior notice; provided, however, that no action authorized by this
Section 16.2 shall reduce the amount of any outstanding Award or change the
terms and conditions thereof without the Participants' consent. No
amendment of the Plan shall, without the approval of the stockholders of
the Company:
(a) increase the total number of shares which may be issued under the Plan;
(b) increase the maximum number of shares with respect to all Awards measured in Common Stock that may be granted to any individual under the Plan;
(c) increase the maximum dollar amount that may be paid with respect to all Awards measured in cash; or
(d) modify the requirements as to eligibility for Awards under the Plan.
In addition, the Plan shall not be amended without the approval of such amendment by the Company's stockholders if such amendment (i) is required under the rules and regulations of the stock exchange or national market system on which the Common Stock is listed or (ii) will disqualify any ISO granted hereunder.
16.3. Amendment or Cancellation of Award Agreements. The Committee may amend or modify any Award Agreement at any time by mutual agreement between the Committee and the Participant or such other persons as may then have an interest therein. In addition, by mutual agreement between the Committee and a Participant or such other persons as may then have an interest therein, Awards may be granted to an Employee, Group Employee, Nonemployee Director or Independent Contractor in substitution and exchange for, and in cancellation of, any Awards previously granted to such Employee, Group Employee, Nonemployee Director or Independent Contractor under the Plan, or any award previously granted to such Employee, Group Employee, Nonemployee Director or Independent Contractor under any other present or future plan of the Company or any present or future plan of an entity which (i) is purchased by the Company, (ii) purchases the Company, or (iii) merges into or with the Company.
17. MISCELLANEOUS
17.1. Other Provisions. Awards granted under the Plan may also be subject to such other provisions (whether or not applicable to an Award granted to any other Participant) as the Committee determines on the date of grant to be appropriate, including, without limitation, for the installment purchase of Common Stock under Stock Options, to assist the Participant in financing the acquisition of Common Stock, for the forfeiture of, or restrictions on resale or other disposition of, Common Stock acquired under any Stock Option, for the acceleration of Vesting of Awards in the event of a Change in Control of the Company, for the payment of the value of Awards to Participants in the event of a Change in Control of the Company, or to comply with federal and state securities laws, or understandings or conditions as to the Participant's employment in addition to those specifically provided for under the Plan.
17.2. Transferability. Each Award granted under the Plan to a Participant shall not be transferable otherwise than by will or the laws of descent and distribution, and Stock Options and SARs shall be exercisable, during the Participant's lifetime, only by the Participant. In the event of the death of a Participant, each Stock Option or SAR theretofore granted to him or her shall be exercisable during such period after his or her death as the Committee shall, in its sole discretion, set forth in the Award Agreement on the date of grant and then only by the executor or administrator of the estate of the deceased Participant or the person or persons to whom the deceased Participant's rights under the Stock Option or SAR shall pass by will or the laws of descent and distribution. Notwithstanding the foregoing, the Committee, in its sole discretion, may permit the transferability of a Stock Option (other than an ISO) by a Participant solely to members of the Participant's immediate family or trusts or family partnerships or other similar entities for the benefit of
such persons, and subject to such terms, conditions, restrictions and/or limitations, if any, as the Committee may establish and include in the Award Agreement.
17.3. Election to Defer Compensation Attributable to Award. The Committee may, in its sole discretion and subject to Code Section 409A, allow a Participant to elect to defer the receipt of any compensation attributable to an Award under guidelines and procedures to be established by the Committee after taking into account the advice of the Company's tax counsel.
17.4. Listing of Shares and Related Matters. If at any time the Committee shall determine that the listing, registration or qualification of the shares of Common Stock subject to an Award on any securities exchange or under any applicable law, or the consent or approval of any governmental regulatory authority, is necessary or desirable as a condition of, or in connection with, the granting of an Award or the issuance of shares of Common Stock thereunder, such Award may not be exercised, distributed or paid out, as the case may be, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.
17.5. No Right, Title, or Interest in Company Assets. Participants shall have no right, title, or interest whatsoever in or to any investments which the Company may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative or any other person. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan. The Plan is not intended to be subject to the Employee Retirement Income Security Act of 1974, as amended.
17.6. No Right to Continued Employment or Service or to Grants. A Participant's rights, if any, to continue to serve the Company, an Affiliate or a Group Company as a director, officer, employee, independent contractor or otherwise, shall not be enlarged or otherwise affected by his or her designation as a Participant under the Plan, and the Company, the Affiliate and the Group Company reserve the right to terminate the employment of any Employee or Group Employee or the services of any Independent Contractor or director at any time. The adoption of the Plan shall not be deemed to give any Employee, Group Employee, Nonemployee Director, Independent Contractor or any other individual any right to be selected as a Participant or to be granted an Award.
17.7. Awards Subject to Foreign Laws. The Committee may grant Awards to individual Participants who are subject to the tax laws of nations other than the United States, and such Awards may have terms and conditions as determined by the Committee as necessary to comply with applicable foreign laws. The Committee may take any action which it deems advisable to obtain approval of such Awards by the appropriate foreign governmental entity; provided, however, that no such Awards may be granted pursuant to
this Section 17.7 and no action may be taken which would result in a violation of the Exchange Act or any other applicable law.
17.8. Governing Law. The Plan, all Awards granted hereunder, and all actions taken in connection herewith shall be governed by and construed in accordance with the laws of the State of Delaware without reference to principles of conflict of laws, except as superseded by applicable federal law. Participants, the Company, a Group Company and Affiliate each submit and consent to the jurisdiction of the courts in the Commonwealth of Massachusetts, County of Worcester, including the Federal Courts located therein, should Federal jurisdiction requirements exist in any action brought to enforce (or otherwise relating to) this Plan or an Award Agreement.
17.9. Other Benefits. No Award granted under the Plan shall be considered compensation for purposes of computing benefits under any retirement plan of the Company, an Affiliate or a Group Company nor affect any benefits or compensation under any other benefit or compensation plan of the Company, and Affiliate or a Group Company, now or subsequently in effect.
17.10. No Fractional Shares. No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, Common Stock, Stock Options, or other property shall be issued or paid in lieu of fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.
17.11. Compliance With Code Section 409A. Any provision of the Plan that becomes subject to Code Section 409A, will be interpreted and applied consistent with that Section and the applicable Treasury Regulations.
EXHIBIT 10.2
IPG PHOTONICS CORPORATION
2006 INCENTIVE COMPENSATION PLAN
(As adopted February 28, 2006)
IPG Photonics Corporation, USA, Inc. (the "Company") hereby establishes the IPG Photonics Corporation 2006 Incentive Compensation Plan for the benefit of its eligible Participants (as hereinafter defined) for the purposes hereinafter set forth. The Plan permits the award of Stock Options, Restricted Stock, Performance Shares, Performance Units, Stock Units, Cash, and SARs.
1. DEFINITIONS
The following terms shall have the following meanings unless the context indicates otherwise:
1.1. "Affiliate" shall mean a corporation that, for purposes of Section 422 of the Code, is a Parent or Subsidiary of the Company within the meaning of Sections 424(e) and 424(f) of the Code.
1.2. "Award" shall mean a Stock Option, a SAR, a Restricted Stock Award, a Stock Unit, a Performance Share, a Performance Unit, or a Cash Award.
1.3. "Award Agreement" shall mean a written agreement between the Company and a Participant that establishes the terms, conditions, restrictions and/or limitations applicable to an Award, in addition to those established by the Plan and by the Committee.
1.4. "Board" shall mean the Board of Directors of the Company.
1.5. "Cash Award" shall mean a grant by the Committee to a Participant of an award of cash as described in Section 11 below.
1.6. "Cause" shall have the meaning set forth in any employment, consulting, or other written agreement between the Participant and the Company, a Group Company or Affiliate. If there is no employment, consulting, or other written agreement between the Participant and the Company, a Group Company or Affiliate, or if such agreement does not define "Cause," then "Cause" shall have the meaning specified in the Award Agreement; provided, that if the Award Agreement does not so specify, "Cause" shall mean, as determined by the Committee in its sole discretion, the Participant: (i) engages in conduct that cause financial or reputational injury to the Company a Group Company or Affiliate; (ii) engages in any act of dishonesty or misconduct that results in damage to the Company, a Group Company or Affiliate, or their business or reputation or that the Committee determines to adversely affect the value, reliability or performance of the Participant to the Company, a Group Company or Affiliate; (iii) refuses or fails to substantially comply with the human resources rules, policies, directions and/or restrictions relating to harassment and/or discrimination, or with compliance or risk management rules, policies, directions and/or restrictions of the Company, a Group Company or Affiliate; (iv) fails to cooperate with the Company, a Group Company or Affiliate in any internal investigation or administrative, regulatory or judicial proceeding; or (v) continuously fails to perform his or her duties to the Company, a Group Company or Affiliate (which may include any sustained and unexcused absence of the Participant from the performance of such duties, which absence has not been certified in writing as due to physical or mental
illness or Disability), after a written demand for performance has been delivered to the Participant identifying the manner in which the Participant has failed to substantially perform his or her duties. If any part of the definition of Cause set forth in clauses (i) through (v) above is deemed applicable to a Participant, this shall not preclude or prevent the reliance by the Company or the Committee on any other part of the preceding sentence that also may be applicable. Unless otherwise defined in the Participant's employment or other agreement, an act or omission is "willful" for this purpose if it was knowingly done, or knowingly omitted to be done, by the Participant not in good faith and without reasonable belief that the act or omission was in the best interest of the Company.
1.7. "Change in Control" shall mean the occurrence of any one or more of the following:
(a) Any "person" (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), including a "group" (as defined in Section 13(d)(3) of the Exchange Act), other than (i) the Company, (ii) any wholly-owned subsidiary of the Company, or (iii) any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate, becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company having fifty percent (50%) or more of the combined voting power of the then-outstanding securities of the Company that may be cast for the election of directors of the Company (other than as a result of an issuance of securities initiated by the Company in the ordinary course of business) (the "Company Voting Securities"); provided, however, that the event described in this paragraph (a) shall not be deemed to be a Change in Control by virtue of any underwriter temporarily holding securities pursuant to an offering of such securities;
(b) During any period of two consecutive years, individuals who at the beginning of any such period constitute the Board (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board, unless the election, or the nomination for election by the stockholders of the Company, of each new director of the Company during such period was approved by a vote of at least two-thirds of the Incumbent Directors then still in office;
(c) As the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of all or substantially all of the assets or contested election, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then-outstanding securities of the Company or any successor corporation or entity entitled to vote generally in the election of the directors of the Company or such other corporation or entity after such transaction is held in the aggregate by the holders of the securities of the Company entitled to vote generally in the election of directors of the Company immediately prior to such transaction; or
(d) The shareholders of the Company approve a plan of complete liquidation of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires beneficial ownership of more than fifty percent (50%) of the Company Voting Securities as a result of the
acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, however, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control transaction shall then occur.
1.8. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.
1.9. "Committee" shall mean (i) the Board or (ii) a committee or subcommittee of the Board appointed by the Board from among its members. The Committee may be the Board's Compensation Committee. Unless the Board determines otherwise, the Committee shall be comprised solely of not less than two members who each shall qualify as:
(a) a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3) (or any successor rule) under the Exchange Act, and
(b) an "outside director" within the meaning of Code Section 162(m) and the Treasury Regulations thereunder.
1.10. "Common Stock" shall mean the voting, common stock, $0.0001 par value per share, of the Company.
1.11. "Company" shall mean IPG Photonics Corporation USA, a Delaware corporation.
1.12. "Disability" means the total and permanent disability of a Participant
(incurred while in the active service of the Company, an Affiliate or a
Group Company) based on proof satisfactory to the Committee. Total and
permanent disability shall be as defined in the Company's long-term
disability plan, if any, or as otherwise provided by the Company.
Notwithstanding the foregoing, for purposes of determining the period of
time after termination of Service during which a Participant may exercise
an ISO, "Disability" will have the meaning set forth in Code Section
22(e)(3), which is, generally, that the Participant is unable to engage in
any substantial gainful activity by reason of a medically determinable
physical or mental impairment that can be expected to result in death or
that has lasted or can be expected to last for a continuous period of at
least twelve months.
1.13. "Dividend Equivalent Right" shall mean the right to receive an amount equal to the amount of any dividend paid with respect to a share of Common Stock multiplied by the number of shares of Common Stock underlying or with respect to a Stock Option, a SAR, a Stock Unit or a Performance Unit, and which shall be payable in cash, in Common Stock, in the form of Stock Units or Performance Units, or a combination of any or all of the foregoing.
1.14. "Effective Date" shall mean the date on which the Board adopts the Plan.
1.15. "Employee" shall mean an employee of the Company or any Affiliate, as described in Treasury Regulation Section 1.421-1(h).
1.16. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time, including applicable regulations thereunder.
1.17. "Exercise Price" shall mean the price at which each share of Common Stock covered by a Stock Option may be purchased.
1.18. "Fair Market Value" shall mean:
(a) if the Common Stock is readily tradable on a national securities exchange or other market system, the closing price of the Common Stock on the date of calculation (or on the last preceding trading date if Common Stock was not traded on such date), or
(b) if the Common Stock is not readily tradable on a national securities exchange or other market system, the value as determined by the reasonable and consistent application of a reasonable valuation method, in good faith by the Board.
1.19. "Group Company" shall mean any business entity deemed by the Board to be a member of the IPG Group, including, but not limited to, any business entity that has a significant financial interest in the Company and any business entity in which the Company has a significant financial interest, such entities to be referred to collectively as the "Group Companies".
1.20. "Group Employee" shall mean any employee of a Group Company who is not an Employee.
1.21. "Independent Contractor" shall mean a person (other than a person who is an Employee, Group Employee or a Nonemployee Director) or an entity that renders services to the Company, an Affiliate or a Group Company.
1.22. "IPO" shall mean the first date that the Common Stock is registered under the Securities Act of 1934 and offered for sale to the public.
1.23. "ISO" shall mean a right to purchase a specified number of shares of
Common Stock at a specified price, which is intended to comply with the
terms and conditions as an "incentive stock option" as set forth in Code
Section 422, as such section may be in effect from time to time.
1.24. "Leave of Absence" means any leave of absence approved by the Company.
1.25. "Nonemployee Director" shall mean a member of the Board who is not an Employee.
1.26. "Nonqualified Stock Option" shall mean a Stock Option to purchase a specified number of shares of Common Stock at a specified price, which does not qualify as an ISO.
1.27. "Nonvoting Stock" shall mean the capital stock of any class or classes having no voting power to elect the directors of a corporation.
1.28. "Parent" shall mean a corporation or any other business entity that directly or indirectly has an ownership interest of 50 percent or more of the Voting Stock of the Company.
1.29. "Participant" shall mean any Employee, Group Employee, Nonemployee Director or Independent Contractor to whom an Award has been granted by the Committee under the Plan.
1.30. "Performance-Based Award" shall mean an Award subject to the achievement of certain performance goals as described in Section 12 below.
1.31. "Performance Share" shall mean the grant by the Committee to a Participant
of an Award of shares of Common Stock subject to restrictions on
transferability, a risk of forfeiture, and certain other terms and
conditions under the Plan or specified by the Committee, as described in
Section 10.1 below.
1.32. "Performance Unit" shall mean the grant by the Committee to a Participant of an Award of a hypothetical share of the value of the Company, represented by a notional account that shall be established and maintained (or caused to be established or maintained) by the Company for such Participant, as described in Section 10.2 below.
1.33. "Plan" shall mean the IPG Photonics 2006 Incentive Compensation Plan.
1.34. "Prior Plan" shall mean the IPG Photonics 2000 Incentive Compensation Plan.
1.35. "Recapitalization" shall mean any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the Company's outstanding shares of capital stock as a class without the Company's receipt of consideration.
1.36. "Reorganization" shall mean any of the following: (a) a merger or consolidation in which the Company is not the surviving entity; (b) a sale, transfer or other disposition of all or substantially all of the Company's assets; (c) a reverse merger in which the Company is the surviving entity but in which the Company's outstanding voting securities are transferred in whole or in part to a person or persons different from the persons holding those securities immediately prior to the merger; or (d) any transaction effected primarily to change the state in which the Company is incorporated or to create a holding company structure.
1.37. "Restricted Stock Award" shall mean a grant by the Committee to a
Participant of an Award of shares of Common Stock subject to restrictions
on transferability, a risk of forfeiture, and certain other terms and
conditions under the Plan or specified by the Committee, as described in
Section 9.1 below.
1.38. "Retirement" means retirement from active employment or other Service with the Company pursuant to the normal or early retirement policy and procedures of the Company.
1.39. "Stock Appreciation Right" or "SAR" shall mean a grant by the Committee to a Participant of a the contingent right to receive Common Stock or cash, as specified in the Award Agreement, in the future, based on the value, or the appreciation in the value, of Common Stock, as described in Section 8 below.
1.40. "Service" means the provision of services to the Company, an Affiliate or
a Group Company in the capacity of (i) an Employee, (ii) a Group Employee,
(iii) a Nonemployee Director, or (iv) an Independent Contractor.
1.41. "Stock Option" shall mean a grant by the Committee to a Participant of an option or right to purchase a specified number of shares of Common Stock at a specified price, as described in Section 7 below.
1.42. "Stock Unit" shall mean a grant by the Committee to a Participant of an Award of a hypothetical share of Common Stock represented by a notional
account established and maintained (or caused to be established or maintained) by the Company for such Participant, as described in Section 9.2 below.
1.43. "Subsidiary" shall mean a corporation of which the Company directly or indirectly owns 50 percent or more of the Voting Stock or any other business entity in which the Company directly or indirectly has an ownership interest of 50 percent or more.
1.44. "Treasury Regulations" shall mean the regulations promulgated under the Code by the United States Department of the Treasury, as amended from time to time.
1.45. "Vest" shall mean:
(a) with respect to Stock Options and SARs, when the Stock Option or SAR (or a portion of such Stock Option or SAR) first becomes exercisable and remains exercisable subject to the terms and conditions of such Stock Option or SAR; or
(b) with respect to Awards other than Stock Options and SARs, when the Participant has:
(i) an unrestricted right, title and interest to receive the compensation (whether payable in Common Stock, cash or a combination of both) attributable to an Award (or a portion of such Award) or to otherwise enjoy the benefits underlying such Award; and
(ii) a right to transfer an Award subject to no Company-imposed restrictions or limitations other than restrictions and/or limitations imposed by Section 14 below.
1.46. "Vesting Date" shall mean the date or dates on which an Award Vests, at which time the Award shall be deemed "Vested."
1.47. "Voting Stock" shall mean the capital stock of any class or classes having general voting power under ordinary circumstances, in the absence of contingencies, to elect the directors of a corporation.
2. PURPOSE AND TERM OF PLAN
2.1. Purpose. The purpose of the Plan is to motivate certain Employees, Group Employees, Nonemployee Directors and Independent Contractors to put forth maximum efforts toward the growth, profitability, and success of the Company, Affiliates and Group Companies by providing incentives to such Employees, Group Employees, Nonemployee Directors and Independent Contractors through cash payments and/or through the ownership and performance of the Common Stock. In addition, the Plan is intended to provide incentives that will attract and retain highly qualified individuals as Employees, Group Employees and Nonemployee Directors and to assist in aligning the interests of such Employees, Group Employees and Nonemployee Directors with those of the Company's shareholders.
2.2. Term. The Plan shall be effective as of the Effective Date; provided, however, that the Plan shall be approved by the shareholders of the Company at an annual meeting or any special meeting of shareholders of the Company within 12 months before or after the Effective Date. The
Committee may not award ISOs before the date the Company's shareholders approve the Plan. The Plan shall terminate on the 10th anniversary of the Effective Date, unless sooner terminated by the Board under Section 16.1 below.
3. ELIGIBILITY AND PARTICIPATION
3.1. Eligibility. All Employees, Group Employees, Nonemployee Directors and Independent Contractors shall be eligible to participate in the Plan and to receive Awards.
3.2. Participation. Participants shall consist of such Employees, Group Employees, Nonemployee Directors and Independent Contractors as the Committee in its sole discretion designates to receive Awards under the Plan. Awards under the Plan shall be made on a one time basis for Participants and designation of a Participant in any year shall not require the Committee to designate such person or entity to receive an Award in any other year or, once designated, to receive the same type or amount of Award as granted to the Participant in any other year. The Committee shall consider such factors as it deems pertinent in selecting Participants and in determining the type and amount of their respective Awards.
4. ADMINISTRATION
4.1. Responsibility. The Committee will administer the Plan. The Committee shall have the responsibility, in its sole discretion, to control, operate, manage and administer the Plan in accordance with its terms.
4.2. Award Agreement. Each Award granted under the Plan shall be evidenced by an Award Agreement that shall be signed by the Committee and the Participant; provided, however, that in the event of any conflict between a provision of the Plan and any provision of an Award Agreement, the provision of the Plan shall prevail.
4.3. Authority of the Committee. The Committee shall have all the discretionary authority that may be necessary or desirable to enable it to discharge its responsibilities with respect to the Plan, including but not limited to the following:
(a) to determine eligibility for participation in the Plan;
(b) to determine eligibility for and the type and size of an Award granted under the Plan;
(c) to supply any omission, correct any defect, interpret any provision or reconcile any inconsistency in the Plan in such manner and to such extent as it shall deem appropriate in its sole discretion to carry the same into effect;
(d) to issue administrative guidelines as an aid to administer the Plan and make changes in such guidelines as it, from time to time, deems proper;
(e) to make rules for carrying out and administering the Plan and make changes in such rules as it, from time to time, deems proper;
(f) to the extent permitted under the Plan, grant waivers of Plan terms, conditions, restrictions, and limitations;
(g) to accelerate the Vesting of any Award when such action or actions would be in the best interest of the Company;
(h) to grant an Award in replacement of Awards previously granted under this Plan or any other executive compensation plan of the Company; and
(i) to take any and all other actions it deems necessary or desirable for the proper operation or administration of the Plan.
4.4. Action by the Committee. The Committee may act only by a majority of its members. A determination of the Committee may be made, without a meeting, by a writing signed by all members of the Committee. In addition, the Committee may authorize any one or more of its members to execute and deliver documents on behalf of the Committee. Meetings of the Committee may be held telephonically or via videoconference, and participation via telephone or videoconference shall have the same force and effect as physical presence at any Committee meeting.
4.5. Delegation of Authority. The Committee may delegate to one or more of its members, or to one or more agents, such administrative duties as it may deem advisable; provided, however, that any such delegation shall be in writing. In addition, the Committee, or any person to whom it has delegated duties under this Section 4.5, may employ one or more persons to render advice with respect to any responsibility the Committee or such person may have under the Plan. The Committee may employ such legal or other counsel, consultants and agents as it may deem desirable for the administration of the Plan and may rely upon any opinion or computation received from any such counsel, consultant or agent. Expenses incurred by the Committee in the engagement of such counsel, consultant or agent shall be paid by the Company, or the Affiliate or Group Company whose employees have benefited from the Plan, as determined by the Committee.
The Board may delegate authority to the Company's Chief Executive Officer
to grant specified numbers of Options (as determined by the Board from time
to time and during such time periods determined by the Board) to existing
or prospective Employees (other than those individuals who are subject to
Section 16(a) of the Exchange Act at the time of the grant) as the Chief
Executive Officer determines appropriate without further action of the
Board, but subject to rules and guidelines established by the Board or the
Committee.
4.6. Determinations and Interpretations by the Committee. All determinations and interpretations made by the Committee shall be binding and conclusive on all Participants and their heirs, successors, and legal representatives.
4.7. Liability. No member of the Board, no member of the Committee and no Employee or Group Employee shall be liable for any act or failure to act hereunder, except in circumstances involving his or her bad faith, gross negligence or willful misconduct, or for any act or failure to act hereunder by any other member or employee or by any agent to whom duties in connection with the administration of the Plan have been delegated.
4.8. Indemnification. Each person who is or has been a member of the Committee or the Board, and any individual or individuals to whom the Committee has delegated authority under this Section 4, will be indemnified and held harmless by the Company, Group Company and Affiliates from and against any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or as a result of any claim, action, suit or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken, or failure to act, under the Plan, except in circumstances involving such person's bad faith, gross negligence or willful misconduct. Each such person will also be indemnified and held harmless by the Company Group Company and Affiliates from and against any and all amounts paid by him or her in a settlement approved by the Company, or paid by him or her in satisfaction of any judgment, of or in a claim, action, suit or proceeding against him or her and described in the previous sentence, so long as he or she gives the Company an opportunity, at its own expense, to handle and defend the claim, action, suit or proceeding before he or she undertakes to handle and defend it. The foregoing right of indemnification will not be exclusive of any other rights of indemnification to which a person who is or has been a member of the Committee or the Board may be entitled under the Articles of Incorporation or By-Laws of the Company, Group Company or Affiliate, as a matter of law, agreement or otherwise, or any power that the Company may have to indemnify him or her or hold him or her harmless.
5. SHARES SUBJECT TO PLAN
5.1. Available Shares. The aggregate number of shares of Common Stock that shall be available under the Plan during its term shall be 6,000,000 shares, subject to any adjustments made in accordance with Section 5.2 below. Such shares of Common Stock may be either authorized but unissued shares, shares of issued stock held in the Company's treasury, or a combination of both, at the discretion of the Company. Any shares of Common Stock (i) underlying an Award under the Plan or the Prior Plan which expires without being exercised, or are forfeited, canceled, settled or otherwise terminated without a distribution of Common Stock to the Participant; (ii) that are delivered (either actually or by attestation) to or withheld by the Company in connection with the exercise of a Stock Option awarded under the Plan or the Prior Plan, or in payment of any required income tax withholding for the exercise of a Stock Option or the vesting of Restricted Stock awarded under the Plan or the Prior Plan, shall again be available under the Plan. Awards that are payable only in cash are not subject to this Section 5.1.
(a) The total number of shares of Common Stock that may be issued in
connection with the awards of Restricted Stock under the Plan shall
not exceed [3,500,000]. Except as contemplated by the provisions of
Section 5.2 hereof, the Committee shall not increase the number of
shares of Common Stock available for issuance in connection with
Awards under the Plan or to any one individual as set forth above. In
no event shall Awards be outstanding at any one time that have
resulted or could result in the issuance of a number of shares of
Common Stock in excess of the number then remaining reserved and
available for issuance under the Plan.
(b) The maximum number of shares of Common Stock that may be issued to Participants in the aggregate under the Plan as ISOs is 1,250,000.
(c) Notwithstanding the foregoing, Awards granted through the assumption of, or in substitution or exchange for, similar awards in connection with the acquisition of another corporation or business entity shall not be counted for purposes of applying the above limitations on numbers of shares available for Awards generally or any particular kind of Award under the Plan.
5.2. Adjustment to Shares. If there is any change in the Common Stock of the
Company, through merger, consolidation, Reorganization, recapitalization,
stock dividend, stock split, reverse stock split, split-up, split-off,
spin-off, combination of shares, exchange of shares, dividend in kind or
other like change in capital structure or distribution (other than normal
cash dividends) to shareholders of the Company, an adjustment shall be made
to each outstanding Award so that each such Award shall thereafter be with
respect to or exercisable for such securities, cash and/or other property
as would have been received in respect of the Common Stock subject to such
Award had such Award been paid, distributed or exercised in full
immediately prior to such change or distribution. Such adjustment shall be
made successively each time any such change or distribution shall occur. In
addition, in the event of any such change or distribution, in order to
prevent dilution or enlargement of Participants' rights under the Plan, the
Committee shall have the authority to adjust, in an equitable manner, the
number and kind of shares that may be issued under the Plan, the number and
kind of shares subject to outstanding Awards, the Exercise Price applicable
to outstanding Stock Options, and the Fair Market Value of the Common Stock
and other value determinations applicable to outstanding Awards.
Appropriate adjustments may also be made by the Committee in the terms of
any Awards granted under the Plan to reflect such changes or distributions
and to modify any other terms of outstanding Awards on an equitable basis,
including modifications of performance goals and changes in the length of
performance periods; provided, however, that any such modifications and/or
changes to Performance-Based Awards does not disqualify compensation
attributable to such Awards as "performance-based compensation" under Code
Section 162(m). In addition, the Committee is authorized to make
adjustments to the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events affecting the
Company or the financial statements of the Company, or in response to
changes in applicable laws, regulations, or accounting principles.
Notwithstanding anything contained in the Plan, any adjustment with respect
to an ISO due to a change or distribution described in this Section 5.2
shall comply with the rules of Code Section 424(a), and in no event shall
any adjustment be made which would render any ISO granted hereunder to be
disqualified as an incentive stock option for purposes of Code Section 422.
6. MAXIMUM INDIVIDUAL AWARDS
6.1. Maximum Aggregate Number of Shares Underlying Stock-Based Awards Granted Under the Plan to Any Single Participant in Any Calendar Year. The maximum aggregate number of shares of Common Stock underlying all Awards measured in shares of Common Stock (whether payable in Common Stock, cash or a combination of both) that may be granted to any single Participant in any calendar year shall be [2,500,000] shares, subject to adjustment as provided in Section 5.2 above. For purposes of the preceding sentence, such Awards that are cancelled or repriced shall continue to be counted in determining such maximum aggregate number of shares of Common Stock that may be granted to any single Participant in any calendar year. The
maximum aggregate number of shares of Common Stock underlying Awards that may be granted to any single Participant in any calendar year as ISOs shall be 200,000
7. STOCK OPTIONS
7.1. In General. The Committee may, in its sole discretion, grant Stock Options to Employees, Group Employees, Nonemployee Directors and/or Independent Contractors on or after the Effective Date. The Committee shall, in its sole discretion, determine the Employees, Group Employees, Nonemployee Directors and Independent Contractors who will receive Stock Options and the number of shares of Common Stock underlying each Stock Option. With respect to Employees who become Participants, the Committee may grant such Participants ISOs or Nonqualified Stock Options or a combination of both. With respect to Group Employees, Nonemployee Directors and Independent Contractors who become Participants, the Committee may grant such Participants only Nonqualified Stock Options. Each Stock Option shall be subject to such terms and conditions consistent with the Plan as the Committee may impose from time to time and set forth in the Award Agreement. In addition, each Stock Option shall be subject to the terms and conditions set forth in Sections 7.2 through 7.8 below.
7.2. Exercise Price. The Committee shall specify the Exercise Price of each Stock Option in the Award Agreement; provided, however, that (i) the Exercise Price of an ISO shall not be less than 100 percent of the Fair Market Value of the Common Stock on the date of grant, and (ii) the Exercise Price of a Nonqualified Stock Option shall not be less than 100 percent of the Fair Market Value of the Common Stock on the date of grant unless the Committee in its sole discretion and due to special circumstances determines otherwise on the date of grant.
7.3. Term of Stock Option. The Committee shall specify the term of each Stock
Option in the Award Agreement; provided, however, that (i) no ISO shall be
exercisable after the 10th anniversary of the date of grant of such ISO and
(ii) no Nonqualified Stock Option shall be exercisable after the 10th
anniversary of the date of grant of such Nonqualified Stock Option. Each
Stock Option shall terminate at such earlier times and upon such conditions
or circumstances as the Committee shall, in its sole discretion, set forth
in the Award Agreement on the date of grant.
7.4. Vesting Date. The Committee shall specify in the Award Agreement the Vesting Date for each Stock Option. The Committee may grant Stock Options that are Vested, either in whole or in part, on the date of grant. If the Committee fails to specify a Vesting Date in the Award Agreement, twenty-five percent (25%) of such Stock Option shall become exercisable on each of the first four (4) one-year anniversaries of the date of grant and shall remain exercisable following such anniversary date until the Stock Option expires in accordance with its terms under the Award Agreement or under the terms of the Plan. The Vesting of a Stock Option may be subject to such other terms and conditions as shall be determined by the Committee and set forth in the Award Agreement, including, without limitation, accelerating the Vesting if certain performance goals are achieved or a Change in Control of the Company occurs.
7.5. Exercise of Stock Options. The Stock Option Exercise Price may be paid in cash or, in the sole discretion of the Committee, by delivery to the Company of shares of Common Stock then owned by the Participant, or by the
Company's withholding a portion of the shares of Common Stock for which the Stock Option is exercisable, or by a combination of these methods. If the Common Stock is readily tradable on a national securities exchange or other market system, payment may also be made by delivering a properly executed exercise notice to the Company and delivering a copy of irrevocable instructions to a broker directing the broker to promptly deliver to the Company the amount of sale or loan proceeds to pay the Exercise Price. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms. The Committee may prescribe any other method of paying the Exercise Price that it determines to be consistent with applicable law and the purpose of the Plan, including, without limitation, in lieu of the delivery to the Company of shares of Common Stock then owned by the Participant, providing the Company with a notarized statement attesting to the number of shares owned by the Participant, where, upon verification by the Company, the Company would issue to the Participant only the number of incremental shares to which the Participant is entitled upon exercise of the Stock Option. In determining which methods a Participant may utilize to pay the Exercise Price, the Committee may consider such factors as it determines are appropriate; provided, however, that with respect to ISOs, all such discretionary determinations shall be made by the Committee at the time of grant and specified in the Award Agreement.
7.6. Restrictions Relating to ISOs. In addition to being subject to the terms
and conditions of this Section 7, ISOs shall comply with all other
requirements under Code Section 422. Accordingly, ISOs may be granted only
to Participants who are employees (as described in Treasury Regulation
Section 1.421-1(h)) of the Company or of any "Parent Corporation" (as
defined in Code Section 424(e)) or of any "Subsidiary Corporation" (as
defined in Code Section 424(f)) on the date of grant. The aggregate market
value (determined as of the time the ISO is granted) of the Common Stock
with respect to which ISOs (under all option plans of the Company and of
any Parent Corporation and of any Subsidiary Corporation) are exercisable
for the first time by a Participant during any calendar year shall not
exceed $100,000. For purposes of the preceding sentence, (i) ISOs shall be
taken into account in the order in which they are granted and (ii) ISOs
granted before 1987 shall not be taken into account. ISOs shall not be
transferable by the Participant other than by will or the laws of descent
and distribution and shall be exercisable, during the Participant's
lifetime, only by such Participant. The Committee shall not grant ISOs to
any Employee who, at the time the ISO is granted, owns stock possessing
(after the application of the attribution rules of Code Section 424(d))
more than 10 percent of the total combined voting power of all classes of
stock of the Company or of any Parent Corporation or of any Subsidiary
Corporation unless the Exercise Price of the ISO is fixed at not less than
110 percent of the Fair Market Value of the Common Stock on the date of
grant and the exercise of such ISO is prohibited by its terms after the 5th
anniversary of the ISO's date of grant.
7.7. Conversion Stock Options. The Committee may, in its sole discretion, grant a Stock Option to any holder of an option (hereinafter referred to as an "Original Option") to purchase shares of stock of any corporation:
(a) the stock or assets of which were acquired, directly or indirectly, by the Company, an Affiliate or Group Company, or
(b) which was merged with and into the Company, an Affiliate or Group Company,
so that the Original Option is converted into a Stock Option (hereinafter referred to as a "Conversion Stock Option"); provided, however, that such Conversion Stock Option as of the date of its grant (the "Conversion Stock Option Grant Date") shall have the same economic value as the Original Option as of the Conversion Stock Option Grant Date. In addition, unless the Committee, in its sole discretion determines otherwise, a Conversion Stock Option that is converting an Original Option intended to qualify as an ISO shall have the same terms and conditions as applicable to the Original Option in accordance with Code Section 424 and the Treasury Regulations thereunder so that the conversion (x) is treated as the issuance or assumption of a stock option under Code Section 424(a) and (y) is not treated as a modification, extension or renewal of a stock option under Code Section 424(h).
7.8. Right to Call Stock Options or Common Stock. Notwithstanding any other provision of this Plan and without regard to the completion of an IPO, any Stock Option granted under this Plan shall be subject to a right of call by the Committee in the event of termination of the Plan due to merger or acquisition of the Company. Prior to an IPO, any Stock held by a Participant as a result of an Award under this Plan shall be subject to a right of call by the Committee in the event of termination of the Plan due to merger or acquisition of the Company or upon the occurrence of Change in Control of the Company, whether or not the Plan is terminated. If the Committee exercises the right to call the Common Stock, the Participant must return the shares of Common Stock to the Company within seven (7) days of the call notice.
(a) Upon the call of Common Stock, the owner of the Common Stock shall,
unless otherwise determined by the Committee pursuant to subsection
(b) below, be entitled to receive from the Company an amount equal to
the Fair Market Value of the returned Common Stock.
(b) Upon the call of a Stock Option, the Committee shall pay the optionee an amount equal to the excess of (i) the Fair Market Value the number of shares of Common Stock subject to the Option, over (y) the Exercise Price of such shares of Common Stock.
(c) The Company shall have the right to defer payment of the proceeds under this Section 7.9, and make such payment in the form of single lump sum or in installments over such periods as the Committee may determine in its discretion, subject to Code Section 409A.
8. SARS
8.1. In General. The Committee may, in its sole discretion, grant SARs to Employees, Group Employees, Nonemployee Directors, and/or Independent Contractors. A SAR is a right to receive a payment in cash, Common Stock or a combination of both, in an amount equal to the excess of (x) the Fair Market Value of a specified number of shares of Common Stock on the date the SAR is exercised over (y) the Fair Market Value of such shares of Common Stock on the date the SAR is granted, all as determined and set forth in the Award Agreement by the Committee; provided, however, that if a SAR is granted retroactively in tandem with or in substitution for a Stock Option, the designated Fair Market Value of the Common Stock in the
Award Agreement may be the Fair Market Value of the Common Stock on the date such Stock Option was granted. Each SAR shall be subject to the terms of the Plan and to such terms and conditions, including, but not limited to, the Vesting Date, an expiration date and a provision that automatically converts a SAR into a Stock Option on a conversion date specified at the time of grant, as the Committee shall impose from time to time in its sole discretion and set forth in the Award Agreement.
9. RESTRICTED STOCK AWARDS AND STOCK UNITS
9.1. Restricted Stock Awards. The Committee may, in its sole discretion, grant Restricted Stock Awards to Employees, Group Employees, Nonemployee Directors, and/or Independent Contractors as additional compensation or in lieu of other compensation for services to the Company, an Affiliate or a Group Company. A Restricted Stock Award shall consist of shares of Common Stock that are subject to such terms and conditions as the Committee in its sole discretion determines appropriate and sets forth in the Award Agreement including, without limitation, restrictions on the sale or other disposition of such shares, the Vesting Date with respect to such shares, and the right of the Company to reacquire such shares for no consideration upon termination of the Participant's Service within specified periods. The Committee may require the Participant to deliver a duly signed stock power, endorsed in blank, relating to the Common Stock covered by such Restricted Stock Award and/or that the stock certificates evidencing such shares be held in custody or bear restrictive legends until the restrictions thereon shall have lapsed. With respect to shares of Common Stock subject to a Restricted Stock Award, the Participant shall have all of the rights of a holder of shares of Common Stock, including the right to receive dividends and to vote the shares, unless the Committee determines otherwise on the date of grant.
9.2. Stock Units. The Committee may, in its sole discretion, grant Stock Units to Employees, Group Employees, Nonemployee Directors, and Independent Contractors as additional compensation or in lieu of other compensation for services to the Company, an Affiliate or a Group Company. A Stock Unit is a hypothetical share of Common Stock represented by a notional account established and maintained (or caused to be established or maintained) by the Company for such Participant who receives a grant of Stock Units. Stock Units shall be subject to such terms and conditions as the Committee, in its sole discretion, determines appropriate and sets forth in the Award Agreement including, without limitation, determinations of the Vesting Date with respect to such Stock Units and the criteria for the Vesting of such Stock Units. Subject to Section 9.3, a Stock Unit granted by the Committee shall provide for payment in shares of Common Stock at such time or times as the Award Agreement shall specify. The Committee shall determine whether a Participant who has been granted a Stock Unit shall also be entitled to a Dividend Equivalent Right.
9.3. Payout of Stock Units. Subject to a Participant's election to defer in accordance with Section 17.4 below, upon the Vesting Date of a Stock Unit, the shares of Common Stock representing the Stock Unit shall be distributed to the Participant, unless the Committee, in its sole discretion, provides for the payment of the Stock Unit in cash (or partly in cash and partly in shares of Common Stock) equal to the value of the shares of Common Stock which would otherwise be distributed to the Participant.
10. PERFORMANCE SHARES AND PERFORMANCE UNITS
10.1. Performance Shares. The Committee may, in its sole discretion, grant Performance Shares to Employees, Group Employees, Nonemployee Directors, and/or Independent Contractors as additional compensation or in lieu of other compensation for services to the Company, an Affiliate or a Group Company. A Performance Share shall consist of a share or shares of Common Stock that are subject to such terms and conditions as the Committee, in its sole discretion, determines appropriate and sets forth in the Award Agreement including, without limitation, determining the performance goal or goals that, depending on the extent to which such goals are met, will determine the number and/or value of the Performance Shares that will be paid out or distributed to the Participant and any other Vesting Date criteria. Performance goals may be based on, without limitation, Company-wide, divisional and/or individual performance, as the Committee, in its sole discretion, may determine, and may be based on the performance measures listed in Section 12.3 below.
10.2. Performance Units. The Committee may, in its sole discretion, grant Performance Units to Employees, Group Employees, Nonemployee Directors, and/or Independent Contractors as additional compensation or in lieu of other compensation for services to the Company, an Affiliate or Group Company. A Performance Unit is a hypothetical share of the value of the Company, represented by a notional account that the Company shall establish and maintain (or caused to be established or maintained) for such Participant who receives a grant of Performance Units. Performance Units shall be subject to such terms and conditions as the Committee, in its sole discretion, determines appropriate and sets forth in the Award Agreement including, without limitation, determining the performance goal or goals that, depending on the extent to which such goals are met, will determine the number and/or value of the Performance Units that will accrue to the Participant and any other Vesting Date criteria. Performance goals may be based on, without limitation, Company-wide, divisional and/or individual performance, as the Committee, in its sole discretion, may determine, and may be based on the performance measures listed in Section 12.3 below.
10.3. Adjustment of Performance Goals. With respect to any Performance Shares or Performance Units that are not intended to qualify as Performance-Based Awards (as described in Section 12 below), the Committee shall have the authority at any time to adjust, as it deems necessary or desirable, the performance goals for any outstanding Performance Shares or Performance Units unless, at the time of establishment of such performance goals, the Committee precludes its authority to make such adjustments.
10.4. Payout of Performance Shares or Performance Units. Subject to a Participant's election to defer distribution in accordance with Section 17.4 below, upon the Vesting of a Performance Share or a Performance Unit, the shares of Common Stock representing the Performance Share or the cash value of the Performance Unit shall be distributed to the Participant, unless the Committee, in its sole discretion, determines to make the payment for the Performance Share in cash, or the Performance Unit in shares of Common Stock (or partly in cash and partly in shares of Common Stock) equal to the value of the shares of Common Stock or cash that would otherwise be distributed to the Participant.
11. CASH AWARDS
11.1. In General. The Committee may, in its sole discretion, grant Cash Awards to Employees, Group Employees, Nonemployee Directors, and/or Independent Contractors as additional compensation or in lieu of other compensation for services to the Company, an Affiliate or Group Company. A Cash Award shall be subject to such terms and conditions as the Committee, in its sole discretion, determines appropriate and sets forth in the Award Agreement including, without limitation, determining the Vesting Date with respect to such Cash Award, the criteria for the Vesting of such Cash Award, and the right of the Company to require the Participant to repay the Cash Award (with or without interest) upon termination of the Participant's Service within specified periods.
12. PERFORMANCE-BASED AWARDS
12.1. In General. The Committee, in its sole discretion, may designate Awards
granted under the Plan as Performance-Based Awards (as defined below). An
Award granted under the Plan may be granted in such a manner that the
compensation attributable to such Award is intended by the Committee to
qualify as "performance-based compensation" (as such term is used in Code
Section 162(m) and the Treasury Regulations thereunder) and thus be exempt
from the deduction limitation imposed by Code Section 162(m)
("Performance-Based Awards").
12.2. Qualification of Performance-Based Awards. Awards shall qualify as Performance-Based Awards under the Plan only if:
(a) at the time of grant the Committee is comprised solely of two or more "outside directors" (as such term is used in Code Section 162(m) and the Treasury Regulations thereunder);
(b) with respect to either the granting or Vesting of an Award (other than
(i) a Nonqualified Stock Option or (ii) a SAR, which are granted with
an Exercise Price at or above the Fair Market Value of the Common
Stock on the date of grant), such Award is subject to the achievement
of a performance goal or goals based on one or more of the performance
measures specified in Section 12.3 below;
(c) the Committee establishes in writing (i) the objective
performance-based goals applicable to a given performance period, and
(ii) the individual employees or class of employees to which such
performance-based goals apply no later than 90 days after the
commencement of such performance period (but in no event after 25
percent of such performance period has elapsed);
(d) no compensation attributable to a Performance-Based Award will be paid to or otherwise received by a Participant until the Committee certifies in writing that the performance goal or goals (and any other material terms) applicable to such performance period have been satisfied; and
(e) after the establishment of a performance goal, the Committee shall not revise such performance goal (unless such revision will not disqualify compensation attributable to the Award as "performance-based compensation" under Code Section 162(m)) or
increase the amount of compensation payable with respect to such Award upon the attainment of such performance goal.
12.3. Performance Measures. The Committee may use the following performance measures (either individually or in any combination) to set performance goals with respect to Awards intended to qualify as Performance-Based Awards: net sales; pretax income before allocation of corporate overhead and bonus; budget; cash flow; earnings per share; net income; division, group or corporate financial goals; return on shareholders' equity; return on assets; attainment of strategic and operational initiatives; appreciation in and/or maintenance of the price of the Common Stock or any other publicly-traded securities of the Company; market share; gross profits; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; economic value-added models; comparisons with various stock market indices; increase in number of customers; revenue backlog; margins realized on delivered goods or services; and/or reductions in costs.
12.4. Shareholder Reapproval. As required by Treasury Regulation Section 1.162-27(e)(vi), the material terms of performance goals as described in this Section 12 shall be disclosed to and reapproved by the Company's shareholders no later than the first shareholder meeting that occurs in the 5th year following the year in which the Company's shareholders previously approved such performance goals.
13. CHANGE IN CONTROL
13.1. Accelerated Vesting. Notwithstanding any other provision of this Plan to the contrary, if there is a Change in Control of the Company, the Committee, in its sole discretion, may take such actions as it deems appropriate with respect to outstanding Awards, including, without limitation, accelerating the Vesting Date and/or payout of such Awards; provided, however, that such action shall not conflict with any provision contained in an Award Agreement unless such provision is amended in accordance with Section 16.3 below.
13.2. Cashout. The Committee, in its sole discretion, may determine that, upon the occurrence of a Change in Control of the Company, all or a portion of certain outstanding Awards shall terminate within a specified number of days after notice to the holders, and each such holder shall receive an amount equal to the value of such Award on the date of the Change in Control, and with respect to each share of Common Stock subject to a Stock Option or SAR, an amount equal to the excess of the Fair Market Value of such shares of Common Stock immediately prior to the occurrence of such Change in Control of the Company over the Exercise Price per share of such Stock Option or SAR. Such amount shall be payable in cash, in one or more kinds of property (including the property, if any, payable in the transaction) or in a combination thereof, as the Committee, in its sole discretion, shall determine.
13.3. Assumption or Substitution of Awards. Notwithstanding anything contained in the Plan to the contrary, the Committee may, in its sole discretion, provide that an Award may be assumed by any entity which acquires control of the Company or may be substituted by a similar award under such entity's compensation plans.
14. TERMINATION OF SERVICE
14.1. Termination of Service Due to Death or Disability. Subject to any written agreement between the Company, an Affiliate or a Group Company and a Participant, if a Participant's Service is terminated due to death or Disability:
(a) all non-Vested portions of Awards held by the Participant on the date of the Participant's death or Disability shall immediately Vest; and
(b) all Vested portions of Stock Options and SARs held by the Participant on the date of the Participant's death or Disability shall remain exercisable until the earlier of:
(i) the end of the 12-month period following the date of the Participant's death or Disability, or
(ii) the date the Stock Option or SAR would otherwise expire.
14.2. Termination of Service for Cause. Subject to any written agreement between the Company, an Affiliate or Group Company and a Participant, if a Participant's Service is terminated by the Company, the Affiliate or the Group Company, as the case may be, for Cause, all Awards held by the Participant on the date of the termination of Service, whether Vested or non-Vested, shall immediately be forfeited by the Participant as of such date, and, in the event a Participant's Service is terminated by the Company, an Affiliate or Group Company for Cause prior to an IPO, the Company shall have the right to call any shares of Common Stock received by the Participant as a result of the exercise of Stock Options under the Plan and the Participant shall be entitled to receive from the Company an amount equal to the Exercise Price paid for such shares. A Participant's Service shall be deemed to have terminated for Cause if, after the Participant's Service has terminated, facts and circumstances are discovered that would have justified a termination for Cause.
14.3. Other Terminations of Service. Subject to any written agreement between the Company, an Affiliate or Group Company and a Participant, if a Participant's Service is terminated for any reason other than for Cause or other than due to death or Disability:
(a) all non-Vested portions of Awards held by the Participant on the date of the termination of his or her Service shall immediately be forfeited by such Participant as of such date; and
(b) all Vested portions of Stock Options and/or SARs held by the Participant on the date of the termination of his or her Service shall remain exercisable until the earlier of (i) the end of the 90-day period following the date of the termination of the Participant's Service or (ii) the date the Stock Option or SAR would otherwise expire.
Notwithstanding the foregoing, the Vesting, expiration and forfeiture of any Stock Options and/or SARs Awarded to a Independent Contractor shall be governed by the terms of the written Award Agreement.
14.4. ISOs. Notwithstanding anything contained in the Plan to the contrary, (i) the provisions contained in this Section 14 shall be applied to an ISO
only if the application of such provision maintains the treatment of such ISO as an ISO.
14.5. Leave of Absence. A Participant shall not cease to be an Employee for purposes of this Plan solely on account of a Leave of Absence. For purposes of ISOs, 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, on the one hundred eighty-first (181st) day of such leave any ISO held by the Participant shall cease to be treated as an ISO and shall be treated for tax purposes as a Nonqualified Stock Option. Notwithstanding anything in the Plan to the contrary, the Committee, in its sole discretion, reserves the right to designate a Participant's leave of absence as "Personal Leave;" provided that military leaves and approved family or medical leaves shall not be considered Personal Leave. No Awards shall be made to a Participant during Personal Leave. A Participant's un-Vested Awards shall remain un-Vested during such Personal Leave and the time spent on such Personal Leave shall not count towards the vesting of such Awards. A Participant's Vested Stock Options that may be exercised shall remain exercisable upon commencement of Personal Leave until the earlier of (i) a period of one year from the date of commencement of such Personal Leave; or (ii) the remaining exercise period of such Stock Options. Notwithstanding the foregoing, if a Participant returns to the Company from a Personal Leave of less than one year and the Participant's Stock Options have not lapsed, the Stock Options shall remain exercisable for the remaining exercise period as provided at the time of grant and subject to the conditions contained herein.
15. TAXES
15.1. Withholding Taxes. With respect to Employees and Group Employees, the Company, or the applicable Affiliate or Group Company, may require a Participant who has Vested in his or her Restricted Stock Award, Stock Unit, Performance Share or Performance Unit granted hereunder, or who exercises a Stock Option or SAR granted hereunder, to reimburse the corporation that employs such Employee or Group Employee for any taxes required by any governmental regulatory authority to be withheld or otherwise deducted and paid by such corporation or entity in respect of the issuance or disposition of such shares or the payment of any amounts. In lieu thereof, the corporation that employs such Employee or Group Employee shall have the right to withhold the amount of such taxes from any other sums due or to become due from such corporation to the Employee or Group Employee upon such terms and conditions as the Committee shall prescribe. The corporation that employs the Employee or Group Employee may, in its discretion, hold the stock certificate to which such Employee or Group Employee is entitled upon the vesting of a Restricted Stock Award, Stock Unit, Performance Share or Performance Unit or the exercise of a Stock Option or SAR as security for the payment of such withholding tax liability, until cash sufficient to pay that liability has been accumulated.
15.2. Use of Common Stock to Satisfy Withholding Obligation. With respect to Employees and Group Employees, at any time that the Company or an Affiliate or Group Company that employs such Employee or Group Employee becomes subject to a withholding obligation under applicable law with respect to the vesting of a Restricted Stock Award, Stock Unit,
Performance Share or Performance Unit or the exercise of a Nonqualified
Stock Option (the "Tax Date"), except as set forth below, a holder of such
Award may elect to satisfy, in whole or in part, the holder's related
personal tax liabilities (an "Election") by (i) directing the Company, the
Affiliate or the Group Company that employs such Employee or Group Employee
to withhold from shares issuable in the related vesting or exercise either
a specified number of shares, or shares of Common Stock having a specified
value in each case equal to the related minimum statutory personal
withholding tax liabilities with respect to the applicable taxing
jurisdiction, (ii) tendering shares of Common Stock previously issued
pursuant to the exercise of a Stock Option or other shares of the Common
Stock owned by the holder, or (iii) combining any or all of the foregoing
Elections in any fashion. An Election shall be irrevocable. The withheld
shares and other shares of Common Stock tendered in payment shall be valued
at their Fair Market Value of the Common Stock on the Tax Date. The
Committee may disapprove any Election, suspend or terminate the right to
make Elections or provide that the right to make Elections shall not apply
to particular shares or exercises. The Committee may impose any additional
conditions or restrictions on the right to make an Election as it shall
deem appropriate, including conditions or restrictions with respect to
Section 16 of the Exchange Act.
15.3. No Guarantee of Tax Consequences. No person connected with the Plan in any capacity, including, but not limited to, the Company, an Affiliate or a Group Company and their directors, officers, agents and employees makes any representation, commitment, or guarantee that any tax treatment, including, but not limited to, federal, state and local income, estate and gift tax treatment, will be applicable with respect to amounts deferred under the Plan, or paid to or for the benefit of a Participant under the Plan, or that such tax treatment will apply to or be available to a Participant on account of participation in the Plan.
16. AMENDMENT AND TERMINATION
16.1. Termination of Plan. The Board may suspend or terminate the Plan at any time with or without prior notice; provided, however, that no action authorized by this Section 16.1 shall reduce the amount of any outstanding Award or change the terms and conditions thereof without the Participants' consent, except as expressly provided herein.
16.2. Amendment of Plan. The Board may amend the Plan at any time with or
without prior notice; provided, however, that no action authorized by this
Section 16.2 shall reduce the amount of any outstanding Award or change the
terms and conditions thereof without the Participants' consent, except as
expressly provided herein. No amendment of the Plan shall, without the
approval of the shareholders of the Company:
(a) increase the total number of shares of Common Stock that may be issued under the Plan;
(b) increase the maximum number of shares with respect to all Awards measured in Common Stock that may be granted to any individual under the Plan;
(c) increase the maximum dollar amount that may be paid with respect to all Awards measured in cash; or
(d) modify the requirements as to eligibility for Awards under the Plan.
In addition, the Plan shall not be amended without the approval of such amendment by the Company's shareholders if such amendment (i) is required under the rules and regulations of the stock exchange or national market system on which the Common Stock is listed or (ii) will disqualify any ISO granted hereunder.
16.3. Amendment or Cancellation of Award Agreements. The Committee may amend or modify any Award Agreement at any time by mutual agreement between the Committee and the Participant or such other persons as may then have an interest therein. In addition, by mutual agreement between the Committee and a Participant or such other persons as may then have an interest therein, Awards may be granted to an Employee, Group Employee, Nonemployee Director or Independent Contractor in substitution and exchange for, and in cancellation of, any Awards previously granted to such Employee, Group Employee, Nonemployee Director or Independent Contractor under the Plan, or any award previously granted to such Employee, Group Employee, Nonemployee Director or Independent Contractor under any other present or future plan of the Company or any present or future plan of an entity which (i) is purchased by the Company, (ii) purchases the Company, or (iii) merges into or with the Company.
17. MISCELLANEOUS
17.1. Other Provisions. Awards granted under the Plan may also be subject to such other provisions (whether or not applicable to an Award granted to any other Participant) as the Committee determines on the date of grant to be appropriate, including, without limitation, for the installment purchase of Common Stock under Stock Options, to assist the Participant in financing the acquisition of Common Stock, for the forfeiture of, or restrictions on resale or other disposition of, Common Stock acquired under any Stock Option, for the acceleration of Vesting of Awards in the event of a Change in Control of the Company, for the payment of the value of Awards to Participants in the event of a Change in Control of the Company, or to comply with federal and state securities laws, or understandings or conditions as to the Participant's Service in addition to those specifically provided for under the Plan.
17.2. Restrictive Covenants and Other Terms and Conditions. The Committee may provide, by way of the Award Agreement or otherwise, that, notwithstanding any other provision of this Plan to the contrary, if the Participant breaches the non-compete, non-solicitation, non-disclosure or other terms, conditions, restrictions and/or limitations of the Award Agreement, whether during or after termination of Service, in addition to any other penalties or restrictions that may apply under any employment agreement, state law, or otherwise, the Participant will forfeit:
(a) any and all Awards granted to him or her under the Plan, including Awards that have become Vested and exercisable; and/or
(b) forfeit the profit the Participant has realized on the exercise of any Stock Options, which is the difference between the Stock Options' Exercise Price and the Fair Market Value of any Stock Option the Participant exercised after terminating Service and within the six month period immediately preceding the Participant's termination of Service (the Participant may be required to repay such difference to the Company).
17.3. Transferability. Each Award granted under the Plan to a Participant shall not be transferable otherwise than by will or the laws of descent and distribution, and Stock Options and SARs shall be exercisable, during the Participant's lifetime, only by the Participant. In the event of the death of a Participant, each Stock Option or SAR theretofore granted to him or her shall be exercisable during such period after his or her death as the Committee shall, in its sole discretion, set forth in the Award Agreement on the date of grant and then only by the executor or administrator of the estate of the deceased Participant or the person or persons to whom the deceased Participant's rights under the Stock Option or SAR shall pass by will or the laws of descent and distribution. Notwithstanding the foregoing, the Committee, in its sole discretion, may permit the transferability of a Stock Option (other than an ISO) by a Participant solely to members of the Participant's immediate family or trusts or family partnerships or other similar entities for the benefit of such persons, and subject to such terms, conditions, restrictions and/or limitations, if any, as the Committee may establish and include in the Award Agreement.
17.4. Election to Defer Compensation Attributable to Award. The Committee may, in its sole discretion and subject to Code Section 409A, allow a Participant to elect to defer the receipt of any compensation attributable to an Award under guidelines and procedures to be established by the Committee after taking into account the advice of the Company's tax counsel.
17.5. Listing of Shares and Related Matters. If at any time the Committee shall determine that the listing, registration or qualification of the shares of Common Stock subject to an Award on any securities exchange or under any applicable law, or the consent or approval of any governmental regulatory authority, is necessary or desirable as a condition of, or in connection with, the granting of an Award or the issuance of shares of Common Stock thereunder, such Award may not be exercised, distributed or paid out, as the case may be, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.
17.6. No Right, Title, or Interest in Company Assets. Participants shall have no right, title, or interest whatsoever in or to any investments which the Company may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative or any other person. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company, no special or separate fund shall be established, and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan. The Plan is not intended to be subject to the Employee Retirement Income Security Act of 1974, as amended.
17.7. No Right to Continued Employment or Service or to Grants. A Participant's rights, if any, to continue to serve the Company, an Affiliate or a Group Company as a director, officer, employee, independent contractor or otherwise, shall not be enlarged or otherwise affected by his or her
designation as a Participant under the Plan, and the Company, the Affiliate and the Group Company reserve the right to terminate the employment or Service of any Employee or Group Employee or the services of any Independent Contractor or director at any time. The adoption of the Plan shall not be deemed to give any Employee, Group Employee, Nonemployee Director, Independent Contractor or any other individual any right to be selected as a Participant or to be granted an Award.
17.8. Awards Subject to Foreign Laws. The Committee may grant Awards to
individual Participants who are subject to the tax laws of nations other
than the United States, and such Awards may have terms and conditions as
determined by the Committee as necessary to comply with applicable foreign
laws. The Committee may take any action that it deems advisable to obtain
approval of such Awards by the appropriate foreign governmental entity;
provided, however, that no such Awards may be granted pursuant to this
Section and no action may be taken which would result in a violation of the
Exchange Act or any other applicable law.
17.9. Governing Law. The Plan, all Awards granted hereunder, and all actions taken in connection herewith shall be governed by and construed in accordance with the laws of the State of Delaware without reference to principles of conflict of laws, except as superseded by applicable federal law. Participants, the Company, a Group Company and Affiliate each submit and consent to the jurisdiction of the courts in the Commonwealth of Massachusetts, County of Worcester, including the Federal Courts located therein, should Federal jurisdiction requirements exist in any action brought to enforce (or otherwise relating to) this Plan or an Award Agreement.
17.10. Other Benefits. No Award granted under the Plan shall be considered compensation for purposes of computing benefits under any retirement plan of the Company, an Affiliate or a Group Company nor affect any benefits or compensation under any other benefit or compensation plan of the Company, and Affiliate or a Group Company, now or subsequently in effect.
17.11. No Fractional Shares. No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, Common Stock, Stock Options, or other property shall be issued or paid in lieu of fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.
17.12. Compliance With Code Section 409A. Any provision of the Plan that becomes subject to Code Section 409A, will be interpreted and applied consistent with that Section and the applicable Treasury Regulations.
EXHIBIT 10.3
IPG PHOTONICS NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
A. Non-Employee Directors of IPG Photonics Corporation (the "Company") will continue to receive an annual cash retainer of $30,000, but will not receive separate fees for attending meetings of the Board of Directors or shareholders. Non-Employee Directors are expected to attend in person all Board meetings, except for telephonic meetings formally called.
B. Commencing July 1, 2006, the Chairman and Members of the Audit, Compensation, Nominating and Corporate Governance and Other Committees will also receive cash annual retainers as set forth below, but will not receive separate fees for attending meetings of Committees. Non-Employee Director Committee Members are expected to attend in person all Committee meetings, except for telephonic meetings formally called.
Chairman Member -------- ------- Audit $20,000 $10,000 Compensation $15,000 $ 7,500 Nominating & Corporate Governance $10,000 $ 5,000 Other Committees $ 5,000 $ 2,500 |
C. Upon initial election to the Board, new Non-Employee Directors will continue to receive options to purchase 30,000 shares of the Company's common stock at an exercise price equal to the fair market value of the shares of the Company's common stock on the date of the grant. The options will have a term of four (4) years and will vest at the rate of 25% per year commencing on the earlier of the one-year anniversary date or the date of the annual shareholders meeting, and 25% thereafter on the earlier of each anniversary date or the date of the annual shareholders meeting.
D. Each sitting Non-Employee Director who has served since June 2005 will be granted at the Board meeting on June 21, 2006, options to purchase 10,000 shares of the Company's common stock at an exercise price equal to the fair market value of the shares of the Company's common stock on the date of the grant. The options will have a term of four (4) years and will vest at the rate of 25% per year commencing on the earlier of the one-year anniversary date or the date of the annual shareholders meeting, and 25% thereafter on the earlier of each anniversary date or the date of the annual shareholders meeting.
E. Commencing in calendar year 2007, annually each sitting Non-Employee Director continuing in office after the annual shareholders meeting will receive immediately following the shareholders meeting options to purchase 10,000 shares of the Company's common stock at an exercise price equal to the fair market value of the shares of the Company's common stock on the date of the grant. The options will have a term of four (4) years and will vest at the rate of 25% per year commencing on the earlier of the one-year anniversary date or the date of the annual shareholders meeting, and 25% thereafter on the earlier of each anniversary date or the date of the annual shareholders meeting.
F. After the initial public offering (IPO) of the common stock of the Company, the following shall apply to the equity portion of Non-Employee Director
compensation, except for hardship cases:
1. Within one year after the IPO for existing directors, or within one year after the date of first election to the Board for directors elected after the IPO, every Non-Employee Director will be expected to own shares of the Company's common stock in an amount not less than $25,000 in market value as of the date of purchase of such shares, and continue to hold such shares until his service as a director concludes.
2. Within three years after the IPO for existing directors, or within three years after the date of first election to the Board for directors elected after the IPO, every Non-Employee Director will be expected to have increased his ownership of shares of the Company's common stock in an amount not less than $50,000 in market value as of the date of purchase of such shares, and continue to hold such shares until his service as a director concludes.
3. Within five years after the IPO for existing directors, or within five years after the date of first election to the Board for directors elected after the IPO, every Non-Employee Director will be expected to have increased his ownership of shares of the Company's common stock in an amount equal to five times the annual Board cash retainer in market value as of the date of purchase of such shares, and continue to hold such shares until his service as a director concludes.
4. Guidelines for hardship exceptions will be developed, but the determination of hardship should be made by a majority of the disinterested Directors on a case-by-case basis.
G. Any unvested options of a Non-Employee Director who retires, in accordance with the Non-Employee Directors Stock Plan, as amended from time to time, after eight years of service on the Board will vest on the last day of such Director's service. This will apply only to options granted on or after June 21, 2006.
Adopted June 21, 2006
EXHIBIT 10.4
IPG PHOTONICS CORPORATION
NON-EMPLOYEE DIRECTORS STOCK PLAN
(Effective June 21, 2006)
IPG Photonics Corporation has established this IPG Photonics Corporation Non-Employee Directors Stock Plan to attract and retain Non-Employee Directors of IPG Photonics Corporation.
1. DEFINITIONS
The following terms shall have the following meanings unless the context indicates otherwise:
1.1. "Award" shall mean a Stock Option, a SAR, a Stock Award, a Stock Unit, or a Cash Award.
1.2. "Award Agreement" shall mean a written agreement between the Company and a Participant that establishes the terms, conditions, restrictions and/or limitations applicable to an Award, in addition to those established by the Plan and by the Board.
1.3. "Board" shall mean the Board of Directors of the Company.
1.4. "Cause" shall have the meaning set forth in any written agreement between the Participant and the Company. If there is no written agreement between the Participant and the Company, or if such agreement does not define "Cause," then "Cause" shall have the meaning specified in the Award Agreement; provided, that if the Award Agreement does not so specify, "Cause" shall mean, as determined by the Board in its sole discretion, the Participant: (i) engages in conduct that cause financial or reputational injury to the Company; (ii) engages in any act of dishonesty or misconduct that results in damage to the Company, or its business or reputation or that the Board determines to adversely affect the value, reliability or performance of the Participant to the Company; (iii) refuses or fails to substantially comply with the human resources rules, policies, directions and/or restrictions relating to harassment and/or discrimination, or with compliance or risk management rules, policies, directions and/or restrictions of the Company; or (iv) fails to cooperate with the Company in any internal investigation or administrative, regulatory or judicial proceeding. If any part of the definition of Cause set forth in clauses (i) through (iv) above is deemed applicable to a Participant, this shall not preclude or prevent the reliance by the Company or the Board on any other part of the preceding sentence that also may be applicable. An act or omission is "willful" for this purpose if it was knowingly done, or knowingly omitted to be done, by the Participant not in good faith and without reasonable belief that the act or omission was in the best interest of the Company.
1.5. "Change in Control of the Company" shall mean the occurrence of any one or more of the following:
(a) Any "person" (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), including a "group" (as defined in Section
13(d)(3) of the Exchange Act), other than (i) the Company, (ii) any wholly-owned subsidiary of the Company, or (iii) any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate, becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company having fifty percent (50%) or more of the combined voting power of the then-outstanding securities of the Company that may be cast for the election of directors of the Company (other than as a result of an issuance of securities initiated by the Company in the ordinary course of business) (the "Company Voting Securities"); provided, however, that the event described in this paragraph (a) shall not be deemed to be a Change in Control by virtue of any underwriter temporarily holding securities pursuant to an offering of such securities;
(b) During any period of two consecutive years, individuals who at the beginning of any such period constitute the Board (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board, unless the election, or the nomination for election by the stockholders of the Company, of each new director of the Company during such period was approved by a vote of at least two-thirds of the Incumbent Directors then still in office;
(c) As the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of all or substantially all of the assets or contested election, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then-outstanding securities of the Company or any successor corporation or entity entitled to vote generally in the election of the directors of the Company or such other corporation or entity after such transaction is held in the aggregate by the holders of the securities of the Company entitled to vote generally in the election of directors of the Company immediately prior to such transaction; or
(d) The shareholders of the Company approve a plan of complete liquidation of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires beneficial ownership of more than fifty percent (50%) of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, however, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control transaction shall then occur.
Notwithstanding the foregoing, to the extent necessary to avoid subjecting
Participants to interest and additional tax under Section 409A of the Code,
no "Change in Control" will be deemed to occur unless and until paragraph
(a), (b), (c) or (d), above, and the preceding paragraph are satisfied and
Section 409A(a)(2)(A)(v) of the Code is satisfied.
1.6. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.
1.7. "Committee" shall mean (i) the Board or (ii) a committee or subcommittee of the Board appointed by the Board from among its members. The Committee may be the Board's Compensation Committee. Unless the Board determines otherwise, the Committee shall be comprised solely of not less than two members who each shall qualify as a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3) (or any successor rule) under the Exchange Act.
1.8. "Common Stock" shall mean the voting, common stock, $0.0001 par value per share, of the Company.
1.9. "Company" shall mean IPG Photonics Corporation, a Delaware corporation.
1.10. "Disability" means the total and permanent disability of a Participant (incurred while in the active service of the Company) based on proof satisfactory to the Board. Total and permanent disability shall be as defined in the Company's long-term disability plan, if any, or as otherwise provided by the Company.
Notwithstanding the foregoing, to the extent necessary to avoid subjecting an individual to interest and additional tax under Section 409A of the Code, such individual shall not be deemed to have a Disability unless and until Section 409A(a)(2)(C) is satisfied.
1.11. "Dividend Equivalent Right" shall mean the right to receive an amount equal to the amount of any dividend paid with respect to a share of Common Stock multiplied by the number of shares of Common Stock underlying or with respect to a Stock Option, a SAR, or a Stock Unit, and which shall be payable in cash, in Common Stock, or in the form of Stock Units, or a combination of any or all of the foregoing.
1.12. "Effective Date" shall mean the date on which the Plan is adopted by the Board.
1.13. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time, including applicable regulations thereunder.
1.14. "Fair Market Value of the Common Stock" shall mean:
(a) if the Common Stock is readily tradeable on a national securities exchange or other market system, the closing price of the Common Stock on the date of calculation (or on the last preceding trading date if Common Stock was not traded on such date), or
(b) if the Common Stock is not readily tradeable on a national securities exchange or other market system, the value as determined in good faith by the Board.
1.15. "Non-Employee Director" shall mean a member of the Board who is not an employee of the Company or any of its affiliates.
1.16. "Nonqualified Stock Option" shall mean a Stock Option that does not qualify as an "incentive stock option" as such term is used in Code Section 422.
1.17. "Nonvoting Stock" shall mean the capital stock of any class or classes having no voting power to elect the directors of a corporation.
1.18. "Participant" shall mean any Non-Employee Director to whom an Award has been granted by the Board under the Plan.
1.19. "Plan" shall mean the IPG Photonics Corporation Non-Employee Directors Stock Plan, as amended.
1.20. "Recapitalization" shall mean any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the Company's outstanding shares of capital stock as a class without the Company's receipt of consideration.
1.21. "Reorganization" shall mean any of the following: (a) a merger or consolidation in which the Company is not the surviving entity; (b) a sale, transfer or other disposition of all or substantially all of the Company's assets; (c) a reverse merger in which the Company is the surviving entity but in which the Company's outstanding voting securities are transferred in whole or in part to a person or persons different from the persons holding those securities immediately prior to the merger; or (d) any transaction effected primarily to change the state in which the Company is incorporated or to create a holding company structure.
1.22. "Retirement" means termination of Service (other than removal for Cause, death or Disability) after completion of eight or more years of Service as a director, only if the Non-Employee Director shall provide Services until the end of a full one-year term (which for this purpose is until the next annual meeting of shareholders) or, in the event of a classified board of directors in which a class of directors is elected by shareholders and where a retiring director may be serving a multi-year term, until the end of a full year of such term (which for this purpose is until the next annual meeting of shareholders).
1.23. "SAR" shall mean a grant by the Board to a Participant of a stock appreciation right as described in Section 7 below.
1.24. "Service" shall mean the provision of services to the Company as a member of the Board of Directors of the Company.
1.25. "Stock" shall mean the shares of capital stock of the Company.
1.26. "Stock Award" shall mean a grant by the Board to a Participant of an Award of Common Stock as described in Section 8.1 below.
1.27. "Stock Option" shall mean a grant by the Board to a Participant of an option to purchase Common Stock as described in Section 6 below.
1.28. "Stock Unit" shall mean a grant by the Board to a Participant of an Award as described in Section 8.2 below.
1.29. "Treasury Regulations" shall mean the regulations promulgated under the Code by the United States Department of the Treasury, as amended from time to time.
1.30. "Vest" shall mean:
(a) with respect to Stock Options and SARs, when the Stock Option or SAR (or a portion of such Stock Option or SAR) first becomes exercisable and remains exercisable subject to the terms and conditions of such Stock Option or SAR; or
(b) with respect to Awards other than Stock Options and SARs, when the Participant has:
(i) an unrestricted right, title and interest to receive the compensation (whether payable in Common Stock, cash or a combination of both) attributable to an Award (or a portion of such Award) or to otherwise enjoy the benefits underlying such Award; and
(ii) a right to transfer an Award subject to no Company-imposed restrictions or limitations other than restrictions and/or limitations imposed by Section 10 below.
1.31. "Vesting Date" shall mean the date or dates on which an Award Vests.
1.32. "Voting Stock" shall mean the capital stock of any class or classes having general voting power under ordinary circumstances, in the absence of contingencies, to elect the directors of a corporation.
2. TERM OF PLAN. The Plan shall be effective as of the Effective Date. The Plan shall terminate on the 10th anniversary of the Effective Date, unless sooner terminated by the Board under Section 13.1 below.
3. ELIGIBILITY AND PARTICIPATION
3.1. Eligibility. All Non-Employee Directors shall be eligible to participate in the Plan and to receive Awards.
3.2. Participation. Participants shall consist of such Non-Employee Directors as the Board in its sole discretion designates to receive Awards under the Plan.
4. ADMINISTRATION
4.1. Responsibility. The Board shall have the responsibility, in its sole discretion, to control, operate, manage and administer the Plan in accordance with its terms.
4.2. Award Agreement. Each Award granted under the Plan shall be evidenced by an Award Agreement which shall be signed by the Company and the Participant; provided, however, that in the event of any conflict between a provision of the Plan and any provision of an Award Agreement, the provision of the Plan shall prevail.
4.3. Authority of the Board. The Board shall have all the discretionary authority that may be necessary or desirable to enable it to discharge its responsibilities with respect to the Plan.
4.4. Delegation of Authority. The Board may delegate to the Committee all or any part of its authority under the Plan. To the extent of any such delegation, references in the Plan to the Board will be deemed to be references to the Committee.
4.5. Determinations and Interpretations by the Board. All determinations and interpretations made by the Board shall be binding and conclusive on all Participants and their heirs, successors, and legal representatives.
4.6. Liability. No member of the Board, no member of the Committee and no employee of the Company shall be liable for (a) any act or failure to act hereunder, except in circumstances involving his or her gross negligence or willful misconduct, or (b) any act or failure to act hereunder by any other member or employee or by any agent to whom duties in connection with the administration of the Plan have been delegated.
4.7. Indemnification. Each person who is or has been a member of the Committee
or the Board, and any individual or individuals to whom the Board has
delegated authority under this Section 4, will be indemnified and held
harmless by the Company from and against any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by him or her in
connection with or as a result of any claim, action, suit or proceeding to
which he or she may be a party or in which he or she may be involved by
reason of any action taken, or failure to act with respect to their duties
on behalf of, under the Plan, except in circumstances involving such
person's gross negligence or willful misconduct. Each such person will also
be indemnified and held harmless by the Company from and against any and
all amounts paid by him or her in a settlement approved by the Company, or
paid by him or her in satisfaction of any judgment, of or in a claim,
action, suit or proceeding against him or her and described in the previous
sentence, so long as he or she gives the Company an opportunity, at its own
expense, to handle and defend the claim, action, suit or proceeding before
he or she undertakes to handle and defend it. The foregoing right of
indemnification will not be exclusive of or limit any other rights of
indemnification to which a person who is or has been a member of the
Committee or the Board may be entitled under the Articles of Incorporation
or By-Laws of the Company, as a matter of law, agreement or otherwise,
including but not limited to any indemnification agreement between an
indemnified person hereunder and the Company as it may be amended from time
to time, or any power that the Company may have to indemnify him or her or
hold him or her harmless. Any person entitled to indemnification under this
Section shall have the right to elect to be indemnified under this Section
or any other arrangement or agreement pursuant to which such person is
entitled to indemnification from the Company, or any combination thereof.
5. SHARES SUBJECT TO PLAN
5.1. Available Shares. At any given time, the maximum number of shares of Common Stock that may be issued or transferred to Participants under the Plan will be 0.75% of the number of Company shares outstanding (on a fully-diluted basis) at the end of the plan year preceding the then-current plan year, or on January 1, 2006, whichever is greater, subject to adjustments made in accordance with Section 5.2 below. Notwithstanding the foregoing, the maximum number of shares of Common Stock that may be issued or transferred to Participants under the Plan shall be 250,000 shares. Shares of Common Stock issued or transferred under the Plan may be either authorized or unissued shares, shares of issued stock held in the Company's treasury, or a combination of both,
at the discretion of the Company. Any shares of Common Stock underlying an Award which terminate by reason of expiration, forfeiture, cancellation or otherwise without the issuance of such shares shall again be available under the Plan. Awards that are payable only in cash are not subject to this Section 5.1.
5.2. Adjustment to Shares. If there is any change in the Common Stock of the Company, through merger, consolidation, Reorganization, Recapitalization, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, dividend in kind or other like change in capital structure or distribution (other than normal cash dividends) to stockholders of the Company, an adjustment shall be made to each outstanding Award so that each such Award shall thereafter be with respect to or exercisable for such securities, cash and/or other property as would have been received in respect of the Common Stock subject to such Award had such Award been paid, distributed or exercised in full immediately prior to such change or distribution. Such adjustment shall be made successively each time any such change or distribution shall occur. In addition, in the event of any such change or distribution, in order to prevent dilution or enlargement of Participants' rights under the Plan, the Board shall have the authority to adjust, in an equitable manner, the number and kind of shares that may be issued under the Plan, the number and kind of shares subject to outstanding Awards, the exercise price applicable to outstanding Stock Options, and the Fair Market Value of the Common Stock and other value determinations applicable to outstanding Awards. Appropriate adjustments may also be made by the Board in the terms of any Awards granted under the Plan to reflect such changes or distributions and to modify any other terms of outstanding Awards on an equitable basis, including modifications of performance goals and changes in the length of performance periods. In addition, the Board is authorized to make adjustments to the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events affecting the Company or the financial statements of the Company, or in response to changes in applicable laws, regulations, or accounting principles.
6. STOCK OPTIONS
6.1. In General. The Board may, in its sole discretion, grant Stock Options to Non-Employee Directors on or after the Effective Date. The Stock Options so granted shall be Nonqualified Stock Options. The Board shall, in its sole discretion, determine the Non-Employee Directors who will receive Stock Options and the number of shares of Common Stock underlying each Stock Option. Each Stock Option shall be subject to such terms and conditions consistent with the Plan as the Board may impose from time to time. In addition, each Stock Option shall be subject to the terms and conditions set forth in Sections 6.2 through 6.6 below.
6.2. Exercise Price. The Board shall specify the exercise price of each Stock Option in the Award Agreement which exercise price shall not be less than 100 percent of the Fair Market Value of the Common Stock on the date of grant.
6.3. Term of Stock Option. The Board shall specify the term of each Stock Option in the Award Agreement; provided, however, that no Stock Option
shall be exercisable after the 10th anniversary of the date of grant of such Stock Option. Each Stock Option shall terminate at such earlier times and upon such conditions or circumstances as the Board shall, in its sole discretion, set forth in the Award Agreement on the date of grant.
6.4. Vesting Date. The Board shall specify in the Award Agreement the Vesting Date for each Stock Option. The Board may grant Stock Options that are Vested, either in whole or in part, on the date of grant. If the Board fails to specify a Vesting Date in the Award Agreement, 25 percent of such Stock Option shall become exercisable on each of the first four one-year anniversaries of the date of grant and shall remain exercisable following such anniversary date until the Stock Option expires in accordance with its terms under the Award Agreement or under the terms of the Plan. The Vesting of a Stock Option may be subject to such other terms and conditions as shall be determined by the Board.
6.5. Exercise of Stock Options. The Stock Option exercise price may be paid in cash or, in the sole discretion of the Board, by delivery to the Company of shares of Common Stock then owned by the Participant, or by the Company's withholding a portion of the shares of Common Stock for which the Stock Option is exercisable, or by a combination of these methods. If the Common Stock is readily tradeable on a national securities exchange or other market system, payment may also be made by delivering a properly executed exercise notice to the Company and delivering a copy of irrevocable instructions to a broker directing the broker to promptly deliver to the Company the amount of sale or loan proceeds to pay the exercise price. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms. The Board may prescribe any other method of paying the exercise price that it determines to be consistent with applicable law and the purpose of the Plan, including, without limitation, in lieu of the delivery to the Company of shares of Common Stock then owned by the Participant, providing the Company with a notarized statement attesting to the number of shares owned by the Participant, where, upon verification by the Company, the Company would issue to the Participant only the number of incremental shares to which the Participant is entitled upon exercise of the Stock Option. In determining which methods a Participant may utilize to pay the exercise price, the Board may consider such factors as it determines are appropriate.
6.6. Additional Terms and Conditions. The Board may, by way of the Award Agreements or otherwise, establish such other terms, conditions, restrictions and/or limitations, if any, of any Stock Option, provided they are not inconsistent with the Plan.
7. SARS
7.1. In General. The Board may, in its sole discretion, grant SARs to
Non-Employee Directors. A SAR is a right to receive a payment in cash,
Common Stock or a combination of both, in an amount equal to the excess of
(x) the Fair Market Value of the Common Stock, or other specified
valuation, of a specified number of shares of Common Stock on the date the
SAR is exercised over (y) the Fair Market Value of the Common Stock, or
other specified valuation (which shall be no less than the Fair Market
Value of the Common Stock), of such shares of Common Stock
on the date the SAR is granted, all as determined by the Board; provided, however, that if a SAR is granted retroactively in tandem with or in substitution for a Stock Option, the designated Fair Market Value of the Common Stock in the Award Agreement may be the Fair Market Value of the Common Stock on the date such Stock Option was granted. Each SAR shall be subject to such terms and conditions, including, but not limited to, a provision that automatically converts a SAR into a Stock Option on a conversion date specified at the time of grant, as the Board shall impose from time to time in its sole discretion and subject to the terms of the Plan.
8. STOCK AWARDS AND STOCK UNITS
8.1. Stock Awards. The Board may, in its sole discretion, grant Stock Awards to Non-Employee Directors as additional compensation or in lieu of other compensation for services to the Company. A Stock Award shall consist of shares of Common Stock which shall be subject to such terms and conditions as the Board in its sole discretion determines appropriate including, without limitation, restrictions on the sale or other disposition of such shares and the Vesting Date with respect to such shares. The Board may require the Participant to deliver a duly signed stock power, endorsed in blank, relating to the Common Stock covered by such Stock Award and/or that the stock certificates evidencing such shares be held in custody or bear restrictive legends until the restrictions thereon shall have lapsed. With respect to shares of Common Stock subject to a Stock Award, the Participant shall have all of the rights of a holder of shares of Common Stock, including the right to receive dividends and to vote the shares, unless the Board determines otherwise on the date of grant.
8.2. Stock Units. The Board may, in its sole discretion, grant Stock Units to Non-Employee Directors as additional compensation or in lieu of other compensation for services to the Company. A Stock Unit is a hypothetical share of Common Stock represented by a notional account established and maintained (or caused to be established or maintained) by the Company for such Participant who receives a grant of Stock Units. Stock Units shall be subject to such terms and conditions as the Board, in its sole discretion, determines appropriate including, without limitation, determinations of the Vesting Date with respect to such Stock Units and the criteria for the Vesting of such Stock Units. Subject to Section 8.3, a Stock Unit granted by the Board shall provide for payment in cash or shares of Common Stock at such time or times as the Award Agreement shall specify. The Board shall determine whether a Participant who has been granted a Stock Unit shall also be entitled to a Dividend Equivalent Right.
8.3. Payout of Stock Units. Subject to a Participant's election to defer in accordance with Section 13.3 below, upon the Vesting of a Stock Unit, the shares of Common Stock representing the Stock Unit shall be distributed to the Participant, unless the Board, in its sole discretion, provides for the payment of the Stock Unit in cash (or partly in cash and partly in shares of Common Stock) equal to the value of the shares of Common Stock which would otherwise be distributed to the Participant.
9. CHANGE IN CONTROL
9.1. Accelerated Vesting. Notwithstanding any other provision of this Plan to the contrary, if there is a Change in Control of the Company, all outstanding Awards shall accelerate, including, without limitation, acceleration of the Vesting Date and/or payout of such Awards.
9.2. Cashout. The Board, in its sole discretion, may determine that, upon the occurrence of a Change in Control of the Company, all or a portion of certain outstanding Awards shall terminate within a specified number of days after notice to the holders, and each such holder shall receive an amount equal to the value of such Award on the date of the Change in Control, and with respect to each share of Common Stock subject to a Stock Option or SAR, an amount equal to the excess of the Fair Market Value of such shares of Common Stock immediately prior to the occurrence of such Change in Control of the Company over the exercise price per share of such Stock Option or SAR. Such amount shall be payable in cash, in one or more kinds of property (including the property, if any, payable in the transaction) or in a combination thereof, as the Board, in its sole discretion, shall determine.
9.3. Assumption or Substitution of Awards. Notwithstanding anything contained in the Plan to the contrary, the Board may, in its sole discretion, provide that an Award may be assumed by any entity which acquires control of the Company or may be substituted by a similar award under such entity's compensation plans.
10. TERMINATION OF SERVICE
10.1. Termination of Service Due to Death, Disability or Retirement. Subject to any written agreement between the Company and a Participant, if a Participant's Service is terminated due to death, disability or Retirement:
(a) all non-Vested portions of Awards held by the Participant on the date of the Participant's death or the date of the termination of his or her Service for disability or Retirement, as the case may be, shall immediately become vested; and
(b) all Vested portions of Awards held by the Participant on the date of the Participant's death or the date of the termination of his or her Service for disability or Retirement, as the case may be, shall remain exercisable until the earlier of:
(i) the end of the 12-month period following the date of the Participant's death or the date of the termination of his or her Service for disability or Retirement, as the case may be, or
(ii) the date the Award would otherwise expire.
10.2. Termination of Service for Cause. Subject to any written agreement between the Company and a Participant, if a Participant's Service is terminated by the Company because of a removal for Cause, all Awards held by the Participant on the date of the termination of Service, whether Vested or non-Vested, shall immediately be forfeited by the Participant as of such date. A Participant's Service shall be deemed to have removed for Cause if, after the Participant's Service has
terminated, facts and circumstances are discovered that would have justified a removal for Cause.
10.3. Other Terminations of Service. Subject to any written agreement between the Company and a Participant, if a Participant's Service is terminated for any reason other than for Cause, death, disability or Retirement:
(a) all non-Vested portions of Awards held by the Participant on the date of the termination of his or her Service shall immediately be forfeited by such Participant as of such date; and
(b) all Vested portions of Awards held by the Participant on the date of the termination of his or her Service shall remain exercisable until the earlier of (i) the end of the 90-day period following the date of the termination of the Participant's Service or (ii) the date the Award would otherwise expire.
11. TAXES
11.1. Withholding Taxes. The Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising under the Plan.
11.2. Use of Common Stock to Satisfy Withholding Obligation. With respect to withholding required upon the exercise of Stock Options or SARs, upon the lapse of restrictions on a Stock Award, or upon any other taxable event arising as a result of Awards granted hereunder, the Company may satisfy the minimum withholding requirement for supplemental wages, in whole or in part, by withholding shares of Stock having a Fair Market Value (determined on the date the Participant recognizes taxable income on the Award) equal to the minimum withholding tax required to be collected on the transaction. The Participant may elect, subject to the approval of the Board, to deliver the necessary funds to satisfy the withholding obligation to the Company, in which case there will be no reduction in the shares of Common Stock otherwise distributable to the Participant.
12. AMENDMENT AND TERMINATION
12.1. Termination of Plan. The Board may suspend or terminate the Plan at any time with or without prior notice; provided, however, that no action authorized by this Section 12.1 shall reduce the amount of any outstanding Award or change the terms and conditions thereof without the Participants' consent.
12.2. Amendment of Plan. The Board may amend the Plan at any time with or
without prior notice; provided, however, that no action authorized by this
Section 12.2 shall reduce the amount of any outstanding Award or change the
terms and conditions thereof without the Participants' consent. No
amendment of the Plan shall, without the approval of the stockholders of
the Company:
(a) increase the total number of shares which may be issued under the Plan by amending the formula and/or limit contained in Section 5.1 hereof; or
(b) modify the requirements as to eligibility for Awards under the Plan.
In addition, the Plan shall not be amended without the approval of such amendment by the Company's stockholders if such amendment is required under the rules and regulations of the stock exchange or national market system on which the Common Stock is listed.
12.3. Amendment or Cancellation of Award Agreements. The Board may amend or modify any Award Agreement at any time by mutual agreement between the Company and the Participant or such other persons as may then have an interest therein. In addition, by mutual agreement between the Company and a Participant or such other persons as may then have an interest therein, Awards may be granted to a Non-Employee Director in substitution and exchange for, and in cancellation of, any Awards previously granted to such Non-Employee Director under the Plan, or any award previously granted to such Non-Employee Director under any other present or future plan of the Company or any present or future plan of an entity which (i) is purchased by the Company, (ii) purchases the Company, or (iii) merges into or with the Company.
13. MISCELLANEOUS
13.1. Other Provisions. Awards granted under the Plan may also be subject to such other provisions (whether or not applicable to an Award granted to any other Participant) as the Company determines on the date of grant to be appropriate, including, without limitation, for the forfeiture of, or restrictions on resale or other disposition of, Common Stock acquired under any Stock Option, for the acceleration of Vesting of Awards in the event of a Change in Control of the Company, for the payment of the value of Awards to Participants in the event of a Change in Control of the Company, or to comply with federal and state securities laws.
13.2. Transferability. Each Award granted under the Plan to a Participant shall not be transferable otherwise than by will or the laws of descent and distribution, and Stock Options and SARs shall be exercisable, during the Participant's lifetime, only by the Participant. In the event of the death of a Participant, each Stock Option or SAR theretofore granted to him or her shall be exercisable during such period after his or her death as the Board shall, in its sole discretion, set forth in the Award Agreement on the date of grant and then only by the executor or administrator of the estate of the deceased Participant or the person or persons to whom the deceased Participant's rights under the Stock Option or SAR shall pass by will or the laws of descent and distribution. Notwithstanding the foregoing, the Board, in its sole discretion, may permit the transferability of a Stock Option by a Participant solely to members of the Participant's immediate family or trusts or family partnerships or other similar entities for the benefit of such persons, and subject to such terms, conditions, restrictions and/or limitations, if any, as the Board may establish and include in the Award Agreement.
13.3. Election to Defer Compensation Attributable to Award. The Board may, in its sole discretion and subject to Code Section 409A, allow a Participant to elect to defer the receipt of any compensation attributable to an Award under guidelines and procedures to be
established by the Board after taking into account the advice of the Company's tax counsel.
13.4. Listing of Shares and Related Matters. If at any time the Board shall determine that the listing, registration or qualification of the shares of Common Stock subject to an Award on any securities exchange or under any applicable law, or the consent or approval of any governmental regulatory authority, is necessary or desirable as a condition of, or in connection with, the granting of an Award or the issuance of shares of Common Stock thereunder, such Award may not be exercised, distributed or paid out, as the case may be, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board.
13.5. No Right to Continued Service or to Grants. A Participant's rights, if any, to continue to serve the Company as a director shall not be enlarged or otherwise affected by his or her designation as a Participant under the Plan. The adoption of the Plan shall not be deemed to give any Non-Employee Director or any other individual any right to be selected as a Participant or to be granted an Award.
13.6. Governing Law. The Plan, all Awards granted hereunder, and all actions taken in connection herewith shall be governed by and construed in accordance with the laws of the State of Delaware without reference to principles of conflict of laws, except as superseded by applicable federal law. Participants and the Company each submit and consent to the jurisdiction of the courts in the Commonwealth of Massachusetts, County of Worcester, including the Federal Courts located therein, should Federal jurisdiction requirements exist in any action brought to enforce (or otherwise relating to) this Plan or an Award Agreement.
13.7. Other Benefits. No Award granted under the Plan shall be considered compensation for purposes of computing benefits under any retirement plan of the Company nor affect any benefits or compensation under any other benefit or compensation plan of the Company, now or subsequently in effect.
13.8. No Fractional Shares. No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan or any Award. The Board shall determine whether cash, Common Stock, Stock Options, or other property shall be issued or paid in lieu of fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.
13.9. Compliance With Code Section 409A. Any provision of the Plan that becomes subject to Code Section 409A, will be interpreted and applied consistent with that Section and the applicable Treasury Regulations.
EXHIBIT 10.5
IPG PHOTONICS CORPORATION
SENIOR EXECUTIVE
SHORT-TERM INCENTIVE PLAN
ARTICLE I GENERAL
SECTION 1.1 PURPOSE.
The purpose of the IPG Photonics Corporation Senior Executive Short-Term Incentive Plan (the "Plan") is to benefit and advance the interests of IPG Photonics Corporation, a Delaware corporation (the "Company"), by providing to selected senior executives of the Company and its subsidiaries performance-based incentive compensation ("Awards") that are based upon the level of achievement of financial, business and other performance criteria.
SECTION 1.2 ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a committee (the "Committee") appointed by the Board of Directors of the Company (the "Board"), consisting of at least such number of directors who have qualifications that satisfy the "outside director" requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and the regulations thereunder. The Committee shall adopt such rules as it may deem appropriate in order to carry out the purpose of the Plan. All questions of interpretation, administration and application of the Plan shall be determined by a majority of the members of the Committee then in office, except that the Committee may authorize any one or more of its members, or any officer of the Company, to execute and deliver documents on behalf of the Committee. The determination of such majority shall be final and binding in all matters relating to the Plan. The Committee shall have authority to designate the eligible persons specified in Section 1.3 below who will receive Awards under, and become participants in, the Plan ("Participants") and to determine the terms and conditions of such Awards.
With respect to any restrictions in the Plan that are based on the requirements of Section 162(m) of the Code or any other applicable law, rule or restriction, to the extent that any such restrictions are no longer required, the Committee shall have the sole discretion and authority to grant Awards that are not subject to such restrictions and/or to waive any such restrictions with respect to outstanding Awards.
SECTION 1.3 ELIGIBLE PERSONS.
Awards may be granted only to employees of the Company or one of its subsidiaries who are at the level of Vice President or employee-Director of the Company or one of its subsidiaries or at a more senior level. An individual shall not be deemed an employee for purposes of the Plan unless such individual is classified and receives compensation from either the Company or one of its subsidiaries for services performed as an employee of the Company or any of its subsidiaries.
ARTICLE II AWARDS
SECTION 2.1 AWARDS.
The Committee may grant Awards to eligible employees with respect to each fiscal year of the Company, subject to the terms and conditions set forth in the Plan.
SECTION 2.2 TERMS OF AWARDS.
Not later than ninety days after the start of each fiscal year of the
Company (but not after more than 25% of the Performance Period (as such term is
defined below) has elapsed) or, for fiscal 2005, not later than April 15, 2005,
the Committee shall (i) determine the Participants from the eligible persons
under Section 1.3 above, (ii) establish for such period ("Performance Period")
the applicable performance goals and objectives ("Performance Targets") for the
Company and the subsidiaries and divisions thereof and for each individual
Participant and the percentage allocation to each such Performance Target, and
(iii) establish target awards ("Target Awards") for each Participant which shall
equal a percentage (up to 200%) of the Participant's Salary (as such term is
defined below). Performance Targets under the Plan may include (but shall not be
limited to) any of the following: net earnings; operating earnings or income;
earnings growth; net income (absolute or competitive growth rates comparative);
net income applicable to common stock; gross revenue or revenue by pre-defined
business segment (absolute or competitive growth rates comparative); revenue
backlog; margins realized on delivered services; cash flow, including operating
cash flow, free cash flow, discounted cash flow return on investment, and cash
flow in excess of cost of capital; earnings per share of common stock; return on
stockholders equity (absolute or peer-group comparative); stock price (absolute
or peer-group comparative); absolute and/or relative return on common
stockholders equity; absolute and/or relative return on capital; absolute and/or
relative return on assets; economic value added (income in excess of cost of
capital); customer satisfaction; expense reduction; ratio of operating expenses
to operating revenues; product development milestones; debt-to-capital ratio or
market share. The Committee may specify any reasonable definition for the
Performance Targets that it uses during a Performance Period.
"Salary" shall mean the annual base salary of the Participant for the Performance Period, and (ii) an amount equal to the annual rate of any deferred compensation for such Performance Period; PROVIDED that, if the Participant has an employment agreement as in effect on the "Effective Date" (as defined below) and such employment agreement expires prior to the end of any Performance Period, the amount of base salary and deferred compensation determined hereunder shall relate to the highest annual amounts that were provided for under such employment agreement. Notwithstanding the foregoing, "Salary" determined hereunder shall not include any amounts that would cause the Committee to exercise discretion not otherwise permitted by Section 162(m) of the Code to the extent Section 162(m) of the Code shall be applicable.
SECTION 2.3 DETERMINATION OF AWARDS.
As soon as administratively practicable after the end of the relevant Performance Period, the Committee, or, if applicable, the
Committee's delegate, shall determine the amount of the Award for each Participant by: (i) determining the actual performance results for each Performance Target; (ii) determining the amount to which each Participant is entitled based on the percentage allocated by the Committee to each Performance Target against the Target Award for each Participant; and (iii) certifying by resolution duly adopted by the Committee (or equivalent action by the Committee's delegate) the value of the Award for each Participant so determined. The Committee may, in its sole discretion, reduce the amount of any Award to reflect the Committee's assessment of the Participant's individual performance during a Performance Period or for any other reason.
SECTION 2.4 PAYMENT OF AWARDS.
Payment of an Award to a Participant shall be made as soon as practicable after determination of the amount of the Award under Section 2.3 above, and after the Committee has approved the aggregate bonus payout amount for the Performance Period, but in no event later than 2-1/2 months after the end of the Performance Period. Subject to the requirements of applicable law, a Participant may defer the payment of all or any portion of an Award under a deferred compensation arrangement maintained by the Company by making a timely deferral election pursuant to such rules and procedures as the Committee may establish from time to time with respect to such arrangement.
SECTION 2.5 EMPLOYMENT REQUIREMENT.
The payment of an Award with respect to a specific Performance Period requires that the Participant be on the payroll of the Company or any of its subsidiaries as of the end of such Performance Period, PROVIDED that, if a Participant becomes "permanently disabled" (as determined by the Committee in its sole discretion), retires under the terms of a qualified pension plan maintained by the Company in which such Participant participates, or dies during a Performance Period, or if a Participant is on an approved leave of absence that began prior to the end of the Performance Period, such Participant or his estate shall be awarded, unless his employment agreement provides otherwise, a pro rata portion of the amount of the Award earned for such Performance Period, except that the Committee may, in its sole discretion, reduce the amount of such Award to reflect the Committee's assessment of such Participant's individual performance prior to such Participant's becoming permanently disabled, retirement or such Participant's death or approved leave as the case may be, or for any other reason.
ARTICLE III ADJUSTMENT OF AWARDS
SECTION 3.1 ADJUSTMENTS.
In the event that, during a Performance Period, any recapitalization, reorganization, merger, acquisition, divestiture, consolidation, spin-off, combination, liquidation, dissolution, sale of assets, or other similar corporate transaction or event, or any other extraordinary item or event not foreseen at the time of the grant of the Award, or any other event that distorts the applicable Performance Targets occurs involving the Company or a subsidiary or division thereof, the Committee shall, to the extent consistent with Section 162(m) of the Code (to the extent Section 162(m) of the Code shall be applicable), adjust or modify, as determined by the Committee in its
sole and absolute discretion, such Performance Targets, to the extent necessary to prevent reduction or enlargement of Participants' Awards under the Plan for such Performance Period attributable to such transaction or event. Such adjustments shall be conclusive and binding for all purposes.
SECTION 3.2 PAYMENT UPON CHANGE IN CONTROL.
Anything to the contrary notwithstanding, within five days following the occurrence of a Change in Control (as defined below), the Company shall pay to each Participant an interim lump-sum cash payment (the "Interim Payment") with respect to his or her participation in the Plan. For each Participant, the amount of the Interim Payment shall equal the product of (x) the number of months, including fractional months, that have elapsed until the occurrence of the Change in Control in the Performance Period in which the Change of Control occurs and (y) one-twelfth of the greater of (i) the amount of most recently paid Award to the Participant for a full calendar year, or (ii) the Target Award for the Participant for the Performance Period in which the Change in Control occurs. The Interim Payment shall not reduce the obligation of the Company to make a final payment under the terms of the Plan, but any Interim Payment made shall be offset against any later payment required under the terms of the Plan for the calendar year in which a Change in Control occurs. No Participant may be required to refund to the Company, or have offset against any other payment due any participant from or on behalf of the Company, all or any portion of the Interim Payment.
"Change in Control" means:
(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); PROVIDED, HOWEVER, that the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company (other than by exercise of a conversion privilege), (B) any acquisition by the Company or any of its subsidiaries, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries or (D) any acquisition by any corporation with respect to which, following such acquisition, more than 50% of the then outstanding combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned by all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Voting Securities immediately prior to such acquisition in substantially the same proportions as their ownership, immediately prior to such acquisition, of the Outstanding Company Voting Securities; or
(ii) Approval by the shareholders of the Company of a reorganization, merger or consolidation, or a sale or other disposition of all or substantially all of the assets of the Company, in each case, with respect to which all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding Company Voting Securities immediately prior to such reorganization, merger, consolidation or sale, do not, following such reorganization, merger, consolidation or sale, beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger, consolidation or sale in substantially the same proportions as their ownership, immediately prior to such reorganization, merger, consolidation or sale of the Outstanding Company Voting Securities.
ARTICLE IV MISCELLANEOUS
SECTION 4.1 NO ADDITIONAL PARTICIPANT RIGHTS.
The selection of an individual as a Participant in the Plan shall not give such Participant any right to be retained in the employ of the Company or any of its subsidiaries, and the Company and any such subsidiary specifically reserve the right to dismiss the Participant or to terminate any arrangement pursuant to which any such Participant provides services to the Company, with or without cause. No person shall have claim to an Award under the Plan, except as otherwise provided for herein, or to continued participation under the Plan. There is no obligation for uniformity of treatment of Participants under the Plan. The benefits provided for Participants under the Plan shall be in addition to and shall in no way preclude other forms of compensation to or in respect of such Participants. It is expressly agreed and understood that the employment of the Participant is terminable at the will of either party and, if such Participant is a party to an employment contract with the Company or one of its subsidiaries, in accordance with the terms and conditions of the Participant's employment contract.
SECTION 4.2 NO ASSIGNMENT.
The rights of a Participant with respect to Awards granted under the Plan shall not be transferable by the Participant, otherwise than by will or the laws of descent and distribution prior to the payment thereof.
SECTION 4.3 TAX WITHHOLDING.
The Company or a subsidiary thereof, as appropriate, shall have the right to deduct from all payments made under the Plan to a Participant or to a Participant's beneficiary or beneficiaries any federal, state or local taxes required by law to be withheld with respect to such payments.
SECTION 4.4 NO RESTRICTION ON RIGHT OF COMPANY TO EFFECT CHANGES.
The Plan shall not affect in any way the right or power of the Company or its stockholders to make or authorize any recapitalization, reorganization, merger, acquisition, divestiture, consolidation, spin-off, combination, liquidation, dissolution, sale of assets, or other similar corporate transaction or event involving the Company or a subsidiary thereof or any other event or series of events, whether of a similar character or otherwise.
SECTION 4.5 SOURCE OF PAYMENTS.
The Company shall not have any obligation to establish any separate fund or trust or other segregation of assets to provide for payments under the Plan. To the extent any person acquires any rights to receive payments hereunder from the Company, such rights shall be no greater than those of an unsecured creditor.
SECTION 4.6 AMENDMENT AND TERMINATION.
The Board may at any time and from time to time alter, amend, suspend or terminate the Plan in whole or in part; PROVIDED, HOWEVER, that no alteration or amendment will be effective without stockholder approval if such approval is required by law. In the case of Participants employed outside the United States, the Committee or its designees may vary the provisions of the Plan as deemed appropriate to conform with local laws, practices and procedures. In addition, the General Counsel of the Company is authorized to make certain minor or administrative changes required by or made desirable by government regulation.
SECTION 4.7 GOVERNMENTAL REGULATIONS.
The Plan, and all Awards hereunder, shall be subject to all applicable rules and regulations of governmental or other authorities.
SECTION 4.8 HEADINGS.
The headings of articles and sections herein are included solely for convenience of reference and shall not affect the meaning of any of the provisions of the Plan.
SECTION 4.9 GOVERNING LAW AND SEVERABILITY.
The Plan and all rights and Awards hereunder shall be construed in accordance with and governed by the laws of the State of Delaware without regard to conflicts of law principles and applicable federal law. If any portion of this Plan is deemed to be in conflict with local law, that portion of the Plan, and that portion only, will be deemed null and void under that local law. All other provisions of the Plan will remain in full effect.
SECTION 4.10 EFFECTIVE DATE.
The Plan shall become effective upon its adoption by the Board. The Plan shall be effective, unless amended or terminated in accordance with Section 4.6 above.
Adopted by IPG BOD on April 6, 2005
Exhibit 10.6
THIS NOTE AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
FORM OF SUBORDINATED PROMISSORY NOTE
$[__________] [closing date of QPO] Oxford, Massachusetts
FOR VALUE RECEIVED, IPG PHOTONICS CORPORATION, a Delaware corporation ("Maker"), promises to pay to [SERIES B PREFERRED STOCKHOLDER] ("Holder"), the principal sum of [__________] DOLLARS (US$[__________]); with interest from the date of this Note on the unpaid principal amounts owing from time to time as provided below. This Note is duly and validly issued and is subject to the following terms and conditions:
1. Maturity
(a) Principal plus all accrued but unpaid interest on the principal amount outstanding shall be due and payable no later than the third anniversary date of the date of original issuance of this Note (the "Maturity Date").
(b) This Note may be prepaid in whole or in part, without penalty, at the option of Maker and without the consent of Holder; provided, however that any prepayment be made pro rata among the Series B Notes (as defined in Section 7 below).
(c) All optional principal prepayments upon this Note shall be applied to the payment of accrued and unpaid interest, and then against the principal amount.
2. Interest
The outstanding principal owing from time to time hereunder will bear interest at the rate of: (1) the greater of the Applicable Federal Rate for short term obligations of three years or less and FOUR PERCENT per annum (compounded annually) for the first one-year period that this Note is outstanding; (2) SEVEN PERCENT per annum (compounded annually) for the second one-year period that this Note is outstanding; and (3) TEN PERCENT per annum (compounded annually) for any period after the second anniversary date of the date of original issuance of this Note that this Note is outstanding until fully paid. Accrued but unpaid interest shall be payable on the anniversary date of the issuance of this Note and on the Maturity Day. Computations of interest shall be based on a year of 360 days but shall be calculated for the actual number of days in the period for which interest is charged.
3. Payments
Maker shall make payments in lawful money of the United States of America and in immediately available funds. All payments under this Note shall be made
to Holder at its address on the books and records of the Company or at such other address as Holder shall direct Maker in writing.
4. Breach of Covenants and Bankruptcy
The occurrence of any of the following shall constitute an "Event of Default" hereunder:
(a) Failure to Pay. Maker shall fail to pay (i) any principal payment on the
Maturity Day hereunder or (ii) any interest payment required pursuant to
the terms hereof on the date due and such failure is not cured within ten
(10) days of the date such payment is due; or
(b) Breaches of Covenants. Maker shall fail to observe or perform any covenant, obligation, condition or agreement contained herein, and such failure shall continue for ten days after Maker's receipt of Holder's written notice to the Maker of such failure;
(c) Voluntary Bankruptcy or Insolvency Proceedings. Maker 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)
admit in writing its inability, to pay its debts generally as they mature;
(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 (iv)
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts pursuant
to 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
(d) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or custodian of the Maker 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 the Maker or the debts thereof pursuant to 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 ninety days of commencement.
5. Rights of Holder upon Default
Upon the occurrence or existence of any Event of Default, and at any time thereafter during the continuance of such Event of Default, Holder may, by written notice to the Maker, declare all outstanding obligations payable by the Maker 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; except that upon the occurrence or existence of any Event of Default set forth in Sections 4(c) or (d) herein, all of the outstanding obligations payable by the Maker 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. No delay or omission by Holder in exercising any right shall operate as a waiver of such right or any other right under this Note; a waiver on any one occasion shall not be construed as a bar to or waiver of any right on any future occasion. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, Holder may exercise any other right, power or remedy granted to it hereunder or pursuant to applicable law. The prevailing party
in any action (i) to collect payment on this Note, (ii) in connection with any dispute that arises as to its enforcement, validity, or interpretation, whether or not legal action is instituted or prosecuted to judgment, or (iii) to enforce any judgment obtained in any related legal proceeding, shall be entitled to all costs and expenses incurred, including attorney fees.
6. Governing Law
This Note shall be governed by the laws of the State of New York, excluding its conflict of law rules.
7. Amendments and Waivers
This Note is one in a series of similar notes in the aggregate principal amount of $20,000,000 issued by the Maker to holders of Series B Convertible Participating Preferred Stock of Maker (the "Series B Notes") and any term of this Note may be amended or waived with the written consent of the Maker and the holders of a majority of the then outstanding aggregate principal amount of the Series B Notes (the "Majority Interest"); provided, however, that any amendment that adversely affects a holder of a Note in a manner different from the other holders of Series B Notes shall require the prior written consent of such holder. Any amendment or waiver effected in accordance with this Section 7 shall be binding upon the Maker, the Holder and each transferee of the Note; however, no such waiver shall affect or impair the rights of Holder to require observance, performance, or satisfaction, either of that term or condition as it applies on a subsequent occasion or of any other term or condition of this Note. Notwithstanding the foregoing, Maker expressly agrees that this Note or any payment under this Note may be extended by the Majority Interest in writing from time to time without in any way affecting the liability of Maker.
8. Transfer, Successors and Assigns
The terms and conditions of this Note shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Neither this Note nor any of the rights, interests or obligations hereunder may be assigned, by operation of law or otherwise, in whole or in part, by the Maker without the prior written consent of Holder. This Note may not be sold or assigned by Holder without prior written consent of Maker except in the event of a merger, consolidation, or acquisition of Holder or any business unit thereof and Holder may pledge this Note to any financial institution as collateral upon written notice to Maker.
9. Notices
Any notice required or permitted by this Note shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by a nationally-recognized delivery service (such as Federal Express or UPS), or five days after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party's address as set forth below or as subsequently modified by written notice.
10. Severability
If any provision or any word, term, clause, or part of any provision of this Note shall be invalid for any reason, the same shall be ineffective, but the remainder of this Note and of the provision shall not be affected and shall remain in full force and effect.
11. Subordination
Maker's obligations under this Note shall be subordinate in right of payment to Senior Indebtedness (as defined below) of Maker. This Note shall be subject to the forms of subordination agreement requested from time to time by holders of Senior Indebtedness, and Holder agrees to enter into such forms of subordination agreement upon request of such holders of Senior Indebtedness and be bound by such agreements. "Senior Indebtedness" as used herein shall mean the principal of (and premium, if any) and unpaid interest on, indebtedness of Maker, or with respect to which Maker is a guarantor, outstanding or under credit lines existing as of the date of this Note, or to banks, insurance companies, lease financing institutions or other lending institutions or business units of such institutions regularly and primarily engaged in the business of lending money, which is for money borrowed (or purchase or lease of equipment in the case of lease financing) by Maker, and which is approved by the Board of Directors of Maker, whether or not secured, and whether or not previously incurred or incurred in the future, or indebtedness of Maker to sellers of land, equipment, furniture, fixtures, components or assets or stock secured by the asset or shares purchased. Other than Senior Indebtedness, the indebtedness owing under this Note shall not rank junior in right of priority of payment to borrowed money of Maker incurred hereafter.
12. Dividends; Redemptions
As long as any principal or unpaid interest on any Series B Note remains outstanding, the Maker shall not declare or pay any dividends or make any distributions of cash, property or securities of the Maker in respect of its capital stock or apply any of its assets to the redemption, retirement, purchase or other acquisition of its capital stock
IN WITNESS WHEREOF, the Maker has caused this Subordinated Promissory Note to be issued as of the date first written above.
MAKER: IPG PHOTONICS CORPORATION
Address: 50 Old Webster Road
Oxford, MA 01540
Attn: Corporate Secretary
AGREED TO AND ACCEPTED:
HOLDER: [__________]
EXHIBIT 10.7
This Warrant and any shares acquired upon the exercise of this Warrant have not been registered under the Securities Act of 1933, as amended, or any applicable state securities laws and may not be transferred, sold or otherwise disposed of without compliance with the registration or qualification provisions of applicable federal or state securities laws or applicable exemptions therefrom.
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO CERTAIN RIGHTS SPECIFIED IN THAT CERTAIN STOCKHOLDERS AGREEMENT DATED AS OF AUGUST 30, 2000, A COPY OF WHICH WILL BE MAILED TO ANY REQUESTING HOLDER WITHIN FIVE (5) DAYS OF WRITTEN REQUEST THEREFOR.
IPG PHOTONICS CORPORATION
Common Stock Purchase Warrant
Sturbridge, Massachusetts
____________, 2000
No. ___
Warrant Coverage Amount: $_______________
IPG PHOTONICS CORPORATION, a Delaware corporation (the "Company"), for
value received, hereby certifies that _______________ or its registered assigns
(the "Holder"), is entitled to purchase from the Company such number of shares
of duly authorized validly issued, fully paid and non-assessable shares of its
Common Stock, $.001 per value per share ("Common Stock") as shall be determined
by dividing the Warrant Coverage Amount specified herein by the Warrant Price
(as defined in Section 11 hereof) at a purchase price per share equal to the
Warrant Price at any time or at any time after an Exercise Date (as defined in
Section 11 hereof); provided that such Exercise Date must occur prior to 5:00
P.M., Eastern Standard Time, on August 30, 2007 (the "Expiration Date"), all
subject to the terms, conditions and adjustments set forth below in this
Warrant. As used herein, the term "Common Stock" shall mean the Common Stock and
any other shares of stock issued or issuable with respect thereto.
This Warrant is one of the Common Stock Purchase Warrants (each a "Warrant" and collectively, the "Warrants," such term to include any such warrants issued in substitution therefor) originally issued pursuant to Section 1.1 of that certain Stock and Purchase Agreement dated as of August 30, 2000 (as from time to time in effect, the "Purchase Agreement") by and among the Company and the Investors named therein, including in any supplement hereto executed in connection which any supplemental closing thereunder (the "Investors"). Certain capitalized terms used in this Warrant are defined in Section 14 hereof.
1. EXERCISE OR CONVERSION OF WARRANT
1.1 Manner of Exercise or Conversion; Payment.
1.1.1 Exercise. From and after the occurrence of an Exercise Date, this Warrant may be exercised by the holder hereof, in whole or in
part, by surrender of this Warrant to the Company at its principal office during
normal business hours on any date on or prior to the Expiration Date,
accompanied by a subscription in substantially the form attached to this Warrant
(or a facsimile thereof) duly executed by such holder and accompanied by payment
(i) in cash, (ii) by certified check payable to the order of the Company or
(iii) by wire transfer, or by any combination of any of the foregoing methods,
in the amount required to be paid in accordance with the introductory paragraph
hereof to acquire the shares being acquired upon such exercise, and such holder
shall thereupon be entitled to receive the number of duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock (or Other
Securities) so purchased.
1.1.2 Conversion. If instead of exercising this Warrant pursuant to the terms of Section 1.1.1 above, the holder hereof elects to convert this Warrant, in whole or in part, into shares of Common Stock, then such holder shall surrender this Warrant to the Company at its principal office during normal business hours on any date on or prior to the Expiration Date, accompanied by a conversion notice in substantially the form attached to this Warrant (or a facsimile thereof) duly executed by such holder, and such holder shall thereupon be entitled to receive the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) as is computed using the following formula:
Y (A-B)
X = -------
A
where X = the number of shares of Common Stock to be issued to such holder pursuant to this Section 1.1.2.
Y = the number of shares of Common Stock to be issued upon exercise and in respect of which the conversion election is made pursuant to this Section 1.1.2.
A = the Current Market Price of one share of Common Stock.
B = the Warrant Price then in effect under this Warrant at the time the conversion election is made pursuant to this Section 1.1.2.
For all purposes of this Warrant (other than this Section 1.1), any reference herein to the exercise of this Warrant shall be deemed to include a reference to the conversion of this Warrant into Common Stock (or Other Securities) in accordance with the terms of this Section 1.1.2.
1.2 When Exercise Effective. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the Business Day on which this Warrant shall have been surrendered to the Company as provided in Section 1.1 hereof, and at such time the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock (or Other Securities) shall be issuable upon such exercise as provided in Section 1.3 hereof shall be deemed to have become the holder or holders of record thereof.
1.3 Delivery of Stock Certificates, etc. As soon as practicable after each exercise of this Warrant, in whole or in part, and in any event within five Business Days thereafter, the Company at its sole expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the holder hereof or as such holder (upon payment by such holder of any applicable transfer taxes) may direct:
(a) a certificate or certificates for the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such holder shall be entitled upon such exercise plus, in lieu of any fractional share to which such holder would otherwise be entitled, cash in an amount equal to the same fraction of the Market Price per share calculated on the Business Day preceding the date of such exercise; and
(b) in case such exercise is in part only, a new Warrant or Warrants of like tenor, dated the date hereof and calling in the aggregate on the face or faces thereof for the number of shares of Common Stock equal to the number of shares with respect to which this Warrant shall not then have been exercised (without giving effect to any adjustment thereof).
1.4 Company to Reaffirm Obligations. The Company will, at the time of each exercise of this Warrant, upon the request of the holder hereof, acknowledge in writing its continuing obligation to afford to such holder all rights (including, without limitation, any rights to registration pursuant to the Registration Rights Agreement referred to in Section 8 hereof of the shares of Common Stock or Other Securities issued upon such exercise) to which such holder shall continue to be entitled after such exercise in accordance with the terms of this Warrant; provided, however, that if the holder of this Warrant shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford such rights to such holder.
2. CONSOLIDATION, MERGER, ETC.
2.1 Adjustments for Consolidation, Merger, Sale of Assets, Reorganizations, etc. In the event the Company after the date hereof (a) shall consolidate with or merge into any other Person and shall not be the continuing or surviving corporation of such consolidation or merger or (b) shall permit any other Person to consolidate with or merge into the Company and the Company shall be the continuing or surviving Person but, in connection with such consolidation or merger, the Common Stock or Other Securities shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property or (c) shall transfer all or substantially all of its properties or assets to any other Person or (d) shall effect a capital reorganization or reclassification of the Common Stock or Other Securities then, and in the case of each such transaction, proper provision shall be made so that, upon the basis and the terms and in the manner provided in this Warrant, the holder of this Warrant, upon the exercise hereof at any time after the consummation of such transaction, shall be entitled to receive (at the aggregate Warrant Price effective at the time of such consummation but with appropriate adjustments to reflect the terms of such transaction in lieu of the Common Stock or Other Securities issuable upon such exercise prior to such consummation, the greatest amount of securities, cash or other property to which such holder would actually have been entitled as a shareholder upon such consummation if such holder had
exercised the rights represented by this Warrant for the full Warrant Coverage Amount immediately prior thereto in accordance with the terms hereof, subject to adjustments (subsequent to such consummation) as nearly equivalent as possible to the adjustments provided for in this Section; provided, however, that if a purchase, tender or exchange offer shall have been made to and accepted by the holders of more than 50% of the outstanding shares of Common Stock, and if the holder of such Warrants so designates in a notice given to the Company on or before the date immediately preceding the date of the consummation of such transaction, then the holder of such Warrants shall be entitled to receive the greatest amount of securities, cash or other property to which such holder would actually have been entitled as a shareholder if the holder of such Warrants had exercised such Warrants prior to the expiration of such purchase, tender or exchange offer and accepted such offer, subject to adjustments (from and after the consummation of such purchase, tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in this Section.
2.2 Assumption of Obligations. Notwithstanding anything contained in the Warrants or in the Purchase Agreement to the contrary, the Company will not effect any of the transactions described in clauses (a) through (d) of Section 2.1 hereof unless, prior to the consummation thereof, each Person (other than the Company) which may be required to deliver any stock, securities, cash or property upon the exercise of this Warrant as provided herein shall assume, by written instrument delivered to, and reasonably satisfactory to, the holder of this Warrant, (a) the obligations of the Company under this Warrant (and if the Company shall survive the consummation of such transaction, such assumption shall be in addition to, and shall not release the Company from, any continuing obligations of the Company under this Warrant) and (b) the obligation to deliver to such holder such shares of stock, securities, cash or property as, in accordance with the foregoing provisions of this Section 3, such holder may be entitled to receive. Nothing in this Section shall be deemed to authorize the Company to enter into any transaction not otherwise permitted by the Purchase Agreement.
3. IMPAIRMENT. The Company will not, by amendment of its Certificate of Incorporation or through any consolidation, merger, reorganization, transfer of assets, 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 of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against dilution or other impairment. Without limiting the generality of the foregoing, the Company (a) will not permit the par value of any shares of stock receivable upon the exercise of this Warrant to exceed the amount payable therefor upon such exercise, (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of stock on the exercise of the Warrants from time to time outstanding and (c) will not take any action which results in any adjustment of the Warrant Price if the total number of shares of Common Stock (or Other Securities) issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Common Stock (or Other Securities) then authorized by the Company's Certificate of Incorporation and available for the purpose of issuance upon such exercise.
4. NOTICES OF CORPORATE ACTION. In the event of
(a) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger involving the Company and any other Person or any transfer of all or substantially all the assets of the Company to any other Person,
(b) any Sale Event, or any voluntary or involuntary dissolution, liquidation or winding-up, or
(c) any IPO,
the Company will mail to each holder of a Warrant a notice specifying (i) the date or expected date on which any such reorganization, reclassification, recapitalization, Sale Event or IPO is to take place, (ii) the time, if any such time is to be fixed, as of which the holders of record of Common Stock (or Other Securities) shall be entitled to exchange their shares of Common Stock (or Other Securities) for the securities or other property deliverable upon such transaction and a description in reasonable detail of the transaction and (iii) if applicable, a description of the securities to be issued in such transaction and the consideration received by the Company therefor. Such notice shall be mailed at least thirty (30) days prior to the date therein specified.
5. REGISTRATION OF COMMON STOCK. If any shares of Common Stock required to be reserved for purposes of exercise of this Warrant require registration with or approval of any governmental authority under any federal or state law (other than the Securities Act) before such shares may be issued upon exercise, the Company will, at its sole expense and as expeditiously as possible, use all reasonable efforts to cause such shares to be duly registered or approved, as the case may be. The shares of Common Stock (and Other Securities) issuable upon exercise of this Warrant constitute Registrable Securities (as such term is defined in the Registration Rights Agreement). Each holder of this Warrant shall be entitled to all of the benefits afforded to a holder of any such Registrable Securities under the Registration Rights Agreement and such holder, by its acceptance of this Warrant, agrees to be bound by and to comply with the terms and conditions of the Registration Rights Agreement applicable to such holder as a holder of such Registrable Securities. At any such time as Common Stock is listed on any national securities exchange or is quoted in the over-the-counter market, the Company will, at its sole expense, obtain promptly and maintain the approval for listing or quotation on each such exchange or market, upon official notice of issuance, the shares of Common Stock issuable upon exercise of the then outstanding Warrants and maintain the listing or quotation of such shares after their issuance; and the Company will also list on such national securities exchange or provide for the quotation in such over-the-counter market, will register under the Exchange Act and will maintain such listing or quotation of, any Other Securities that at any time are issuable upon exercise of the Warrants, if and at the time that any securities of the same class shall be listed on such national securities exchange or over-the-counter market by the Company.
6. CONTEST AND APPRAISAL RIGHTS.
6.1 Dispute. If the Warrant Majority Holders shall, for any reason whatsoever, disagree with the Company's determination of the Market Price for the Common Stock, then the Company and the Warrant Majority Holders shall
negotiate in good faith in an effort to reach an agreement upon the Market Price for a period of ten (10) days beginning at any time following notice by the Warrant Majority Holders of such disagreement. If the Company and the Warrant Majority Holders are unable to reach agreement as so provided, such dispute shall be resolved as set forth in Section 6.2 below.
6.2 Appointment of Appraiser. The Company and the Warrant Majority Holders shall within thirty (30 days) after the expiration of the ten-day period referenced in Section 6.1 above, engage an Appraiser to make an independent determination of the Market Price for the Common Stock (the "Appraiser's Determination"). In determining the Market Price for the Common Stock, the Appraiser shall base any valuation upon the fair market value of the Company assuming that the Company were sold as a going concern, without regard to the existence of any control block, the anticipated impact upon current market prices of any such sale, the lack or depth of a market for the Common Stock, the Warrants or other securities of the Company, or any other factors concerning the liquidity or marketability of the Common Stock, the Warrants or other securities of the Company. The Appraiser's Determination shall be final and binding on the Company and all holders of Warrants.
6.3 Appraiser's Determination. If the Company's determination of the Market Price for the Common Stock and the Appraiser's Determination differ by an amount of 10% or less, then the costs of conducting the appraisal shall be borne equally by the Company and the holders of the Warrants; if the Company's determination of the Market Price for the Common Stock is greater than the Appraiser's Determination by more than 10%, then the costs of conducting the appraisal shall be borne entirely by the holders of the Warrants; and if the Appraiser's Determination is greater than the Company's determination of the Market Price for the Common Stock by more than 10%, then the costs of conducting the appraisal shall be borne entirely by the Company; provided that in each case costs separately incurred by the Company and any holder of Warrants shall be separately and respectively borne by them.
7. RESERVATION OF STOCK, ETC. The Company will at all times reserve and keep available, solely for issuance and delivery upon exercise of the Warrants, the number of shares of Common Stock (or Other Securities) from time to time issuable upon exercise of all Warrants at the time outstanding. All shares of Common Stock (or Other Securities) issuable upon exercise of any Warrants shall be duly authorized and, when issued upon such exercise, shall be validly issued and fully paid and nonassessable with no liability on the part of the holders thereof.
8. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
8.1 Ownership of Warrants. The Company may treat the person in whose name any Warrant is registered on the register kept at the principal office of the Company as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes, notwithstanding any notice to the contrary. A Warrant, if properly assigned, may be exercised by a new holder without a new Warrant first having been issued.
8.2 Transfer and Exchange of Warrants.
(a) The Company shall cause to be kept at its principal office a register for the registration and transfer of the Warrants. The names and addresses of holder of Warrants, the transfer thereof and the names and addresses of transferees of Warrants shall be registered in such register. The Person in whose name any Warrant shall be so registered shall be deemed and treated as the owner and holder thereof for all purposes of this Warrant, and the Company shall not be affected by any notice or knowledge to the contrary. Any transferee of Warrants shall be required to execute the Stockholders Agreement then in effect prior to the transfer of Warrants.
(b) Upon the surrender of any Warrant, properly endorsed, for registration of transfer or for exchange at the principal office of the Company, the Company at its expense will execute and deliver to or upon the order of the holder thereof a new Warrant or Warrants of like tenor, in the name of such holder or as such holder (upon payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces therefor for the number of shares of Common Stock called for on the face or faces of the Warrant or Warrants so surrendered.
8.3 Replacement of Warrants. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction of any Warrant held by a Person other than an Investor or any institutional investor, upon delivery of an indemnity reasonably satisfactory to the Company in form and amount or, in the case of any such mutilation, upon surrender of such Warrant for cancellation at the principal office of the Company, the Company at its sole expense will execute and deliver, in lieu thereof, a new Warrant of like tenor and dated the date hereof.
9. RESTRICTIONS ON TRANSFERABILITY.
(a) In General. This Warrant and the Common Stock issued upon the exercise hereof shall not be transferable except upon the conditions hereinafter specified and specified the Stockholders Agreement.
The Holder of each share of Common Stock issued upon the exercise of this Warrant (evidenced by a certificate required to bear the legend specified in this Warrant), by its acceptance thereof, agrees to sell or otherwise transfer such Common Stock, in compliance with applicable law and in compliance with the Stockholders Agreement.
(b) Restrictive Legends. The Warrant shall bear on the face thereof a legend substantially in the form of the notice endorsed on the first page of this Warrant.
Each certificate for shares of Common Stock initially issued upon the exercise of this Warrant and each certificate for shares of Common Stock issued to a subsequent transferee of such certificate shall, unless otherwise permitted by the provisions of this Section 9, bear on the face thereof a legend reading substantially as follows:
"The securities represented by this certificate were issued in a private placement, without registration under the Securities Act of 1933, as amended (the "Securities Act"), and may not be sold, assigned, pledged or
otherwise transferred in the absence of an effective registration under the Securities Act or qualification or an exemption therefrom."
"The securities represented by this certificate are subject to restrictions on transfer and requirements of sale and the provisions as set forth in the Stockholders Agreement dated as of August 30, 2000, as amended and in effect from time to time, and constitute Shares as defined in such Stockholders Agreement. The Company will furnish a copy of such agreement to the holder of this certificate without charge upon written request."
In the event that a registration statement covering the shares of Common Stock issued upon the exercise of this Warrant shall become effective under the Securities Act and under any applicable state securities laws or in the event that the Company shall receive an opinion of counsel to the Holder (which may be internal counsel to such Holder) that, in the opinion of such counsel, such legend is not, or is no longer, necessary or required (including, without limitation, because of the availability of the exemption afforded by Rule 144 of the General Rules and Regulations of the Commission), the Company shall, or shall instruct its transfer agents and registrars to, remove such legend from the certificates evidencing the shares of Common Stock issued upon the exercise of this Warrant or issue new certificates without such legend in lieu thereof.
10. AVAILABILITY OF INFORMATION. If the Company shall have filed a registration statement pursuant to the requirements of Section 12 of the Exchange Act or a registration statement pursuant to the requirements of the Securities Act, the Company will comply with the reporting requirements of Section 13 and 15(d) of the Exchange Act and will comply with all public information reporting requirements of the Commission (including Rule 144 promulgated by the Commission under the Securities Act) from time to time in effect and relating to the availability of an exemption from the Securities Act for the sale of any Restricted Securities. The Company will also cooperate with each holder of any Restricted Securities in supplying such information as may be necessary for such holder to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of an exemption from the Securities Act for the sale of any Restricted Securities. The Company furnish to each holder of any Warrants, promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available generally by the Company to its stockholders, and copies of all regular and periodic reports and all registration statements and prospectuses filed by the Company with any securities exchange or with the Commission.
11. DEFINITIONS. As used herein, unless the context otherwise requires, the following terms have the following respective meanings:
"Business Day" means any day other than a Saturday or a Sunday or a day on which commercial banking institutions in New York, New York are authorized or obligated by law or executive order to be closed. Any reference to "days" (unless Business Days are specified) shall mean calendar days.
"Certificate of Incorporation" means the Amended and Restated Certificate of Incorporation of the Company, as amended from time to time.
"Commission" means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.
"Company" shall have the meaning given to such term in the introduction to this Warrant, such term to include any corporation which shall succeed to or assume the obligations of the Company in compliance with Section 2 hereof.
"Current Market Price" means on any date specified herein, the average daily Market Price during the period of the most recent 20 days, ending on such date, on which the national securities exchanges were open for trading, except that if no class of the Common Stock is then listed or admitted to trading on any national securities exchange or quoted in the over-counter market, the Current Market Price shall be the Market Price on such date.
"Exchange Act" means the Securities Exchange Act of 1934, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
"Exercise Date" means (i) in the case of an IPO, the closing date of the IPO or (ii) in the case of a Sale Event, the closing or completion date of such Sale Event.
"Expiration Date" shall have the meaning given to such term in the introduction to this Warrant.
"Investors" shall have the meaning given to such term in the introduction to this Warrant.
"IPO" means the Company's first underwritten offering to the public pursuant to an effective registration statement under the Securities Act covering the offer and sale of shares of the Common Stock.
"Liquidity Event" means an IPO or a Sale Event.
"Liquidity Event Price" means, (i) in the case of an IPO, the price to be public as specified in the definitive prospectus in such IPO, (ii) in the case of a Sale Event, the amount per share of Common Stock to be paid in any such transaction "Market Price" means on any date specified herein, the amount per share of Common Stock equal to (a) the last sale price of Common Stock, regular way, on such date or, if no such sale takes place on such date, the average of the closing bid and asked prices thereof on such date, in each case as officially reported on the principal national securities exchange on which Common Stock is then listed or admitted to trading, or (b) if Common Stock is not then listed or admitted to trading on any national securities exchange but is designated as a national market system security by the NASD, the last trading price of Common Stock on such date, or (c) if there shall have been no trading on such date or if Common Stock is not so designated, the average of the closing bid and asked prices of Common Stock on such date as shown by the NASD automated quotation system, or (d) if Common Stock is not then listed or admitted to trading on any national exchange or quoted in the over-the-counter market, or if the asset to be valued is property, then the fair value thereof determined in good faith by the Board of Directors of the Company as of a date which is within 15 days of the date as of which the determination is to be made.
"NASD" means the National Association of Securities Dealers, Inc. and any successor organization thereto.
"Other Securities" means any stock (other than Common Stock) and other
securities of the Company or any other person (corporate or otherwise) which the holders of the Warrants at any time shall be entitled to receive, or shall have received, upon the exercise of Warrants, in lieu of or in addition to Common Stock, which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 3 hereof or otherwise.
"Person" means any individual, corporation, partnership, company, association, limited liability company, joint venture, estate, trust, unincorporated organization, entity or division or government, governmental department or any agency or political subdivision thereof.
"Purchase Agreement" shall have the meaning given to such term in the introduction to this Warrant.
"Registration Rights Agreement" means that Registration Rights Agreement dated as of August 30, 2000 by and among the Company and the Investors named therein.
For purposes of valuing any securities or other noncash or consideration to be delivered to the holders of the Common Stock in any Sale Event, the following shall apply:
(i) If traded on a nationally recognized securities exchange or inter-dealer quotation system, the value shall be deemed to be the average of the closing prices of the securities on such exchange or system over the 30-day period ending three (3) business days prior to the closing;
(ii) If traded over-the-counter, the value shall be deemed to be the average of the closing bid prices over the 30-day period ending three (3) business days prior to the closing; and
(iii) If there is no active public market, the value shall be the fair market value thereof, as mutually determined by the Company and the holders of not less than a Majority Warrant Majority Holders, provided that if the Company and the Warrant Majority Holders are unable to reach agreement, then by independent appraisal by a mutually agreed to investment banker, the fees of which shall be paid by the Company.
"Sale Event" means a transaction of the type specified in Article IV,
Section B.3(a) and (c) of the Certificate of Incorporation.
"Securities Act" means the Securities Act of 1933, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be amended and in effect at the time.
"Stockholders Agreement" means that certain Stockholders Agreement dated as of August 30, 2000 by and among the Company, IP Fiber Devices Ltd., a UK corporation, the Founders (as defined therein) and the Investors (as defined therein), as from time to time in effect.
"Warrant Majority Holders" means the holders of Warrants entitling such holders to purchase a majority of the Common Stock subject to purchase upon the exercise of Warrants at the time outstanding.
"Warrant Coverage Amount" means $____________ provided that such amount shall be reduced from time to time by the amount paid in connection with any
partial exercise hereunder (or deemed paid in connection with any cashless exercise under Section 1.12).
"Warrant Price" means the dollar amount equal to the product obtained by multiplying the Liquidity Event Price by .5.
"Warrants" shall have the meaning given to such term in the introduction of this Warrant.
12. GENERAL
12.1 Amendments, Waivers and Consents. No course of dealing between or among any of the parties hereto and no delay on the part of any party hereto in exercising any rights hereunder shall operate as a waiver of the rights hereof. This Warrant may not be amended or modified or any provision hereof waived without the written consent of the Company and the holders of Warrants entitling such holders to purchase eighty percent (80%) of the Common Stock subject to purchase upon the exercise of Warrants at the time outstanding provided, that any party may waive any provision hereof intended for its benefit by written consent.
12.2 Governing Law. This Warrant shall be construed in accordance with the laws of Delaware without giving effect to conflict of laws principles thereof.
12.3 Section Headings. The descriptive headings in this Warrant have been inserted for convenience only and shall not be deemed to limit or otherwise affect the construction of any provision hereof.
12.4 Notices and Demands. Any notice or demand which is required or provided to be given under this Warrant shall be deemed to have been sufficiently given and received for all purposes when delivered by hand, telecopy, telex or other method of facsimile, or five days after being sent by certified or registered mail, postage and charges prepaid, return receipt requested, or two days after being sent by overnight delivery providing receipt of delivery, to the following addresses: if to the Company, at its address set forth on the signature page hereto, or at any other address designated by the Company to the holder of this Warrant in writing; and if to the holder of this Warrant, at the mailing address designated by such holder to the Company in writing.
12.5 Remedies; Severability. It is specifically understood and agreed that any breach of the provisions of this Warrant by any Person subject hereto will result in irreparable injury to the other parties hereto, that the remedy at law alone will be an inadequate remedy for such breach, and that, in addition to any other remedies which they may have, such other parties may enforce their respective rights by actions for specific performance (to the extent permitted by law). Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be deemed prohibited or invalid under such applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, and such prohibition or invalidity shall not invalidate the remainder of such provision or the other provisions of this Warrant.
12.6 No Rights as Stockholder. Except as otherwise provided in the Stockholders Agreement, prior to the exercise of this Warrant, no holder of this Warrant shall be entitled to any rights of a stockholder of the Company with respect to the shares of Common Stock for which this Warrant shall be exercisable, including the right to vote, to receive dividends or other distributions or to exercise any preemptive rights and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Company hereby executes this Warrant as of the date first written above.
IPG PHOTONICS CORPORATION
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To IPG PHOTONICS CORPORATION
The undersigned registered holder of the within Warrant hereby irrevocably exercises such Warrant for, and purchases thereunder, _________ shares of the Voting Common Stock and herewith makes payment of $__________ therefor, and requests that the certificates for such shares be issued in the name of, and delivered to _____________________, whose address is _____________________________________.
FORM OF CONVERSION NOTICE
[To be executed only upon exercise of Warrant]
To IPG PHOTONICS CORPORATION
The undersigned registered holder of the within Warrant hereby irrevocably converts such Warrant with respect to _________ shares of the Common Stock which such holder would be entitled to receive upon the exercise hereof, and requests that the certificates for such shares be issued in the name of, and delivered to ________________________, whose address is ________________________.
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant hereby sells, assigns and transfers unto _______________________ the rights represented by such Warrant to purchase _______ shares of Common Stock of IPG PHOTONICS CORPORATION to which and such Warrant relates, and appoints _______________________ Attorney to make such transfer on the books of IPG PHOTONICS CORPORATION maintained for such purpose, with full power of substitution in the premises.
AMENDMENT TO
COMMON STOCK PURCHASE WARRANTS
THIS AMENDMENT (this "Amendment") to those certain Common Stock Purchase Warrants (each a "Warrant" and collectively, the "Warrants") originally issued pursuant to Section 1.1 of that certain Stock Purchase Agreement dated as of August 30, 2000 by and among IPG Photonics Corporation (the "Company") and the parties named therein is effective as of December 21, 2005. All capitalized terms used herein and not otherwise defined have the meanings set forth in the Warrants.
WHEREAS, the Company and the holders of the Warrants desire to amend the Warrants to extend the Expiration Date and to provide a repurchase right for the Company;
NOW, THEREFORE, the parties do hereby agree as follows:
Each Warrant shall be amended in the following manner:
1. The term "Expiration Date" shall be amended to mean April 15, 2008.
2. The following subsection shall be added to Section 1: "1.5 Company
Repurchase Right. The Company or its assignee shall have the right, at its
option, to purchase each Warrant for a purchase price equal to the product of
(x) Warrant Coverage Amount specified in such Warrant and (y) the difference
between one (1) and the quotient obtained by dividing the underwriter discount
and commission per share in the QPO by the offering price per share to the
public in the QPO".
3. Section 4 shall be amended and restated to read in its entirety as follows:
"4. Notices of Corporate Action. In the event of
(a) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger involving the Company and any other Person or any transfer of all or substantially all of the assets of the Company to any other Person,
(b) any Sale Event, or any voluntary or involuntary dissolution, liquidation or winding-up, or
(c) any IPO,
the Company will mail to each holder of a Warrant a notice specifying (i) the date or expected date on which any such reorganization, reclassification, recapitalization, Sale Event or IPO is to take place; (ii) the time, if any such time is to be fixed, as of which the holders of record of Common Stock (or Other Securities) shall be entitled to exchange their shares of Common Stock (or other Securities) for the securities or other property deliverable upon such transaction and a description in reasonable detail of the transaction, and if applicable; (iii) if such IPO is
intended to be a QPO; (iv) if the Company is exercising its repurchase right pursuant to Section 1.5 and (v) a description of the securities to be issued in such transaction and the consideration received by the Company therefor. Such notice shall be mailed at least thirty (30) days prior to the date therein specified."
4. Section 11 is amended by adding the following definitions:
"QPO" or "Qualified Public Offering" shall mean an IPO that would constitute a Qualified Public Offering as defined in Article Fourth, Section B.2 of the Certificate of Incorporation of the Company.
5. As herein amended, the Warrants shall remain in full force and effect and are hereby ratified and confirmed in all respects.
6. This Amendment may be executed in any number of counterparts and by the different parties on separate counterparts, and each such counterpart shall be deemed to be an original.
[REMAINDER OF PAGE INTENTIONALLY LEFT BANK]IN WITNESS WHEREOF, the
undersigned have caused this Amendment to be duly executed as of the date first set forth above.
COMPANY
IPG PHOTONICS CORPORATION
HOLDERS
TA IX, L.P.
By: TA Associates IX LLC,
Its General Partner
By: TA Associates, Inc., its Manager
TA/ADVENT VIII L.P.
By: TA Associates VIII LLC,
Its General Partner
By: TA Associates, Inc., its Manager
TA/ATLANTIC AND PACIFIC IV L.P.
By: TA Associates AP IV L.P.,
Its General Partner
TA EXECUTIVES FUND LLC
By: TA Associates, Inc., its Manager
TA INVESTORS LLC
By: TA Associates, Inc., its Manager
Merrill Lynch Ventures L.P. 2001
By: Merrill Lynch Ventures LLC,
its General Partner
ML IBK Positions Inc.
Merrill Lynch KECALP L.P. 1999
By: KECALP Inc., its General Partner
KECALP Inc., as nominee for Merrill Lynch KECALP International L.P.
1999
Merrill Lynch Taurus 2000 Fund, L.P.
By: ML Taurus, Inc., its General Partner
APAX EUROPE IV - A, L.P.
By: APAX Europe IV GP, L.P.,
its Managing General Partner
By: APAX Europe IV GP Co. Limited,
its Managing General Partner
APAX EUROPE IV - B, L.P.
By: APAX Europe IV GP, L.P.,
its Managing General Partner
By: APAX Europe IV GP Co. Limited,
its Managing General Partner
APAX EUROPE IV - C GMBH & CO., KG
By: APAX Europe IV GP, L.P.,
its Managing General Partner
By: APAX Europe IV GP Co. Limited,
its Managing General Partner
APAX EUROPE IV - D, L.P.
By: APAX Europe IV GP, L.P.,
its Managing General Partner
By: APAX Europe IV GP Co. Limited,
its Managing General Partner
APAX EUROPE IV - E, L.P.
By: APAX Europe IV GP, L.P.,
its Managing General Partner
By: APAX Europe IV GP Co. Limited,
its Managing General Partner
APAX EUROPE IV - F, C.V.
By: APAX Europe IV GP, L.P.,
its Managing General Partner
By: APAX Europe IV GP Co. Limited,
its Managing General Partner
APAX EUROPE IV - G, C.V.
By: APAX Europe IV GP, L.P.,
its Managing General Partner
By: APAX Europe IV GP Co. Limited,
its Managing General Partner
APAX EUROPE IV - H GMBH & CO., KG
By: APAX Europe IV GP, L.P.,
its attorney
By: APAX Europe IV GP Co. Limited,
its Managing General Partner
BAYVIEW 2000, LP
By: Bayview 2000 GP, LLC,
its General Partner
THE SOG FUND, LP
By: The Special Opportunities Group LLC,
its General Partner
THE SOG FUND II, LP
By: The Special Opportunities Group LLC,
its General Partner
WINSTON/THAYER PARTNERS, L.P.
MARCONI CAPITAL LIMITED
Exhibit 10.8
Employment Agreement
This Employment Agreement ("Agreement"), dated as of March 1, 2006 is made by and between IPG Photonics Corporation, a Delaware corporation having an office at 50 Old Webster Road, Oxford, MA, 01540 (the "Corporation"), and Valentin P. Gapontsev ("Executive"). The Corporation and Executive are referred to jointly below as the "Parties."
WHEREAS, the Corporation desires to employ Executive on the terms and conditions set forth in this Agreement; and
WHEREAS, Executive desires to accept employment by the Corporation on such terms and conditions.
NOW, THEREFORE, in consideration of the employment of Executive, the mutual terms and conditions set forth below, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. Employment. Executive will be employed by the Corporation in the position of Chief Executive Officer. Executive will report to the Corporation's Board of Directors. Executive's primary responsibility will be executive management of the business and affairs of the Corporation and its subsidiaries. Executive will carry out such duties as shall be assigned from time to time by the Corporation's Board of Directors, subject to applicable laws. During the Employment Term (as defined below), Executive shall devote Executive's reasonable best efforts, energies and abilities and Executive's full business time, skill and attention to the business and affairs of the Corporation, and shall act at all times according to the highest professional standards, for the purpose of advancing the business of the Corporation. Executive shall perform his duties from the headquarters of the Corporation in Oxford, Massachusetts.
2. Term. Subject to the Termination provisions below, Executive's employment by the Corporation is for a term of three (3) years commencing on the date of this Agreement (the "Initial Employment Period"). Executive's employment by the Corporation will continue for successive one year terms following expiration of the Initial Employment Period (the Initial Employment Period together with any subsequent employment period shall be referred to as the "Employment Term"), unless either party provides notice of intent not to renew not less than (a) one hundred and eighty (180) days prior to expiration of the then current term, or (b) 364 days prior to the end of the then current term following a "Change of Control" of the Corporation (as such term is defined in the Corporation's 2006 Incentive Stock Plan in effect on the date of this Agreement), or unless in either case employment is terminated under the termination provisions below.
3. Compensation. The Corporation shall pay Executive on a salary basis at an annual rate of $360,000 (the "Base Salary"). The Base Salary will be paid in equal installments in accordance with the Corporation's standard payroll policies and schedule and is subject to tax and elective withholding and deductions. The Corporation may, in its sole discretion, increase the Base Salary on an annual or other basis. In the event that the Board of Directors adopts a bonus compensation program or other stock option, restricted stock or similar incentive plan of general applicability to its executives, Executive shall be eligible to participate in such a program on a
similar basis to executives at similar levels within the organization. The amount of any bonus compensation to Executive under any such program will be determined by the Board of Directors in its sole discretion.
4. Benefits.
(i) Executive shall be entitled to the extent eligible to participate in any benefit plans as may be adopted and modified by the Corporation from time to time, including health and medical plans, life and disability insurance, paid holidays, vacations, and retirement plans. The benefits available to Executive shall be no less favorable than those available to other executives at similar levels within the organization. Benefits provided under this Agreement shall be subject to the terms and conditions of any applicable benefit plan, including any eligibility and vesting requirements, as such plans may be in effect from time to time.
(ii) Executive shall be entitled to four weeks vacation each year. Executive shall be entitled to accrue up to four weeks of vacation days to the extent not taken during the term of this Agreement.
(iii) The Corporation shall provide to Executive, at the Corporation's sole expense, accommodation reasonably satisfactory to him, and automobile transportation in connection with the business visits of Executive to the Corporation's subsidiaries in the course of performing his duties under this Agreement. The Corporation shall reimburse the Executive for reasonable travel expenses incurred for the business of the Corporation.
5. Intentionally omitted.
6. Other Activities. The employment of Executive shall be on a full-time basis, but Executive may be an investor or otherwise have an interest in or serve on the board of directors or advisory board to other businesses, partnerships and entities so long as the other activities of Executive do not materially interfere with the performance of Executive's duties to the Corporation, and so long as such other activities do not cause Executive to violate the Restrictive Covenants incorporated herein in Section 12 of this Agreement, and so long as Executive discloses all such activities to the Board of Directors of the Corporation. Nothing in this provision or this Agreement limits or restricts Executive's duties and obligations, including the duty of loyalty, that arise under the law.
7. Termination by the Corporation. The Corporation may terminate the Employment Term for Cause (as defined below).
"Cause" shall mean: (A) an act of fraud, embezzlement or theft by Executive in connection with Executive's duties or in the course of Executive's employment with the Corporation; (B) Executive's intentional wrongful damage to the property of the Corporation; (C) Executive's intentional breach of Section 12 hereof while Executive remains in the employ of the Corporation; (D) an act of Gross Misconduct (as defined below); or (E) a felony conviction or a conviction for a misdemeanor involving moral turpitude; and, in each case, the determination by the Directors of the Corporation as hereafter provided that any such act shall have been materially harmful to the Corporation. For purposes of this Agreement, "Gross Misconduct" shall mean a willful or grossly negligent act or omission which has or will have a material and adverse impact on the business or reputation of the Corporation, or on the business of the Corporation's customers or suppliers as such relate to the Corporation. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for "Cause" hereunder unless and until there shall have been delivered to Executive a copy of a resolution duly adopted
by the affirmative vote of a majority of the independent Directors then in office at a meeting of the Directors called and held for such purpose finding that, Executive has committed an act set forth above in this Section 7. Nothing herein shall limit Executive's right or Executive's beneficiaries' right to contest the validity or propriety of any such determination.
8. Termination by Executive. Executive may terminate the Employment Term
(i) by giving the Corporation sixty (60) days' prior written notice, or (ii) for
Good Reason (as defined below), subject to the Corporation's right to cure the
breach for a period of thirty (30) days after notice from the Executive of his
intention to terminate for Good Reason. In the event of termination by notice
under the preceding subsection (i), the Corporation in its discretion may elect
a termination date that is earlier than the conclusion of the sixty (60) day
notice period, but in the event of such election the termination shall still be
deemed a voluntary termination by Executive under this Section. "Good Reason"
means the occurrence of any of the following events without Executive's express
written consent:
(a) The assignment to Executive of any duties materially inconsistent with Executive's position in the Corporation and the responsibilities specified in this Agreement or a substantial adverse alteration in the nature of Executive's position or responsibilities or in the conditions of employment;
(b) A reduction by the Corporation of or a failure to pay Executive's Base Salary, or a material reduction in benefits the Executive is entitled to under this Agreement other than a reduction approved by the Board of Directors of the Corporation that similarly applies to all executive officers of the Corporation;
(c) A relocation of the offices of the Executive to a place greater than thirty-five (35) miles in distance from the executive offices of the Corporation in Oxford, MA; or
(d) The failure of Executive to be the chief executive officer of a company having its securities registered under the Securities Exchange Act of 1934 following the effectiveness of the Corporation's initial public offering, or of the Corporation if a "Change of Control of the Corporation" (as such term is defined in the Corporation's 2000 Incentive Stock Plan in effect on the date of this Agreement) shall occur.
The Corporation shall have no obligations to Executive after Executive's last day of employment following termination of employment under this Section, except as specifically set forth in this Agreement or under the option agreement.
9. Automatic Termination. Notwithstanding the provisions of Section 2, Executive's employment shall automatically terminate upon Executive's death or Disability (as defined below). Executive shall be deemed to have a "Disability" for purposes of this Agreement if Executive is unable to substantially perform, by reason of physical or mental incapacity, Executive's duties or obligations under this Agreement, with or without reasonable accommodation as defined in the Americans with Disabilities Act and implementing regulations, for a period of one hundred and eighty (180) consecutive days in any 360-day period. The Board of Directors shall determine, according to the facts then available, whether and when the
disability of Executive has occurred and shall state that date of termination in the Notice of Termination. Such determination shall be made by the Board of Directors in the exercise of reasonable discretion.
10. Certain Obligations of the Corporation Following Termination of the Employment Period. Following termination of the Employment Period under the circumstances described below, the Corporation will pay to Executive the following compensation and provide the following benefits in addition to any benefits to which the Executive may be entitled by law in full satisfaction and final settlement of any and all claims and demands that Executive or the Corporation may have against the other under this Agreement:
(i) Good Reason by the Executive. In the event that the Employment Period is terminated by Executive for Good Reason pursuant to Section 8 hereof, Executive shall be entitled to the following payments:
(a) Base Salary through the termination date and any bonus that has been actually earned as of or prior to the termination date, but has not been paid; and
(b) Continuing payments of Base Salary, payable in accordance with regular payroll practices of the Corporation, for the greater of: [X] twelve months or [Y] the remaining portion of the Employment Period (as it may be extended as provided in Section 2 hereof), but not to exceed twenty-four months.
(ii) Termination by Executive Without Good Reason or by the Corporation for Cause. In the event the Employment Period as terminated by Executive pursuant to 8(i) hereof without Good Reason or by the Corporation pursuant to Section 7 hereof for Cause, Executive shall be entitled to no further compensation or other benefits under this Agreement except as to that portion of any unpaid Base Salary and other benefits accrued, earned or vested up to and including the effective date of such termination.
(iii) Death; Disability. In the event that the Employment Period
is terminated by reason of Executive's death or for Disability, Executive or
Executive's estate, as the case may be, shall be entitled to the payment of:
Base Salary through the date of death or the date of termination as specified in
the Notice of Termination in the event of Disability, plus any unpaid bonus
previously awarded to Executive.
11. Nature of Payments. Upon termination of employment pursuant to Sections 7, 8 or 9, Executive will be released from any duties and obligations to the Corporation set forth in this Agreement (except the duties and obligations under the Restrictive Covenants and as set forth in Section 12 hereof) and the obligations of the Corporation to Executive will be as set forth in Section 10.
12. Restrictive Covenants. Executive has previously executed and delivered a Non-Competition and Confirmatory Assignment Agreement, dated August 30, 2000 (the "Restrictive Covenants") and Executive agrees that, as part of this Agreement, Executive shall comply with the terms of the Restrictive Covenants.
13. Indemnification.
(i) Indemnification Terms. The Corporation agrees that if the Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Executive's alleged action in an official capacity while serving as a director, officer, member, employee or agent, the Executive shall be indemnified and held harmless by the Corporation to the fullest extent permitted or authorized by the Corporation's certificate of incorporation or bylaws or, if greater, by the laws of the State of Massachusetts, against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if he has ceased to be a director, member, employee or agent of the Corporation or other entity and shall inure to the benefit of the Executive's heirs, executors and administrators. The Corporation shall advance to the Executive all reasonable costs and expenses incurred by him in connection with a Proceeding within 20 days after receipt by the Corporation of a written request for such advance. Such request shall include an undertaking by the Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses.
(ii) No Presumptions. Neither the failure of the Corporation (including its Board, independent legal counsel or stockholders) to have made a determination prior to the commencement of any proceeding concerning payment of amounts claimed by the Executive under Section 15(a) above that indemnification of the Executive is proper because he has met the applicable standard of conduct, nor a determination by the Corporation (including its Board, independent legal counsel or stockholders) that the Executive has not met such applicable standard of conduct, shall create a presumption that the Executive has not met the applicable standard of conduct.
(iii) Liability Insurance. The Corporation agrees to continue and maintain a directors' and officers' liability insurance policy covering the Executive to the extent the Corporation provides such coverage for its other executive officers, and which would provide coverage for the Executive after the Term of Employment for actions taken during the Term of Employment.
14. Notices. Any and all notices provided for herein shall be in writing and shall be delivered by certified mail, return receipt requested or in person. Notice shall be deemed to have been given when notice is received by the party on whom the notice was served. Notice to the Corporation shall be addressed to the Corporation at its principal office, and notice to Executive at Executive's last address as shown on the records of the Corporation.
15. Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the substantive laws of the Commonwealth of Massachusetts, without regard to its internal conflicts of law provisions.
16. Severability. In the event that any provision of this Agreement shall be determined to be invalid, illegal or otherwise unenforceable or contrary to law or public policy, the enforceability of the other provisions in this Agreement shall not affected thereby.
17. Assignment. Executive recognizes that this is an agreement for personal services and that Executive may not assign this Agreement. The Agreement shall inure to the benefit of and binding upon the Corporation's successors and assigns.
18. Entire Agreement/Amendment. This Agreement and the restrictive agreement referred to in Section 12 constitute the entire agreement between the Parties with respect to the subject matter hereof and supersedes any and all other agreements, either oral or in writing, among the Parties hereto with respect to the subject matter hereof (including terminating all employment agreements between Executive and subsidiaries of the Corporation). This Agreement may not be amended except by written agreement signed by both Parties.
19. Execution in Counterparts. This Agreement may be executed in one or more counterparts, and by the different Parties in separate counterparts, each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement (and all signatures need not appear on any one counterpart), and this Agreement shall become effective when one or more counterparts has been signed by each of the Parties hereto and delivered to each of the other Parties hereto.
20. Waiver. The failure of either of the Parties to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Agreement or any provision hereof or the right of either of the Parties to enforce each and every provision of this Agreement. No waiver of any breach of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party against whom or which enforcement of such waiver is sought, and no waiver of any such breach shall be construed or deemed to be a waiver of any other or subsequent breach.
21. Capacity. The Executive and the Corporation hereby represent and warrant to the other that: (i) Executive or the Corporation has full power, authority and capacity to execute and deliver this Agreement, and to perform the Executive's or the Corporation's obligations hereunder; (ii) such execution, delivery and performance will not (and with the giving of notice or lapse of time or both would not) result in the breach of any agreements or other obligations to which Executive or the Corporation is a party or the Executive or the Corporation is otherwise bound; and (iii) this Agreement is the Executive's or the Corporation's valid and binding obligation in accordance with its terms.
22. Liability Limit. Notwithstanding anything to the contrary contained in this Agreement, in the event of a termination of the employment of the Executive in breach of this Agreement by the Corporation, the Executive and the Company agree that the maximum aggregate amount of damages recoverable by the Executive for any such breach shall not exceed an amount equal to three years of Base Salary. The damages shall be determined by negotiation or, if the parties cannot reach a mutually acceptable agreement, by arbitration.
23. Arbitration. Any controversy or claim arising out of or relating to this Agreement or the breach thereof or otherwise arising out of the Executive's employment or the termination of that employment (including, without limitation, any claims of unlawful employment discrimination whether based on age or otherwise) shall, to the fullest extent permitted by law, be settled by arbitration in any forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of the American
Arbitration Association ("AAA") in Worcester, Massachusetts in accordance with the Employment Dispute Resolution Rules of the AAA, including, but not limited to, the rules and procedures applicable to the selection of arbitrators. In the event that any person or entity other than the Executive or the Employer may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted to arbitration subject to such other person or entity's agreement. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. This Section 23 shall be specifically enforceable. Notwithstanding the foregoing, this Section 23 shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or a preliminary injunction in circumstances in which such relief is appropriate; provided that any other relief shall be pursued through an arbitration proceeding pursuant to this Section 23. Punitive and consequential damages shall not be permitted as an award and each party shall bear the fees and expenses of its own counsel and expert witnesses.
24. Consent to Jurisdiction. To the extent that any court action is permitted consistent with or to enforce Section 23 of this Agreement, the parties hereby consent to the jurisdiction of the Superior Court of the Commonwealth of Massachusetts and the United States District Court for the District of Massachusetts. Accordingly, with respect to any such court action, the Executive (a) submits to the personal jurisdiction of such courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process.
IN WITNESS WHEREOF, this Employment Agreement has been duly executed:
IPG PHOTONICS CORPORATION
By: /s/ Angelo P. Lopresti /S/ Valentin P. Gapontsev --------------------------------- ------------------------------- Name: Angelo P. Lopresti Name: Valentin P. Gapontsev Title: Vice President and Secretary |
EXHIBIT 10.9
Service Agreement
This Service Agreement ("Agreement"), dated as of March 1, 2006, is made by and between IPG Laser GmbH, a German limited company having an office at Siemensstrasse 7, 57299 Burbach Germany (the "Company"), and Evgeny Shcherbakov, residing at Forstweg 16, 57299, Burbach Germany, born on 20 June 1947 ("Executive"). The Company and Executive are referred to jointly below as the "Parties."
WHEREAS, the Company desires to retain the services of Executive as managing director on the terms and conditions set forth in this Agreement; and
WHEREAS, Executive desires to accept the offer from the Company on such terms and conditions.
NOW, THEREFORE, in consideration of the services to be provided by Executive, the mutual terms and conditions set forth below, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. Services. Executive will provide services to the Company in the position of managing director. Executive will report to the Company's majority shareholder. Executive's primary responsibility will be managing the general business and affairs of the Company, and performing related administrative duties. Executive will carry out such duties as shall be assigned from time to time by the Company's sole shareholder, subject to applicable laws, and ethical duties. During the Service Term (as defined below), Executive shall devote Executive's reasonable best efforts, energies and abilities and Executive's full business time, skill and attention to the business and affairs of the Company, and shall act at all times according to the highest professional standards, for the purpose of advancing the business of the Company.
2. Term. Subject to the Termination provisions below, Executive shall provide services to the Company for a term of two (2) years commencing on the date of this Agreement (the "Initial Service Period"). Executive's services to the Company will continue for successive one year terms following expiration of the Initial Service Period (the Initial Service Period together with any subsequent service period shall be referred to as the "Service Term"), unless either party provides notice of intent not to renew not less than (a) one hundred eighty (180) days prior to expiration of the then current term or (b) 364 days prior to the end of the then current term following a "Change of Control" of IPG Photonics Corporation (as such term is defined in IPG Photonics Corporation's 2006 Incentive Stock Plan in effect on the date of this Agreement), or unless in either case service is terminated under the termination provisions below.
3. Compensation. The Company shall pay Executive on a salary basis at a monthly rate of E16,800 paid on the basis of a 14-month year for gross annual salary of E235,200 (the "Base Salary"). The Base Salary will be paid in equal installments in accordance with the Company's standard payroll policies and schedule and is subject to tax and elective withholding and deductions. The Company may, in its sole discretion, increase the Base Salary on an annual or other basis. The amount of any bonus compensation to Executive under any such program will be determined by the Board of Directors of IPG Photonics Company in its sole discretion.
4. Benefits.
(i) Executive shall be entitled to the extent eligible to participate in any benefit plans as may be adopted and modified by the Company from time to time, including without limitation health, dental and medical plans, life and disability insurance, paid time off, holiday, and retirement plans. The benefits available to Executive shall be no less favorable than those available to other executives at similar levels within the organization or to the employees of the Company at the location where Executive works. Benefits provided under this Agreement shall be subject to the terms and conditions of any applicable benefit plan, including any eligibility and vesting requirements, as such plans may be in effect from time to time.
(ii) Executive shall be entitled to four weeks vacation each year. The maximum number of accrued vacation hours that Executive can have at any point in time is equal to the total vacation hours earned in the last twelve months, plus one week of vacation carried over from the prior twelve months of service.
(iii) Executive shall have the right to a luxury class car which may be also used for personal purposes.
5. Intentionally Omitted.
6. Other Activities. The service of Executive shall be on a full-time basis, but Executive may be an investor or otherwise have an interest in or serve on the board of directors or advisory board to other businesses, partnerships and entities so long as the other activities of Executive do not materially interfere with the performance of Executive's duties to the Company, and so long as such other activities do not cause Executive to violate the Restrictive Covenants incorporated herein in Section 12 of this Agreement, and so long as Executive discloses all such activities to the Chief Executive Officer and the Board of Directors of the Company. Nothing in this provision or this Agreement limits or restricts Executive's duties and obligations, including the duty of loyalty, that arise under the law.
7. Termination by the Company. The Company may terminate the Service Term:
(i) by giving Executive ninety (90) days' prior written notice without Cause (as defined below), or
(ii) for Cause (as defined below).
"Cause" shall mean: (A) an act of fraud, embezzlement or theft by Executive in connection with Executive's duties or in the course of Executive's service with the Company; (B) Executive's intentional wrongful damage to the property of the Company; (C) Executive's intentional breach of Section 12 hereof while Executive remains in the employ of the Company; (D) an act of Gross Misconduct (as defined below); or (E) a felony conviction or a conviction for a misdemeanor involving moral turpitude; and, in each case, the determination by the Directors of the Company as hereafter provided that any such act shall have been materially harmful to the Company. For purposes of this Agreement, "Gross Misconduct" shall mean a willful or grossly negligent act or omission which has or will have a material and adverse impact on the business or reputation of the Company, or on the business of the Company's customers or
suppliers as such relate to the Company. Notwithstanding the foregoing,
Executive shall not be deemed to have been terminated for "Cause" hereunder
unless and until there shall have been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote of a majority of the independent
Directors then in office at a meeting of the Directors called and held for such
purpose, finding that, Executive has committed an act set forth above in this
Section 7. Nothing herein shall limit Executive's right or Executive's
beneficiaries' right to contest the validity or propriety of any such
determination.
8. Termination by Executive. Executive may terminate the Service Term (i) by giving the Company sixty (60) days' prior written notice, or (ii) for Good Reason (as defined below), subject to the Company's right to cure the breach for a period of thirty (30) days after notice from Executive of his intention to terminate for Good Reason. In the event of termination by notice under the preceding subsection (i), the Company in its discretion may elect a termination date that is earlier than the conclusion of the sixty (60) day notice period, but in the event of such election the termination shall still be deemed a voluntary termination by Executive under this Section. "Good Reason" means the occurrence of any of the following events without Executive's express written consent:
(a) The assignment to Executive of any duties materially inconsistent (except in the nature of a promotion) with Executive's position in the Company and the responsibilities specified in this Agreement or a substantial adverse alteration in the nature of Executive's position or responsibilities or in the conditions of service;
(b) A reduction by the Company of or a failure to pay Executive's Base Salary, or a material reduction in benefits Executive is entitled to under this Agreement other than a reduction approved by the Board of Directors of the Company that similarly applies to all executive officers of the Company, provided that a reduction in Base Salary shall not exceed more than 10% of then Base Salary;
(c) A relocation of the offices of Executive to a place greater than thirty-five (35) miles in distance from Executive offices of the Company in Burbach, Germany; or
(d) The failure of Executive to be the General Manager of the Company following a "Change of Control" of the Company (as such term is defined in the IPG Photonics Corporation's 2006 Incentive Stock Plan in effect on the date of this Agreement).
The Company shall have no obligations to Executive after Executive's last day of service following termination of service under this Section, except as specifically set forth in this Agreement or under the option agreement.
9. Automatic Termination. Notwithstanding the provisions of Section 2, Executive's service shall automatically terminate upon Executive's death or Disability (as defined below). Executive shall be deemed to have a
"Disability" for purposes of this Agreement if Executive is unable to substantially perform, by reason of physical or mental incapacity, Executive's duties or obligations under this Agreement, with or without reasonable accommodation as defined in the Americans with Disabilities Act and implementing regulations, for a period of one hundred and eighty (180) consecutive days in any 360-day period. The Board of Directors shall determine, according to the facts then available, whether and when the disability of Executive has occurred and shall state that date of termination in the Notice of Termination. Such determination shall be made by the Board of Directors in the exercise of reasonable discretion.
10. Certain Obligations of the Company Following Termination of the Service Period. Following termination of the Service Period under the circumstances described below, the Company will pay to Executive the following compensation and provide the following benefits in addition to any benefits to which Executive may be entitled by law in full satisfaction and final settlement of any and all claims and demands that Executive or the Company may have against the other under this Agreement:
(i) Without Cause by the Company or Good Reason by Executive. In the
event that the Service Period is terminated by the Company without Cause
pursuant to Section 7(i) hereof or by Executive for Good Reason pursuant to
Section 8 hereof, Executive shall be entitled to the following payments:
(a) Base Salary through the termination date and any bonus that has been actually earned as of or prior to the termination date, but has not been paid; and
(b) Continuing payments of Base Salary, payable in accordance with regular payroll practices of the Company, for twelve months following the date of termination.
(ii) Termination by Executive Without Good Reason or by the Company for Cause. In the event the Service Period as terminated by Executive pursuant to 8(i) hereof without Good Reason or by the Company pursuant to Section 7(ii) hereof for Cause, Executive shall be entitled to no further compensation or other benefits under this Agreement except as to that portion of any unpaid Base Salary and other benefits accrued, earned or vested up to and including the effective date of such termination.
(iii) Death; Disability. In the event that the Service Period is terminated by reason of Executive's death or for Disability, Executive or Executive's estate, as the case may be, shall be entitled to the payments Base Salary through the date of death or the date of termination as specified in the Notice of Termination in the event of Disability, plus any unpaid bonus previously awarded to Executive.
11. Nature of Payments. Upon termination of service pursuant to Sections 7, 8 or 9, Executive will be released from any duties and obligations to the Company set forth in this Agreement (except the duties and obligations under the Restrictive Covenants and as set forth in Section 12 hereof) and the obligations of the Company to Executive will be as set forth in Section 10.
12. Restrictive Covenants. Executive shall comply with the Confidentiality, Non-Competition and Confirmatory Assignment Terms attached as Exhibit A to this Agreement and incorporated herein by reference (the "Restrictive Covenants").
13. Indemnification.
(i) Indemnification Terms. The Company agrees that if Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee or agent of another company, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is Executive's alleged action in an official capacity while serving as a director, officer, member, employee or agent, Executive shall be indemnified and held harmless by the Company to the fullest extent permitted or authorized by the Company's certificate of incorporation or bylaws or, if greater, by the laws of the State of Delaware, against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by Executive in connection therewith, and such indemnification shall continue as to Executive even if he has ceased to be a director, member, employee or agent of the Company or other entity and shall inure to the benefit of Executive's heirs, executors and administrators. The Company shall advance to Executive all reasonable costs and expenses incurred by him in connection with a Proceeding within 20 days after receipt by the Company of a written request for such advance. Such request shall include an undertaking by Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses.
(ii) No Presumptions. Neither the failure of the Company (including its Board, independent legal counsel or stockholders) to have made a determination prior to the commencement of any proceeding concerning payment of amounts claimed by Executive under Section 15(a) above that indemnification of Executive is proper because he has met the applicable standard of conduct, nor a determination by the Company (including its Board, independent legal counsel or stockholders) that Executive has not met such applicable standard of conduct, shall create a presumption that Executive has not met the applicable standard of conduct.
(iii) Liability Insurance. The Company agrees to continue and maintain a directors' and officers' liability insurance policy covering Executive to the extent IPG Photonics Corporation provides such coverage for its other executive officers, and which would provide coverage for Executive after the Service Term for actions taken during the Service Term.
14. Notices. Any and all notices provided for herein shall be in writing and shall be delivered by certified mail, return receipt requested or in person. Notice shall be deemed to have been given when notice is received by the party on whom the notice was served. Notice to the Company shall be addressed to the Company at its principal office, and notice to Executive at Executive's last address as shown on the records of the Company.
15. Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the substantive laws of the Commonwealth of Massachusetts except that the social security insurance and mandatory statutory provisions set forth under company law shall be governed by the laws of the Federal Republic of Germany, without regard to its internal conflicts of law provisions.
16. Severability. In the event that any provision of this Agreement shall be determined to be invalid, illegal or otherwise unenforceable or contrary to law or public policy, the enforceability of the other provisions in this Agreement shall not affected thereby.
17. Assignment. Executive recognizes that this is an agreement for personal services and that Executive may not assign this Agreement. The Agreement shall inure to the benefit of and binding upon the Company's successors and assigns.
18. Entire Agreement/Amendment. This Agreement and the restrictive agreement referred to in Section 12 constitute the entire agreement between the Parties with respect to the subject matter hereof and supersedes any and all other agreements, either oral or in writing, among the Parties hereto with respect to the subject matter hereof. This Agreement may not be amended except by written agreement signed by both Parties.
19. Execution in Counterparts. This Agreement and the Restrictive Covenants may be executed in one or more counterparts, and by the different Parties in separate counterparts, each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement (and all signatures need not appear on any one counterpart), and this Agreement shall become effective when one or more counterparts has been signed by each of the Parties hereto and delivered to each of the other Parties hereto.
20. Waiver. The failure of either of the Parties to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Agreement or any provision hereof or the right of either of the Parties to enforce each and every provision of this Agreement. No waiver of any breach of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party against whom or which enforcement of such waiver is sought, and no waiver of any such breach shall be construed or deemed to be a waiver of any other or subsequent breach.
21. Capacity. Executive and the Company hereby represent and warrant to the
other that: (i) Executive or the Company has full power, authority and capacity
to execute and deliver this Agreement, and to perform Executive's or the
Company's obligations hereunder; (ii) such execution, delivery and performance
will not (and with the giving of notice or lapse of time or both would not)
result in the breach of any agreements or other obligations to which Executive
or the Company is a party or Executive or the Company is otherwise bound; and
(iii) this Agreement is Executive's or the Company's valid and binding
obligation in accordance with its terms.
22. Arbitration. Any controversy or claim arising out of or relating to this Agreement or the breach thereof or otherwise arising out of Executive's service or the termination of that service (including, without limitation, any claims of unlawful discrimination whether based on age or
otherwise) shall, to the fullest extent permitted by law, be settled by arbitration in any forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of the International Arbitration Association ("IAA") in Frankfurt/Main, Germany in accordance with the rules of the IAA the govern dispute resolution of personal services, including, but not limited to, the rules and procedures applicable to the selection of arbitrators. In the event that any person or entity other than Executive or the Employer may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted to arbitration subject to such other person or entity's agreement. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. This Section 22 shall be specifically enforceable. Notwithstanding the foregoing, this Section 22 shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or a preliminary injunction in circumstances in which such relief is appropriate; provided that any other relief shall be pursued through an arbitration proceeding pursuant to this Section 22. Punitive and consequential damages shall not be permitted as an award and each party shall bear the fees and expenses of its own counsel and expert witnesses.
23. Consent to Jurisdiction. To the extent that any court action is permitted consistent with or to enforce Section 22 of this Agreement, the parties hereby consent to the jurisdiction of the courts of the Commonwealth of Massachusetts. Accordingly, with respect to any such court action, Executive (a) submits to the personal jurisdiction of such courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process.
24. German Civil Code. Executive shall be exempt from the restrictions of
Section 181 of the German Civil Code, provided that Executive shall first obtain
the prior written consent of IPG Photonics Corporation with respect to the
transaction.
IN WITNESS WHEREOF, this Service Agreement has been duly executed on March 1, 2006:
/s/ Valentin P. Gapontsev /s/ Evgeny Shcherbakov ------------------------------------- ---------------------------------------- Valentin P. Gapontsev Evgeny Shcherbakov Geschaftsfuhrer, CEO Managing Director IPG Laser GmbH IPG Photonics Corporation /s/ Valentin P. Gapontsev ------------------------------------- By: Valentin P. Gapontsev Chief Executive Officer |
Exhibit A
CONFIDENTIALITY, NON-COMPETITION AND CONFIRMATORY ASSIGNMENT Terms (this
"Agreement").
WITNESSETH
WHEREAS, the Company is a manufacturer of fiber amplifiers, fiber lasers and associated products.
WHEREAS, the Company's business is conducted throughout the world and the reputation and goodwill of the Company are an integral part of its business success; and
WHEREAS, in consideration and as a condition of any employment (or continued employment) by the Company, Executive agrees to the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:
Section 1. Confidentiality. Executive represents, warrants and covenants that he or she has not revealed and will not at any time, whether during or after the termination of his or her employment, reveal to anyone outside the Company any of the trade secrets or confidential information of the Company, its customers or suppliers, or any information received in confidence from third parties by the Company. Confidential information of the Company is any information or material (a) generated or collected by or used in the operation of the Company that relates to the actual or anticipated business, marketing and sales, strategic planning, products, services, research and development, or production and/or manufacturing processes, of the Company or its customers or suppliers, including its and their organization, personnel, customers and finances; or (b) suggested by or resulting from any task assigned to Executive or work performed by Executive for or on behalf of the Company. Executive will deliver to the Company copies of all confidential information upon the earlier of (a) a request by the Company, or (b) termination of Executive's employment. Upon termination of Executive's employment, Executive will not retain any such materials or copies.
Confidential Information shall not include (a) any information that is in
the public domain at time of disclosure or thereafter comes into the public
domain (other than by breach of this Agreement by Executive); or (b) any
information which is disclosed to Executive in good faith by a third party
unaffiliated with the Company with the legal right to make such disclosure; or
(c) any information which the Company authorizes its unrestricted use in
writing.
Further, Executive represents, warrants and covenants that during his or her employment he or she did not and will not take, use or permit to be used any notes, memoranda, reports, lists, records, drawings, sketches, specifications, software programs, data, documentation or other materials of any nature relating to any matter within the scope of the business of the Company or concerning any of its dealings or affairs otherwise than for the benefit of the Company. Executive further agrees that he or she has not used or permitted to be used and shall not, after the termination of his or her employment, use or permit to be used any such notes, memoranda, reports,
lists, records, drawings, sketches, specifications, software programs, data, documentation or other materials, it being agreed that all of the foregoing shall be and remain the sole and exclusive property of the Company and that immediately upon the termination of Executive's employment he or she shall deliver all of the foregoing, and all copies thereof, to the Company, at its main office.
Executive understands that the Company has received and will receive from third parties information that is confidential or proprietary ("Third-Party Information") and that is subject to restrictions on the Company regarding its use and disclosure. Executive, both during and after termination of his or her employment will hold Third-Party Information in the strictest confidence and will not disclose or use Third-Party Information except as permitted by the agreement between the Company and the relevant third party, unless expressly authorized to act otherwise by the Company.
Executive agrees to report known or suspected unauthorized disclosures of confidential or proprietary information of the Company by any other person immediately to an officer of the Company.
Section 2. Non-Competition; Non-Solicitation. In view of the fact that any activity of the Executive in violation of the terms hereof would adversely affect the Company and its subsidiaries (as defined below), and to preserve the goodwill associated with the Company's business, the Executive hereby agrees to the following restrictions on his activities:
(a) Non-Competition. The Executive hereby agrees that one (1) year after the date on which the Executive's employment with the Company and its subsidiaries terminates for any reason (the "Non-Competition Period"), Executive will not, without the express written consent of the Company, directly or indirectly, anywhere where the Company sells or offers (at any time during the term of this Agreement ) products directly or indirectly through distributors, subsidiaries or affiliated companies including IPG Photonics Corporation, engage in any activity which is, or participate or invest in, or provide or facilitate the provision of financing to, or assist (whether as owner, part-owner, shareholder, member, partner, director, officer, trustee, employee, agent or consultant, or in any other capacity) any business, organization or person other than the Company (or any subsidiary of the Company), and including any such business, organization or person involving, or which is, a family member of the Executive, whose business, activities, products or services are competitive with the products/technologies/services listed on the Annex to this Agreement. The Executive hereby acknowledges that, because of the global-based nature of the Company's business, the geographic scope as set forth above is reasonable and fair.
(b) Non-Solicitation. The Executive hereby agrees that during the period commencing on the date hereof and ending on the date which is the later of (i) two (2) years after the date hereof and (ii) eighteen (18) months after the date on which the Executive's employment with the Company and its subsidiaries terminates for any reason, he will not, without the express written consent of the Company, (w) hire or engage or attempt to hire or engage for or on behalf of himself or herself or any such competitor any officer or employee of the Company or any of its subsidiaries, or any former employee of the Company and any of its subsidiaries who was employed during the one (1) year period immediately preceding the date on which the Executive's employment or service relationship with the Company or any of its subsidiaries was terminated for any reason, (x) encourage for or on behalf of himself or any such competitor any such officer or employee to terminate his
or her relationship or employment with the Company or any of its subsidiaries,
(y) solicit for or on behalf of himself or any such competitor any client or
supplier of the Company or any of its subsidiaries or (z) divert to any person
(as hereinafter defined) any client or business opportunity of the Company or
any of any of its subsidiaries.
The Board of Directors, with prior notice and adequate disclosure of any opportunity or proposed activity, shall be entitled to interpret the provisions of this Agreement and exempt any opportunity or activity of the Executive which the Board of Directors of IPG Photonics Corporation, in its reasonable judgment, believes is in the interests of, or not opposed to the interests of, the Company or any of its subsidiaries.
Notwithstanding anything herein to the contrary, the Executive may make passive investments in any enterprise the shares of which are publicly traded if such investment constitutes less than three percent (3%) of the equity of such enterprise.
Neither the Executive nor any business entity controlled by the Executive is a party to any contract, commitment, arrangement or agreement which could, following the date hereof, restrain or restrict the Company or any subsidiary of the Company from carrying on its business or restrain or restrict the Executive from performing his or her employment obligations, and as of the date of this Agreement the Executive has no business interests whatsoever in or relating to the industries in which the Company and its subsidiaries currently engage other than Executive's interest in the Company and other than interests in public companies of less than three percent (3%).
For purposes of this Agreement, any reference to the "subsidiaries" of the Company shall be deemed to include all entities directly or indirectly controlled by it through an ownership of more than fifty percent (50%) of the voting interests. As used in this Agreement, the term "person" shall mean an individual, a corporation, an association, a partnership, a limited liability company, an estate, a trust, and any other entity or organization.
Section 3. Scope of Agreement. The parties acknowledge that the time, scope, geographic area and other provisions of this Agreement have been specifically negotiated by sophisticated parties and agree that (a) all such provisions are reasonable and fair to the parties hereto under the circumstances of the transactions contemplated hereby, and (b) are given as an integral and essential part of the transactions contemplated hereby. The Executive has independently consulted with Executive's counsel and has been advised in all respects concerning the reasonableness and fairness of the covenants contained herein, with specific regard to the business to be conducted by Company and its subsidiaries, and represents that the Agreement is intended to be, and shall be, fully enforceable and effective in accordance with its terms.
Section 4. Acknowledgement Regarding Inventions/Receipt of Fair Compensation. Executive hereby confirms, acknowledges and agrees that all inventions, modifications, discoveries, designs, developments, improvements, processes, know-how, or intellectual property rights whatsoever (collectively, "Developments") that he or she (either alone or with others) has conceived, made or reduced to practice at any time or times while employed by the Company or any of its subsidiaries that:
(a) related to fixtures for and methods of manufacture of fiber lasers and fiber amplifiers and certain aspects of fiber laser and fiber amplifiers, or otherwise relate to the business of the
Company from time to time, or any customer or supplier to the Company, or any of the products or services being developed, manufactured or sold by the Company or any of the products which may be used in connection therewith,
(b) resulted from tasks assigned to the Executive by the Company or any of its subsidiaries to the business, or
(c) resulted from the use of premises or personal property (whether tangible or intangible) owned, leased or contracted for or by the Company or any of its subsidiaries,
are the sole and absolute property of the Company, its successors and assigns.
Executive acknowledges that all Developments were made as a "work for hire" and
all proprietary rights which the Executive may have acquired in such
Developments were assigned to the Company. The Executive hereby acknowledges he
or she has not created any Developments that do not satisfy the provisions of
Section 4(a), (b) or (c). Executive hereby confirms, acknowledges and agrees
that Executive has received mutually-agreed upon compensation from the Company
in consideration for the Company's ownership rights to the Developments set
forth in this Section 4 and that such consideration is fair and reasonable.
Executive will make and maintain adequate and current records of and communicate to the Company (or any persons designated by it) promptly and fully each Development without publishing the same. Further, Executive will, both during and after the period of his or her employment by the Company, execute all appropriate documents and give the Company all assistance it reasonably requires to perfect, protect and use its rights to the Developments. In the event the Company is unable, after reasonable effort, to secure Executive's signature on any letter patent, copyright or other analogous protection relating to a Development, Executive hereby irrevocably appoints the Company and its duly authorized officers and agents as Executive's agent and attorney-in-fact, to execute and file any such application or applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent, copyright or other protection with the same legal force and effect as if signed by Executive.
Executive has attached hereto, as Addendum A, a list describing all Inventions which were made by Executive prior to his employment by the Company ("Prior Inventions"), which belong to Executive and which relate in any way to the Company's business, products, services, research or development, and which are not assigned to the Company. If no such list is attached, Executive represents that there are no such Prior Inventions. If in the course of employment by the Company, Executive incorporates into a Company product or process a Prior Invention, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make, have made, modify, use and sell such Prior Invention as part of or in connection with such product or process.
Section 5. Use of Voice, Image and Likeness; Publication of Statements. Executive gives the Company permission to use Executive's voice, image or likeness, with or without using Executive's name, for the purposes of advertising and promoting the Company, except to the extent expressly prohibited by law. To ensure that the Company delivers a consistent message about its products, services and operations to the public, and further in recognition that even positive statements may have a detrimental effect on the Company in certain securities transactions and other contexts, Executive agrees that any statement about the Company which he or she creates, publishes or posts during Executive's period of employment and for six (6)
months thereafter, on any media accessible by the public, including but not limited to electronic bulletin boards and Web-based chat rooms, shall first be reviewed and approved by an officer of the Company before it is released in the public domain.
Section 6. No Employment Obligation. Executive understands that this Agreement does not create an obligation on the Company or entity to continue Executive's employment or to exploit any Developments. Executive acknowledges that nothing in this Agreement shall interfere with or restrict in any way the rights of the Company, to discharge Executive at any time for any reason whatsoever, with or without cause, except as may be expressly provided in a separate agreement between the Company and Executive.
Section 7. Certain Remedies; Severability. It is specifically understood and agreed that any breach of the provisions of this agreement by the Executive will result in irreparable injury to the Company and its subsidiaries, that the remedy at law alone will be an inadequate remedy for such breach and that, in addition to any other remedy it may have, the Company and upon authorization by the Board of Directors of the Company its subsidiaries shall be entitled to enforce the specific performance of this agreement by the Executive through both temporary and permanent injunctive relief without the necessity of proving actual damages, but without limitation of their right to damages and any and all other remedies available to them, it being understood that injunctive relief is in addition to, and not in lieu of, such other remedies.
In the event that any covenant contained in this Agreement shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it shall be interpreted to extend only over the maximum period of time for which it may be enforceable and/or over the maximum geographical area as to which it may be enforceable and/or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action. The existence of any claim or cause of action which the Executive may have against the Company or any of its subsidiaries shall not constitute a defense or bar to the enforcement of any of the provisions of this Agreement. Executive agrees that Executive will not assert, and it should not be considered, that any provision contained in this Agreement prevents him or her from earning a living or is otherwise void, voidable, or unenforceable or should be voided or held to be unenforceable.
Section 8. Jurisdiction. The parties hereby irrevocably submit to the non-exclusive jurisdiction of the courts of the Federal Republic of Germany to construe and enforce the covenants contained in this Agreement. In the event that the courts of any state shall hold such covenants unenforceable (in whole or in part) by reason of the breadth of such scope or otherwise, it is the intention of the parties hereto that such determination shall not bar or in any way affect the right of the Company or upon authorization by other the Directors of the Company any its subsidiaries to the relief provided for herein in the courts of any other state within the geographic scope of such covenants, as to breaches of such covenants in such other respective states, the above covenants as they relate to each state being, for this purpose, severable into diverse and independent covenants.
Section 9. Notices. Any notice or demand which is required or provided to be given under this Agreement shall be deemed to have been
sufficiently given and received for all purposes when delivered by hand, telecopy, telex or other method of facsimile, or five days after being sent by certified or registered mail, postage and charges prepaid, return receipt requested, or two days after being sent by overnight delivery providing receipt of delivery, to the following addresses: if to the Company, Siemensstrasse 7, D-57299 Burbach, Germany 01540, Facsimile: +49-2736-4420-150, Attn: CEO, or at any other address designated by the Company to the Executive in writing; and if to the Executive, to the home address of Executive as designated in the current personnel files maintained by the Company, or at any other address designated by the Executive to the Company in writing.
Section 10. Miscellaneous. This Agreement shall be governed by and construed under the laws of the Commonwealth of Massachusetts (without regard to its conflict of laws principles) and shall not be modified or discharged in whole or in part except by an agreement in writing signed by the Company and the Executive. The failure of any of the parties to require the performance of a term or obligation or to exercise any right under this Agreement or the waiver of any breach hereunder shall not prevent subsequent enforcement of such term or obligation or exercise of such right or the enforcement at any time of any other right hereunder or be deemed a waiver of any subsequent breach of the provision so breached, or of any other breach hereunder. Executive's obligations under this Agreement shall survive the termination of Executive's employment regardless of the manner of such termination and shall be binding upon by Executive's heirs, executors, administrators and legal representatives. The Company shall have the right to assign this Agreement to its affiliates, successors and assigns but this Agreement may not be assigned by the Executive. This Agreement supersedes all prior understandings and agreements between the parties relating to the subject matter hereof, including the Confidentiality and Assignment of Inventions Agreement and the Non-Competition and Confirmatory Assignment Agreement, each dated August 30, 2000.
Section 11. No Conflicting Agreements. Executive warrants that Executive is not bound by the terms of a confidentiality agreement or other agreement with a third party that would conflict with Executive's obligations hereunder.
Section 12. Third Party Beneficiaries. The parties hereto acknowledge and agree that the Investors named in that certain Stock Purchase Agreement dated August 30, 2000 are third party beneficiaries of this Agreement.
IN WITNESS WHEREOF, this Confidentiality, Non-Competition And Confirmatory Assignment Terms has been duly executed on March 1, 2006:
/S/ Valentin P. Gapontsev /s/ Evgeny Shcherbakov ------------------------------------- ---------------------------------------- Valentin P. Gapontsev Evgeny Shcherbakov Geschaftsfuhrer, CEO Managing Director IPG Laser GmbH IPG Photonics Corporation /s/ Valentin P. Gapontsev ------------------------------------- By: Valentin P. Gapontsev Chief Executive Officer |
Annex
Section 2(a) Non-Competition Limitation: All systems, products and components manufactured, sold or being developed, including without limitation fiber lasers, fiber amplifiers and diode lasers, and all services provided, by IPG Laser.
Exhibit 10.10
Employment Agreement
This Employment Agreement ("Agreement"), dated as of March 1, 2006, is made by and between IPG Photonics Corporation, a Delaware corporation having an office at 50 Old Webster Road, Oxford, MA, 01540 (the "Corporation"), and Timothy Mammen ("Executive"). The Corporation and Executive are referred to jointly below as the "Parties."
WHEREAS, the Corporation desires to employ Executive on the terms and conditions set forth in this Agreement; and
WHEREAS, Executive desires to accept employment by the Corporation on such terms and conditions.
NOW, THEREFORE, in consideration of the employment of Executive, the mutual terms and conditions set forth below, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. Employment. Executive will be employed by the Corporation in the position of Vice President and Chief Financial Officer. Executive will report to the Corporation's Chief Executive Officer. Executive's primary responsibility will be managing the financial affairs of the Corporation and its subsidiaries. Executive will carry out such duties as shall be assigned from time to time by the Corporation's Chief Executive Officer, subject to applicable laws, and ethical duties. During the Employment Term (as defined below), Executive shall devote Executive's reasonable best efforts, energies and abilities and Executive's full business time, skill and attention to the business and affairs of the Corporation, and shall act at all times according to the highest professional standards, for the purpose of advancing the business of the Corporation.
2. Term. Subject to the Termination provisions below, Executive's employment by the Corporation is for a term of two (2) years commencing on the date of this Agreement (the "Initial Employment Period"). Executive's employment by the Corporation will continue for successive one year terms following expiration of the Initial Employment Period (the Initial Employment Period together with any subsequent employment period shall be referred to as the "Employment Term"), unless either party provides notice of intent not to renew not less than (a) one hundred eighty (180) days prior to expiration of the then current term or (b) 364 days prior to the end of the then current term following a "Change of Control" of the Corporation (as such term is defined in the Corporation's 2006 Incentive Stock Plan in effect on the date of this Agreement), or unless in either case employment is terminated under the termination provisions below.
3. Compensation. The Corporation shall pay Executive on a salary basis at an annual rate of $270,000 (the "Base Salary"). The Base Salary will be paid in equal installments in accordance with the Corporation's standard payroll policies and schedule and is subject to tax and elective withholding and deductions. The Corporation may, in its sole discretion, increase the Base Salary on an annual or other basis. The amount of any bonus compensation to Executive under any such program will be determined by the Board of Directors in its sole discretion.
4. Benefits.
(i) Executive shall be entitled to the extent eligible to participate in any benefit plans as may be adopted and modified by the Corporation from time to time, including without limitation health, dental and medical plans, life and disability insurance, paid time off, holiday, and retirement plans. The benefits available to Executive shall be no less favorable than those available to other executives at similar levels within the organization or to the employees of the Company at the location where Executive works. Benefits provided under this Agreement shall be subject to the terms and conditions of any applicable benefit plan, including any eligibility and vesting requirements, as such plans may be in effect from time to time.
(ii) Executive shall be entitled to four weeks vacation each year. The maximum number of accrued vacation hours that Executive can have at any point in time is equal to the total vacation hours earned in the last twelve months, plus one week of vacation carried over from the prior twelve months of service.
5. Intentionally Omitted.
6. Other Activities. The employment of Executive shall be on a full-time basis, but Executive may be an investor or otherwise have an interest in or serve on the board of directors or advisory board to other businesses, partnerships and entities so long as the other activities of Executive do not materially interfere with the performance of Executive's duties to the Corporation, and so long as such other activities do not cause Executive to violate the Restrictive Covenants incorporated herein in Section 12 of this Agreement, and so long as Executive discloses all such activities to the Chief Executive Officer and the Board of Directors of the Corporation. Nothing in this provision or this Agreement limits or restricts Executive's duties and obligations, including the duty of loyalty, that arise under the law.
7. Termination by the Corporation. The Corporation may terminate the Employment Term:
(i) by giving Executive ninety (90) days' prior written notice without Cause (as defined below), or
(ii) for Cause (as defined below).
"Cause" shall mean: (A) an act of fraud, embezzlement or theft by Executive in connection with Executive's duties or in the course of Executive's employment with the Corporation; (B) Executive's intentional wrongful damage to the property of the Corporation; (C) Executive's intentional breach of Section 12 hereof while Executive remains in the employ of the Corporation; (D) an act of Gross Misconduct (as defined below); or (E) a felony conviction or a conviction for a misdemeanor involving moral turpitude; and, in each case, the determination by the Directors of the Corporation as hereafter provided that any such act shall have been materially harmful to the Corporation. For purposes of this Agreement, "Gross Misconduct" shall mean a willful or grossly negligent act or omission which has or will have a material and adverse impact on the business or reputation of the Corporation, or on the business of the Corporation's customers or suppliers as such relate to the Corporation. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for "Cause" hereunder unless and until there
shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of a majority of the independent Directors then in office at a meeting of the Directors called and held for such purpose, finding that, Executive has committed an act set forth above in this Section 7. Nothing herein shall limit Executive's right or Executive's beneficiaries' right to contest the validity or propriety of any such determination.
8. Termination by Executive. Executive may terminate the Employment Term
(i) by giving the Corporation sixty (60) days' prior written notice, or (ii) for
Good Reason (as defined below), subject to the Corporation's right to cure the
breach for a period of thirty (30) days after notice from Executive of his
intention to terminate for Good Reason. In the event of termination by notice
under the preceding subsection (i), the Corporation in its discretion may elect
a termination date that is earlier than the conclusion of the sixty (60) day
notice period, but in the event of such election the termination shall still be
deemed a voluntary termination by Executive under this Section. "Good Reason"
means the occurrence of any of the following events without Executive's express
written consent:
(a) The assignment to Executive of any duties materially inconsistent (except in the nature of a promotion) with Executive's position in the Corporation and the responsibilities specified in this Agreement or a substantial adverse alteration in the nature of Executive's position or responsibilities or in the conditions of employment;
(b) A reduction by the Corporation of or a failure to pay Executive's Base Salary, or a material reduction in benefits Executive is entitled to under this Agreement other than a reduction approved by the Board of Directors of the Corporation that similarly applies to all executive officers of the Company, provided that a reduction in Base Salary shall not exceed more than 10% of then Base Salary;
(c) A relocation of the offices of Executive to a place greater than thirty-five (35) miles in distance from Executive offices of the Corporation in Oxford, MA; or
(d) The failure of Executive to be the Vice President and Chief Financial Officer of (i) a company having its securities registered under the Securities Exchange Act of 1934 following the effectiveness of the Corporation's initial public offering, or (ii) the Corporation following a "Change of Control" of the Corporation (as such term is defined in the Corporation's 2006 Incentive Stock Plan in effect on the date of this Agreement).
The Corporation shall have no obligations to Executive after Executive's last day of employment following termination of employment under this Section, except as specifically set forth in this Agreement or under the option agreement.
9. Automatic Termination. Notwithstanding the provisions of Section 2, Executive's employment shall automatically terminate upon Executive's death or Disability (as defined below). Executive shall be deemed to have a "Disability" for purposes of this Agreement if Executive is unable to substantially perform, by reason of physical or mental incapacity, Executive's duties or obligations under this Agreement, with or without reasonable accommodation as defined in the Americans with Disabilities Act and implementing regulations, for a period of one hundred and eighty (180) consecutive days in any 360-day period. The Board of Directors shall determine, according to the facts then available, whether and when the disability of Executive has occurred and shall state that date of termination in the Notice of Termination. Such determination shall be made by the Board of Directors in the exercise of reasonable discretion.
10. Certain Obligations of the Corporation Following Termination of the Employment Period. Following termination of the Employment Period under the circumstances described below, the Corporation will pay to Executive the following compensation and provide the following benefits in addition to any benefits to which Executive may be entitled by law in full satisfaction and final settlement of any and all claims and demands that Executive or the Corporation may have against the other under this Agreement:
(i) Without Cause by the Corporation or Good Reason by Executive. In the event that the Employment Period is terminated by the Corporation without Cause pursuant to Section 7(i) hereof or by Executive for Good Reason pursuant to Section 8 hereof, Executive shall be entitled to the following payments:
(a) Base Salary through the termination date and any bonus that has been actually earned as of or prior to the termination date, but has not been paid; and
(b) Continuing payments of Base Salary, payable in accordance with regular payroll practices of the Corporation, for twelve months following the date of termination.
(ii) Termination by Executive Without Good Reason or by the Corporation for Cause. In the event the Employment Period as terminated by Executive pursuant to 8(i) hereof without Good Reason or by the Corporation pursuant to Section 7(ii) hereof for Cause, Executive shall be entitled to no further compensation or other benefits under this Agreement except as to that portion of any unpaid Base Salary and other benefits accrued, earned or vested up to and including the effective date of such termination.
(iii) Death; Disability. In the event that the Employment Period is terminated by reason of Executive's death or for Disability, Executive or Executive's estate, as the case may be, shall be entitled to the payments Base Salary through the date of death or the date of termination as specified in the Notice of Termination in the event of Disability, plus any unpaid bonus previously awarded to Executive.
11. Nature of Payments. Upon termination of employment pursuant to Sections 7, 8 or 9, Executive will be released from any duties and obligations to the Corporation set forth in this Agreement (except the duties and obligations under the Restrictive Covenants and as set forth in Section 12 hereof) and the obligations of the Corporation to Executive will be as set forth in Section 10.
12. Restrictive Covenants. Executive has executed and delivered an Employee Non-Disclosure Agreement, dated the date hereof (the "Restrictive Covenants") and Executive agrees that, as part of this Agreement, Executive shall comply with the terms of the Restrictive Covenants.
13. Indemnification.
(i) Indemnification Terms. The Corporation agrees that if Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is Executive's alleged action in an official capacity while serving as a director, officer, member, employee or agent, Executive shall be indemnified and held harmless by the Corporation to the fullest extent permitted or authorized by the Corporation's certificate of incorporation or bylaws or, if greater, by the laws of the State of Massachusetts, against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by Executive in connection therewith, and such indemnification shall continue as to Executive even if he has ceased to be a director, member, employee or agent of the Corporation or other entity and shall inure to the benefit of Executive's heirs, executors and administrators. The Corporation shall advance to Executive all reasonable costs and expenses incurred by him in connection with a Proceeding within 20 days after receipt by the Corporation of a written request for such advance. Such request shall include an undertaking by Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses.
(ii) No Presumptions. Neither the failure of the Corporation (including its Board, independent legal counsel or stockholders) to have made a determination prior to the commencement of any proceeding concerning payment of amounts claimed by Executive under Section 15(a) above that indemnification of Executive is proper because he has met the applicable standard of conduct, nor a determination by the Corporation (including its Board, independent legal counsel or stockholders) that Executive has not met such applicable standard of conduct, shall create a presumption that Executive has not met the applicable standard of conduct.
(iii) Liability Insurance. The Corporation agrees to continue and maintain a directors' and officers' liability insurance policy covering Executive to the extent the Corporation provides such coverage for its other executive officers, and which would provide coverage for Executive after the Term of Employment for actions taken during the Term of Employment.
14. Notices. Any and all notices provided for herein shall be in writing and shall be delivered by certified mail, return receipt requested or in person. Notice shall be deemed to have been given when notice is received by the party on whom the notice was served. Notice to the Corporation shall be addressed to the Corporation at its principal office, and notice to Executive at Executive's last address as shown on the records of the Corporation.
15. Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the substantive laws of the Commonwealth of Massachusetts, without regard to its internal conflicts of law provisions.
16. Severability. In the event that any provision of this Agreement shall be determined to be invalid, illegal or otherwise unenforceable or contrary to law or public policy, the enforceability of the other provisions in this Agreement shall not affected thereby.
17. Assignment. Executive recognizes that this is an agreement for personal services and that Executive may not assign this Agreement. The Agreement shall inure to the benefit of and binding upon the Corporation's successors and assigns.
18. Entire Agreement/Amendment. This Agreement and the restrictive agreement referred to in Section 12 constitute the entire agreement between the Parties with respect to the subject matter hereof and supersedes any and all other agreements, either oral or in writing, among the Parties hereto with respect to the subject matter hereof. This Agreement may not be amended except by written agreement signed by both Parties.
19. Execution in Counterparts. This Agreement may be executed in one or more counterparts, and by the different Parties in separate counterparts, each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement (and all signatures need not appear on any one counterpart), and this Agreement shall become effective when one or more counterparts has been signed by each of the Parties hereto and delivered to each of the other Parties hereto.
20. Waiver. The failure of either of the Parties to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Agreement or any provision hereof or the right of either of the Parties to enforce each and every provision of this Agreement. No waiver of any breach of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party against whom or which enforcement of such waiver is sought, and no waiver of any such breach shall be construed or deemed to be a waiver of any other or subsequent breach.
21. Capacity. Executive and the Corporation hereby represent and warrant to the other that: (i) Executive or the Corporation has full power, authority and capacity to execute and deliver this Agreement, and to perform Executive's or the Corporation's obligations hereunder; (ii) such execution, delivery and performance will not (and with the giving of notice or lapse of time or both would not) result in the breach of any agreements or other obligations to which Executive or the Corporation is a party or Executive or the Corporation is otherwise bound; and (iii) this Agreement is Executive's or the Corporation's valid and binding obligation in accordance with its terms.
22. Arbitration. Any controversy or claim arising out of or relating to this Agreement or the breach thereof or otherwise arising out of Executive's employment or the termination of that employment (including, without limitation, any claims of unlawful employment discrimination whether based on age or otherwise) shall, to the fullest extent permitted by law, be settled by arbitration in any forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of the American
Arbitration Association ("AAA") in Worcester, Massachusetts in accordance with the Employment Dispute Resolution Rules of the AAA, including, but not limited to, the rules and procedures applicable to the selection of arbitrators. In the event that any person or entity other than Executive or the Employer may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted to arbitration subject to such other person or entity's agreement. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. This Section 23 shall be specifically enforceable. Notwithstanding the foregoing, this Section 23 shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or a preliminary injunction in circumstances in which such relief is appropriate; provided that any other relief shall be pursued through an arbitration proceeding pursuant to this Section 23. Punitive and consequential damages shall not be permitted as an award and each party shall bear the fees and expenses of its own counsel and expert witnesses.
23. Consent to Jurisdiction. To the extent that any court action is permitted consistent with or to enforce Section 23 of this Agreement, the parties hereby consent to the jurisdiction of the Superior Court of the Commonwealth of Massachusetts and the United States District Court for the District of Massachusetts. Accordingly, with respect to any such court action, Executive (a) submits to the personal jurisdiction of such courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process.
IN WITNESS WHEREOF, this Employment Agreement has been duly executed:
/s/ Valentin P. Gapontsev /s/ Timothy Mammen ------------------------------------- ---------------------------------------- Chief Executive Officer, by and for Timothy Mammen IPG PHOTONICS CORPORATION Executive |
Exhibit 10.11
Employment Agreement
This Employment Agreement ("Agreement"), dated as of March 1, 2006 is made by and between IPG Photonics Corporation, a Delaware corporation having an office at 50 Old Webster Road, Oxford, MA, 01540 (the "Corporation"), and Angelo P. Lopresti ("Executive"). The Corporation and Executive are referred to jointly below as the "Parties."
WHEREAS, the Corporation desires to employ Executive on the terms and conditions set forth in this Agreement; and
WHEREAS, Executive desires to accept employment by the Corporation on such terms and conditions.
NOW, THEREFORE, in consideration of the employment of Executive, the mutual terms and conditions set forth below, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. Employment. Executive will be employed by the Corporation in the position of General Counsel, Vice President and Secretary. Executive will report to only the Corporation's Chief Executive Officer. Executive's primary responsibility will be managing the legal affairs of the Corporation and its subsidiaries, and performing corporate secretary tasks. Executive will carry out such duties as shall be assigned from time to time by the Corporation's Chief Executive Officer, subject to applicable laws, ethical duties and legal cannons. During the Employment Term (as defined below), Executive shall devote Executive's reasonable best efforts, energies and abilities and Executive's full business time, skill and attention to the business and affairs of the Corporation, and shall act at all times according to the highest professional standards, for the purpose of advancing the business of the Corporation.
2. Term. Subject to the Termination provisions below, Executive's employment by the Corporation is for a term of two (2) years commencing on the date of this Agreement (the "Initial Employment Period"). Executive's employment by the Corporation will continue for successive one year terms following expiration of the Initial Employment Period (the Initial Employment Period together with any subsequent employment period shall be referred to as the "Employment Term"), unless either party provides notice of intent not to renew not less than (a) one hundred and eighty (180) days prior to expiration of the then current term or (b) 364 days prior to the end of the then current term following a "Change of Control" of the Corporation (as such term is defined in the Corporation's 2006 Incentive Stock Plan in effect on the date of this Agreement), or unless in either case employment is terminated under the termination provisions below.
3. Compensation. The Corporation shall pay Executive on a salary basis at an annual rate of $270,000 (the "Base Salary"). The Base Salary will be paid in equal installments in accordance with the Corporation's standard payroll policies and schedule and is subject to tax and elective withholding and deductions. The Corporation may, in its sole discretion, increase the Base Salary on an annual or other basis. The amount of any bonus compensation to Executive under any such program will be determined by the Board of Directors in its sole discretion.
4. Benefits.
(i) Executive shall be entitled to the extent eligible to participate in any benefit plans as may be adopted and modified by the Corporation from time to time, including without limitation health, dental and medical plans, life and disability insurance, paid time off, holiday, and retirement plans. The benefits available to Executive shall be no less favorable than those available to other executives at similar levels within the organization or to the employees of the Company at the location where Executive works. Benefits provided under this Agreement shall be subject to the terms and conditions of any applicable benefit plan, including any eligibility and vesting requirements, as such plans may be in effect from time to time.
(ii) The Corporation shall obtain and directly pay for legal malpractice insurance with respect to the performance of the Executive's duties.
(iii) Executive shall be entitled to four weeks vacation each year. The maximum number of accrued vacation hours that Executive can have at any point in time is equal to the total vacation hours earned in the last twelve months, plus one week of vacation carried over from the prior twelve months of service.
5. Intentionally Omitted.
6. Other Activities. The employment of Executive shall be on a full-time basis, but Executive may be an investor or otherwise have an interest in or serve on the board of directors or advisory board to other businesses, partnerships and entities so long as the other activities of Executive do not materially interfere with the performance of Executive's duties to the Corporation, and so long as such other activities do not cause Executive to violate the Restrictive Covenants incorporated herein in Section 12 of this Agreement, and so long as Executive discloses all such activities to the Chief Executive Officer and the Board of Directors of the Corporation. Nothing in this provision or this Agreement limits or restricts Executive's duties and obligations, including the duty of loyalty, that arise under the law.
7. Termination by the Corporation. The Corporation may terminate the Employment Term:
(i) by giving Executive ninety (90) days' prior written notice without Cause (as defined below), or
(ii) for Cause (as defined below).
"Cause" shall mean: (A) an act of fraud, embezzlement or theft by Executive in connection with Executive's duties or in the course of Executive's employment with the Corporation; (B) Executive's intentional wrongful damage to the property of the Corporation; (C) Executive's intentional breach of Section 12 hereof while Executive remains in the employ of the Corporation; (D) an act of Gross Misconduct (as defined below); or (E) a felony conviction or a conviction for a misdemeanor involving moral turpitude; and, in each case, the determination by the Directors of the Corporation as hereafter provided that any such act shall have been materially harmful to the Corporation. For purposes of this Agreement, "Gross Misconduct" shall mean a
willful or grossly negligent act or omission which has or will have a material and adverse impact on the business or reputation of the Corporation, or on the business of the Corporation's customers or suppliers as such relate to the Corporation. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for "Cause" hereunder unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of a majority of the independent Directors then in office at a meeting of the Directors called and held for such purpose, finding that, Executive has committed an act set forth above in this Section 7. Nothing herein shall limit Executive's right or Executive's beneficiaries' right to contest the validity or propriety of any such determination.
8. Termination by Executive. Executive may terminate the Employment Term
(i) by giving the Corporation sixty (60) days' prior written notice, or (ii) for
Good Reason (as defined below), subject to the Corporation's right to cure the
breach for a period of thirty (30) days after notice from Executive of his
intention to terminate for Good Reason. In the event of termination by notice
under the preceding subsection (i), the Corporation in its discretion may elect
a termination date that is earlier than the conclusion of the sixty (60) day
notice period, but in the event of such election the termination shall still be
deemed a voluntary termination by Executive under this Section. "Good Reason"
means the occurrence of any of the following events without Executive's express
written consent:
(a) The assignment to Executive of any duties materially inconsistent (except in the nature of a promotion) with Executive's position in the Corporation and the responsibilities specified in this Agreement or a substantial adverse alteration in the nature of Executive's position or responsibilities or in the conditions of employment;
(b) A reduction by the Corporation of or a failure to pay Executive's Base Salary, or a material reduction in benefits Executive is entitled to under this Agreement other than a reduction approved by the Board of Directors of the Corporation that similarly applies to all executive officers of the Company, provided that a reduction in Base Salary shall not exceed more than 10% of then Base Salary;
(c) A relocation of the offices of Executive to a place greater than thirty-five (35) miles in distance from the executive offices of the Corporation in Oxford, MA; or
(d) The failure of Executive to be the chief legal officer of
(i) a company having its securities registered under the
Securities Exchange Act of 1934 following the effectiveness
of the Corporation's initial public offering, or (ii) the
Corporation following a "Change of Control" of the
Corporation (as such term is defined in the Corporation's
2006 Incentive Stock Plan in effect on the date of this
Agreement).
The Corporation shall have no obligations to Executive after Executive's last day of employment following termination of employment under this Section, except as specifically set forth in this Agreement or under the option agreement.
9. Automatic Termination. Notwithstanding the provisions of Section 2, Executive's employment shall automatically terminate upon Executive's death or Disability (as defined below). Executive shall be deemed to have a "Disability" for purposes of this Agreement if Executive is unable to substantially perform, by reason of physical or mental incapacity, Executive's duties or obligations under this Agreement, with or without reasonable accommodation as defined in the Americans with Disabilities Act and implementing regulations, for a period of one hundred and eighty (180) consecutive days in any 360-day period. The Board of Directors shall determine, according to the facts then available, whether and when the disability of Executive has occurred and shall state that date of termination in the Notice of Termination. Such determination shall be made by the Board of Directors in the exercise of reasonable discretion.
10. Certain Obligations of the Corporation Following Termination of the Employment Period. Following termination of the Employment Period under the circumstances described below, the Corporation will pay to Executive the following compensation and provide the following benefits in addition to any benefits to which Executive may be entitled by law in full satisfaction and final settlement of any and all claims and demands that Executive or the Corporation may have against the other under this Agreement:
(i) Without Cause by the Corporation or Good Reason by Executive. In the event that the Employment Period is terminated by the Corporation without Cause pursuant to Section 7(i) hereof or by Executive for Good Reason pursuant to Section 8 hereof, Executive shall be entitled to the following payments:
(a) Base Salary through the termination date and any bonus that has been actually earned as of or prior to the termination date, but has not been paid; and
(b) Continuing payments of Base Salary, payable in accordance with regular payroll practices of the Corporation, for twelve months following the date of termination.
(ii) Termination by Executive Without Good Reason or by the Corporation for Cause. In the event the Employment Period as terminated by Executive pursuant to 8(i) hereof without Good Reason or by the Corporation pursuant to Section 7(ii) hereof for Cause, Executive shall be entitled to no further compensation or other benefits under this Agreement except as to that portion of any unpaid Base Salary and other benefits accrued, earned or vested up to and including the effective date of such termination.
(iii) Death; Disability. In the event that the Employment Period is terminated by reason of Executive's death or for Disability, Executive or Executive's estate, as the case may be, shall be entitled to the payments Base Salary through the date of death or the date of termination as specified in the Notice of Termination in the event of Disability, plus any unpaid bonus previously awarded to Executive.
11. Nature of Payments. Upon termination of employment pursuant to Sections 7, 8 or 9, Executive will be released from any duties and obligations to the Corporation set forth in this Agreement (except the duties and obligations under the Restrictive Covenants and as set forth in Section 12 hereof) and the obligations of the Corporation to Executive will be as set forth in Section 10.
12. Restrictive Covenants. Executive has executed and delivered an Employee Non-Disclosure Agreement, dated the date hereof (the "Restrictive Covenants") and Executive agrees that, as part of this Agreement, Executive shall comply with the terms of the Restrictive Covenants.
13. Indemnification.
(i) Indemnification Terms. The Corporation agrees that if Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is Executive's alleged action in an official capacity while serving as a director, officer, member, employee or agent, Executive shall be indemnified and held harmless by the Corporation to the fullest extent permitted or authorized by the Corporation's certificate of incorporation or bylaws or, if greater, by the laws of the State of Massachusetts, against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by Executive in connection therewith, and such indemnification shall continue as to Executive even if he has ceased to be a director, member, employee or agent of the Corporation or other entity and shall inure to the benefit of Executive's heirs, executors and administrators. The Corporation shall advance to Executive all reasonable costs and expenses incurred by him in connection with a Proceeding within 20 days after receipt by the Corporation of a written request for such advance. Such request shall include an undertaking by Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses.
(ii) No Presumptions. Neither the failure of the Corporation (including its Board, independent legal counsel or stockholders) to have made a determination prior to the commencement of any proceeding concerning payment of amounts claimed by Executive under Section 15(a) above that indemnification of Executive is proper because he has met the applicable standard of conduct, nor a determination by the Corporation (including its Board, independent legal counsel or stockholders) that Executive has not met such applicable standard of conduct, shall create a presumption that Executive has not met the applicable standard of conduct.
(iii) Liability Insurance. The Corporation agrees to continue and maintain a directors' and officers' liability insurance policy covering Executive to the extent the Corporation provides such coverage for its other executive officers, and which would provide coverage for Executive after the Term of Employment for actions taken during the Term of Employment.
14. Notices. Any and all notices provided for herein shall be in writing and shall be delivered by certified mail, return receipt requested or in person. Notice shall be deemed to have been given when notice is received by the party on whom the notice was served. Notice to the Corporation shall be addressed to the Corporation at its principal office, and notice to Executive at Executive's last address as shown on the records of the Corporation.
15. Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the substantive laws of the Commonwealth of Massachusetts, without regard to its internal conflicts of law provisions.
16. Severability. In the event that any provision of this Agreement shall be determined to be invalid, illegal or otherwise unenforceable or contrary to law or public policy, the enforceability of the other provisions in this Agreement shall not affected thereby.
17. Assignment. Executive recognizes that this is an agreement for personal services and that Executive may not assign this Agreement. The Agreement shall inure to the benefit of and binding upon the Corporation's successors and assigns.
18. Entire Agreement/Amendment. This Agreement and the restrictive agreement referred to in Section 12 constitute the entire agreement between the Parties with respect to the subject matter hereof and supersedes any and all other agreements, either oral or in writing, among the Parties hereto with respect to the subject matter hereof. This Agreement may not be amended except by written agreement signed by both Parties.
19. Execution in Counterparts. This Agreement may be executed in one or more counterparts, and by the different Parties in separate counterparts, each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement (and all signatures need not appear on any one counterpart), and this Agreement shall become effective when one or more counterparts has been signed by each of the Parties hereto and delivered to each of the other Parties hereto.
20. Waiver. The failure of either of the Parties to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Agreement or any provision hereof or the right of either of the Parties to enforce each and every provision of this Agreement. No waiver of any breach of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party against whom or which enforcement of such waiver is sought, and no waiver of any such breach shall be construed or deemed to be a waiver of any other or subsequent breach.
21. Capacity. Executive and the Corporation hereby represent and warrant to the other that: (i) Executive or the Corporation has full power, authority and capacity to execute and deliver this Agreement, and to perform Executive's or the Corporation's obligations hereunder; (ii) such execution, delivery and performance will not (and with the giving of notice or lapse of time or both would not) result in the breach of any agreements or other obligations to which Executive or the Corporation is a party or Executive or the Corporation is otherwise bound; and (iii) this Agreement is Executive's or the Corporation's valid and binding obligation in accordance with its terms.
22. Arbitration. Any controversy or claim arising out of or relating to this Agreement or the breach thereof or otherwise arising out of Executive's employment or the termination of that employment (including, without limitation, any claims of unlawful employment discrimination whether based on age or otherwise) shall, to the fullest extent permitted by law, be settled by arbitration in any forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of the American Arbitration Association ("AAA") in Worcester, Massachusetts in accordance with the Employment Dispute Resolution Rules of the AAA, including, but not limited to, the rules and procedures applicable to the selection of arbitrators. In the event that any person or entity other than Executive or the Employer may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted to arbitration subject to such other person or entity's agreement. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. This Section 23 shall be specifically enforceable. Notwithstanding the foregoing, this Section 23 shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or a preliminary injunction in circumstances in which such relief is appropriate; provided that any other relief shall be pursued through an arbitration proceeding pursuant to this Section 23. Punitive and consequential damages shall not be permitted as an award and each party shall bear the fees and expenses of its own counsel and expert witnesses.
23. Consent to Jurisdiction. To the extent that any court action is permitted consistent with or to enforce Section 23 of this Agreement, the parties hereby consent to the jurisdiction of the Superior Court of the Commonwealth of Massachusetts and the United States District Court for the District of Massachusetts. Accordingly, with respect to any such court action, Executive (a) submits to the personal jurisdiction of such courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process.
IN WITNESS WHEREOF, this Employment Agreement has been duly executed:
/s/ Valentin P. Gapontsev /s/ Angelo Lopresti ------------------------------------- ---------------------------------------- Chief Executive Officer, by and for Angelo Lopresti IPG PHOTONICS CORPORATION Executive |
Exhibit 10.12
Employment Agreement
This Employment Agreement ("Agreement"), dated as of March 1, 2006, is made by and between IPG Photonics Corporation, a Delaware corporation having an office at 50 Old Webster Road, Oxford, MA, 01540 (the "Corporation"), and Denis Gapontsev ("Executive"). The Corporation and Executive are referred to jointly below as the "Parties."
WHEREAS, the Corporation desires to employ Executive on the terms and conditions set forth in this Agreement; and
WHEREAS, Executive desires to accept employment by the Corporation on such terms and conditions.
NOW, THEREFORE, in consideration of the employment of Executive, the mutual terms and conditions set forth below, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. Employment. Executive will be employed by the Corporation in the position of Vice President - Research and Development. Executive will report to the Corporation's Chief Executive Officer. Executive's primary responsibility will be managing the laser and amplifier research staff at the Corporation's US operation, sales and marketing of the Corporation's products (other than telecom products) research and development. Executive will carry out such duties as shall be assigned from time to time by the Corporation's Chief Executive Officer, subject to applicable laws, and ethical duties. During the Employment Term (as defined below), Executive shall devote Executive's reasonable best efforts, energies and abilities and Executive's full business time, skill and attention to the business and affairs of the Corporation, and shall act at all times according to the highest professional standards, for the purpose of advancing the business of the Corporation.
2. Term. Subject to the Termination provisions below, Executive's employment by the Corporation is for a term of two (2) years commencing on the date of this Agreement (the "Initial Employment Period"). Executive's employment by the Corporation will continue for successive one year terms following expiration of the Initial Employment Period (the Initial Employment Period together with any subsequent employment period shall be referred to as the "Employment Term"), unless either party provides notice of intent not to renew not less than (a) one hundred eighty (180) days prior to expiration of the then current term or (b) 364 days prior to the end of the then current term following a "Change of Control" of the Corporation (as such term is defined in the Corporation's 2006 Incentive Stock Plan in effect on the date of this Agreement), or unless in either case employment is terminated under the termination provisions below.
3. Compensation. The Corporation shall pay Executive on a salary basis at an annual rate of $240,000 (the "Base Salary"). The Base Salary will be paid in equal installments in accordance with the Corporation's standard payroll policies and schedule and is subject to tax and elective withholding and deductions. The Corporation may, in its sole discretion, increase the Base Salary on an annual or other basis. The amount of any bonus compensation to Executive under any such program will be determined by the Board of Directors in its sole discretion.
4. Benefits.
(i) Executive shall be entitled to the extent eligible to participate in any benefit plans as may be adopted and modified by the Corporation from time to time, including without limitation health, dental and medical plans, life and disability insurance, paid time off, holiday, and retirement plans. The benefits available to Executive shall be no less favorable than those available to other executives at similar levels within the organization or to the employees of the Company at the location where Executive works. Benefits provided under this Agreement shall be subject to the terms and conditions of any applicable benefit plan, including any eligibility and vesting requirements, as such plans may be in effect from time to time.
(ii) Executive shall be entitled to four weeks vacation each year. The maximum number of accrued vacation hours that Executive can have at any point in time is equal to the total vacation hours earned in the last twelve months, plus one week of vacation carried over from the prior twelve months of service.
5. Intentionally Omitted.
6. Other Activities. The employment of Executive shall be on a full-time basis, but Executive may be an investor or otherwise have an interest in or serve on the board of directors or advisory board to other businesses, partnerships and entities so long as the other activities of Executive do not materially interfere with the performance of Executive's duties to the Corporation, and so long as such other activities do not cause Executive to violate the Restrictive Covenants incorporated herein in Section 12 of this Agreement, and so long as Executive discloses all such activities to the Chief Executive Officer and the Board of Directors of the Corporation. Nothing in this provision or this Agreement limits or restricts Executive's duties and obligations, including the duty of loyalty, that arise under the law.
7. Termination by the Corporation. The Corporation may terminate the Employment Term:
(i) by giving Executive ninety (90) days' prior written notice without Cause (as defined below), or
(ii) for Cause (as defined below).
"Cause" shall mean: (A) an act of fraud, embezzlement or theft by Executive in connection with Executive's duties or in the course of Executive's employment with the Corporation; (B) Executive's intentional wrongful damage to the property of the Corporation; (C) Executive's intentional breach of Section 12 hereof while Executive remains in the employ of the Corporation; (D) an act of Gross Misconduct (as defined below); or (E) a felony conviction or a conviction for a misdemeanor involving moral turpitude; and, in each case, the determination by the Directors of the Corporation as hereafter provided that any such act shall have been materially harmful to the Corporation. For purposes of this Agreement, "Gross Misconduct" shall mean a willful or grossly negligent act or omission which has or will have a material and adverse impact on the business or reputation of the Corporation, or on the business of the Corporation's customers or suppliers as such relate to the Corporation. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for "Cause" hereunder unless and until there
shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of a majority of the independent Directors then in office at a meeting of the Directors called and held for such purpose, finding that, Executive has committed an act set forth above in this Section 7. Nothing herein shall limit Executive's right or Executive's beneficiaries' right to contest the validity or propriety of any such determination.
8. Termination by Executive. Executive may terminate the Employment Term
(i) by giving the Corporation sixty (60) days' prior written notice, or (ii) for
Good Reason (as defined below), subject to the Corporation's right to cure the
breach for a period of thirty (30) days after notice from Executive of his
intention to terminate for Good Reason. In the event of termination by notice
under the preceding subsection (i), the Corporation in its discretion may elect
a termination date that is earlier than the conclusion of the sixty (60) day
notice period, but in the event of such election the termination shall still be
deemed a voluntary termination by Executive under this Section. "Good Reason"
means the occurrence of any of the following events without Executive's express
written consent:
(a) The assignment to Executive of any duties materially inconsistent (except in the nature of a promotion) with Executive's position in the Corporation and the responsibilities specified in this Agreement or a substantial adverse alteration in the nature of Executive's position or responsibilities or in the conditions of employment;
(b) A reduction by the Corporation of or a failure to pay Executive's Base Salary, or a material reduction in benefits Executive is entitled to under this Agreement other than a reduction approved by the Board of Directors of the Corporation that similarly applies to all executive officers of the Company, provided that a reduction in Base Salary shall not exceed more than 10% of then Base Salary;
(c) A relocation of the offices of Executive to a place greater than thirty-five (35) miles in distance from Executive offices of the Corporation in Oxford, MA; or
(d) The failure of Executive to be the Vice President - Research and Development of (i) a company having its securities registered under the Securities Exchange Act of 1934 following the effectiveness of the Corporation's initial public offering, or (ii) the Corporation following a "Change of Control" of the Corporation (as such term is defined in the Corporation's 2006 Incentive Stock Plan in effect on the date of this Agreement).
The Corporation shall have no obligations to Executive after Executive's last day of employment following termination of employment under this Section, except as specifically set forth in this Agreement or under the option agreement.
9. Automatic Termination. Notwithstanding the provisions of Section 2, Executive's employment shall automatically terminate upon Executive's death or Disability (as defined below). Executive shall be deemed to have a "Disability" for purposes of this Agreement if Executive is unable to substantially perform, by reason of physical or mental incapacity, Executive's duties or obligations under this Agreement, with or without reasonable accommodation as defined in the Americans with Disabilities Act and implementing regulations, for a period of one hundred and eighty (180) consecutive days in any 360-day period. The Board of Directors shall determine, according to the facts then available, whether and when the disability of Executive has occurred and shall state that date of termination in the Notice of Termination. Such determination shall be made by the Board of Directors in the exercise of reasonable discretion.
10. Certain Obligations of the Corporation Following Termination of the Employment Period. Following termination of the Employment Period under the circumstances described below, the Corporation will pay to Executive the following compensation and provide the following benefits in addition to any benefits to which Executive may be entitled by law in full satisfaction and final settlement of any and all claims and demands that Executive or the Corporation may have against the other under this Agreement:
(i) Without Cause by the Corporation or Good Reason by Executive. In the event that the Employment Period is terminated by the Corporation without Cause pursuant to Section 7(i) hereof or by Executive for Good Reason pursuant to Section 8 hereof, Executive shall be entitled to the following payments:
(a) Base Salary through the termination date and any bonus that has been actually earned as of or prior to the termination date, but has not been paid; and
(b) Continuing payments of Base Salary, payable in accordance with regular payroll practices of the Corporation, for twelve months following the date of termination.
(ii) Termination by Executive Without Good Reason or by the Corporation for Cause. In the event the Employment Period as terminated by Executive pursuant to 8(i) hereof without Good Reason or by the Corporation pursuant to Section 7(ii) hereof for Cause, Executive shall be entitled to no further compensation or other benefits under this Agreement except as to that portion of any unpaid Base Salary and other benefits accrued, earned or vested up to and including the effective date of such termination.
(iii) Death; Disability. In the event that the Employment Period is terminated by reason of Executive's death or for Disability, Executive or Executive's estate, as the case may be, shall be entitled to the payments Base Salary through the date of death or the date of termination as specified in the Notice of Termination in the event of Disability, plus any unpaid bonus previously awarded to Executive.
11. Nature of Payments. Upon termination of employment pursuant to Sections 7, 8 or 9, Executive will be released from any duties and obligations to the Corporation set forth in this Agreement (except the duties and obligations under the Restrictive Covenants and as set forth in Section 12 hereof) and the obligations of the Corporation to Executive will be as set forth in Section 10.
12. Restrictive Covenants. Executive has executed and delivered a Confidentiality, Non-Competition and Confirmatory Assignment Agreement, dated the date hereof (the "Restrictive Covenants") and Executive agrees that, as part of this Agreement, Executive shall comply with the terms of the Restrictive Covenants.
13. Indemnification.
(i) Indemnification Terms. The Corporation agrees that if Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is Executive's alleged action in an official capacity while serving as a director, officer, member, employee or agent, Executive shall be indemnified and held harmless by the Corporation to the fullest extent permitted or authorized by the Corporation's certificate of incorporation or bylaws or, if greater, by the laws of the State of Massachusetts, against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by Executive in connection therewith, and such indemnification shall continue as to Executive even if he has ceased to be a director, member, employee or agent of the Corporation or other entity and shall inure to the benefit of Executive's heirs, executors and administrators. The Corporation shall advance to Executive all reasonable costs and expenses incurred by him in connection with a Proceeding within 20 days after receipt by the Corporation of a written request for such advance. Such request shall include an undertaking by Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses.
(ii) No Presumptions. Neither the failure of the Corporation (including its Board, independent legal counsel or stockholders) to have made a determination prior to the commencement of any proceeding concerning payment of amounts claimed by Executive under Section 15(a) above that indemnification of Executive is proper because he has met the applicable standard of conduct, nor a determination by the Corporation (including its Board, independent legal counsel or stockholders) that Executive has not met such applicable standard of conduct, shall create a presumption that Executive has not met the applicable standard of conduct.
(iii) Liability Insurance. The Corporation agrees to continue and maintain a directors' and officers' liability insurance policy covering Executive to the extent the Corporation provides such coverage for its other executive officers, and which would provide coverage for Executive after the Term of Employment for actions taken during the Term of Employment.
14. Notices. Any and all notices provided for herein shall be in writing and shall be delivered by certified mail, return receipt requested or in person. Notice shall be deemed to have been given when notice is received by the party on whom the notice was served. Notice to the Corporation shall be addressed to the Corporation at its principal office, and notice to
Executive at Executive's last address as shown on the records of the Corporation.
15. Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the substantive laws of the Commonwealth of Massachusetts, without regard to its internal conflicts of law provisions.
16. Severability. In the event that any provision of this Agreement shall be determined to be invalid, illegal or otherwise unenforceable or contrary to law or public policy, the enforceability of the other provisions in this Agreement shall not affected thereby.
17. Assignment. Executive recognizes that this is an agreement for personal services and that Executive may not assign this Agreement. The Agreement shall inure to the benefit of and binding upon the Corporation's successors and assigns.
18. Entire Agreement/Amendment. This Agreement and the restrictive agreement referred to in Section 12 constitute the entire agreement between the Parties with respect to the subject matter hereof and supersedes any and all other agreements, either oral or in writing, among the Parties hereto with respect to the subject matter hereof. This Agreement may not be amended except by written agreement signed by both Parties.
19. Execution in Counterparts. This Agreement may be executed in one or more counterparts, and by the different Parties in separate counterparts, each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement (and all signatures need not appear on any one counterpart), and this Agreement shall become effective when one or more counterparts has been signed by each of the Parties hereto and delivered to each of the other Parties hereto.
20. Waiver. The failure of either of the Parties to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Agreement or any provision hereof or the right of either of the Parties to enforce each and every provision of this Agreement. No waiver of any breach of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party against whom or which enforcement of such waiver is sought, and no waiver of any such breach shall be construed or deemed to be a waiver of any other or subsequent breach.
21. Capacity. Executive and the Corporation hereby represent and warrant to the other that: (i) Executive or the Corporation has full power, authority and capacity to execute and deliver this Agreement, and to perform Executive's or the Corporation's obligations hereunder; (ii) such execution, delivery and performance will not (and with the giving of notice or lapse of time or both would not) result in the breach of any agreements or other obligations to which Executive or the Corporation is a party or Executive or the Corporation is otherwise bound; and (iii) this Agreement is Executive's or the Corporation's valid and binding obligation in accordance with its terms.
22. Arbitration. Any controversy or claim arising out of or relating to this Agreement or the breach thereof or otherwise arising out of Executive's employment or the termination of that employment (including, without limitation, any claims of unlawful employment discrimination whether
based on age or otherwise) shall, to the fullest extent permitted by law, be settled by arbitration in any forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of the American Arbitration Association ("AAA") in Worcester, Massachusetts in accordance with the Employment Dispute Resolution Rules of the AAA, including, but not limited to, the rules and procedures applicable to the selection of arbitrators. In the event that any person or entity other than Executive or the Employer may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted to arbitration subject to such other person or entity's agreement. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. This Section 23 shall be specifically enforceable. Notwithstanding the foregoing, this Section 23 shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or a preliminary injunction in circumstances in which such relief is appropriate; provided that any other relief shall be pursued through an arbitration proceeding pursuant to this Section 23. Punitive and consequential damages shall not be permitted as an award and each party shall bear the fees and expenses of its own counsel and expert witnesses.
23. Consent to Jurisdiction. To the extent that any court action is permitted consistent with or to enforce Section 23 of this Agreement, the parties hereby consent to the jurisdiction of the Superior Court of the Commonwealth of Massachusetts and the United States District Court for the District of Massachusetts. Accordingly, with respect to any such court action, Executive (a) submits to the personal jurisdiction of such courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process.
IN WITNESS WHEREOF, this Employment Agreement has been duly executed:
/s/ Valentin P. Gapontsev /s/ Denis Gapontsev ------------------------------------- ---------------------------------------- Chief Executive Officer, by and for Denis Gapontsev IPG PHOTONICS CORPORATION Executive |
Exhibit 10.13
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this "Agreement") is made this __ day of _______, 2006, between IPG Photonics Corporation, a Delaware corporation (the "Company"), and _______________________ ("Indemnitee").
WHEREAS, it is essential to the Company that it be able to retain and attract as directors and officers the most capable persons available;
WHEREAS, increased corporate litigation has subjected directors and officers to litigation risks and expenses, and the limitations on the availability of directors and officers liability insurance have made it increasingly difficult for the Company to attract and retain such persons;
WHEREAS, the Amended and Restated By-laws of the Company (the "By-laws") provide for the indemnification of its directors and officers and permit it to make other indemnification arrangements and agreements;
WHEREAS, the Company desires to provide Indemnitee with specific contractual assurance of Indemnitee's rights to full indemnification against litigation risks and expenses (regardless, among other things, of any change in the ownership of the Company or the composition of its board of directors);
WHEREAS, this Agreement is a supplement to and in furtherance of the Amended and Restated Certificate of Incorporation of the Company (the "Certificate") and the By-laws and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder;
WHEREAS, Indemnitee does not regard the protection available under the Company's By-laws and insurance as adequate in the present circumstances, and may not be willing to serve as director or officer without adequate protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified; and
WHEREAS, Indemnitee is relying upon the rights afforded to the Indemnitee under this Agreement in [accepting] [continuing in] Indemnitee's position as a director or an officer of the Company.
NOW, THEREFORE, the Company and Indemnitee agree as follows.
1. Definitions.
(a) "Corporate Status" describes the status of a person who is serving
or has served (i) as a director and/or officer of the Company, (ii) in any
capacity with respect to any employee benefit plan of the Company or (iii) as a
director, partner, trustee, officer, employee or agent of any other Entity at
the request of the Company. For purposes of subsection (iii) of this Section
1(a), a director of the Company who is serving or has served as a director,
partner, trustee, officer, employee or agent of a Subsidiary
shall be deemed to be serving in each such capacity at the request of the Company.
(b) "Change in Control" shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:
(i) Acquisition of Stock by Third Party. Any Person (as defined below), other than Persons who are beneficial Owners of the Company's securities on the date of this Agreement, is or becomes the Beneficial Owner (as defined below), directly or indirectly, of securities of the Company representing fifteen percent (15%) or more of the combined voting power of the Company's then outstanding securities;
(ii) Change in Board of Directors. 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, 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(b)(i), 1(b)(iii) or 1(b)(iv)) whose election by the board of directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds 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 at least a majority of the members of the board of directors;
(iii) Corporate Transactions. The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 51% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such surviving entity;
(iv) Liquidation. The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; and
(v) Other Events. There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act (as defined below), whether or not the Company is then subject to such reporting requirement.
For purposes of this Section 1(b), the following terms shall have the following meanings:
(A) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
(B) "Person" shall have the meaning as set forth in Sections
13(d) and 14(d) of the Exchange Act; provided, however, that Person
shall exclude (i) the Company, (ii) any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, and
(iii) any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company.
(C) "Beneficial Owner" shall have the meaning given to such term in Rule 13d-3 under the Exchange Act; provided, however, that Beneficial Owner shall exclude any Person otherwise becoming a Beneficial Owner by reason of the stockholders of the Company approving a merger of the Company with another entity.
(c) "Disinterested Director" means a director of the Company who is not and was not a party to the Proceeding (as defined below) in respect of which indemnification is sought by Indemnitee.
(d) "Entity" means any corporation, partnership, limited liability company, joint venture, trust, foundation, association, organization or other entity.
(e) "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, employee, agent or fiduciary.
(f) "Expenses" means all reasonable fees, costs and expenses incurred in connection with any Proceeding (as defined below), including, without limitation, reasonable attorneys' fees, disbursements and retainers, fines, excise taxes assessed with respect to any employee benefit plan, fees and disbursements of expert witnesses, private investigators and professional advisors (including, without limitation, accountants and investment bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission charges, postage, delivery services, secretarial services and other disbursements and expenses.
(g) "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding (as defined below) giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent 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 Indemnitee's rights under this Agreement. The Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses,
claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.
(h) "Liabilities" means judgments, damages, liabilities, obligations, losses, penalties, excise taxes, fines and amounts paid in settlement.
(i) "Proceeding" means any threatened, pending or completed claim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal or any other proceeding, whether civil, criminal, administrative, arbitrative or investigative, whether formal or informal, including a proceeding initiated by Indemnitee pursuant to Section 12 of this Agreement to enforce Indemnitee's rights hereunder.
(j) "Subsidiary" means any Entity of which the Company owns (either
directly or through or together with another Subsidiary of the Company) either
(i) a general partner, managing member or other similar interest or (ii) 50% or
more of the outstanding voting capital stock or other voting equity interests of
such Entity.
2. Services of Indemnitee. In consideration of the Company's undertakings in this Agreement, Indemnitee agrees to serve or continue to serve as a director and/or officer of the Company. However, this Agreement does not impose any obligation on Indemnitee or the Company to continue Indemnitee's service to the Company beyond any period otherwise required by law or by other agreements between the Company and Indemnitee, if any.
3. Agreement to Indemnify. The Company shall indemnify Indemnitee as follows:
(a) Subject to the exceptions contained in Section 4(a) below, if Indemnitee was or is a party, or is threatened to be made a party, to any Proceeding (other than an action by or in the right of the Company) by reason of Indemnitee's Corporate Status, the Company shall, to the extent permitted by applicable law, indemnify Indemnitee against all Expenses and Liabilities incurred or paid by Indemnitee in connection with such Proceeding (referred to herein as "Indemnifiable Expenses" and "Indemnifiable Liabilities," respectively, and collectively as "Indemnifiable Amounts").
(b) To the extent permitted by applicable law and subject to the exceptions contained in Section 4(b) below, if Indemnitee was or is a party, or is threatened to be made a party, to any Proceeding by or in the right of the Company to procure a judgment in its favor by reason of Indemnitee's Corporate Status, the Company shall indemnify Indemnitee against all Indemnifiable Expenses.
4. Exceptions to Indemnification. The Company shall indemnify Indemnitee under Sections 3(a) and 3(b) above in all circumstances other than the following:
(a) If indemnification is requested under Section 3(a) and it has been finally adjudicated by a court of competent jurisdiction (or arbitrator in an arbitration proceeding commenced by Indemnitee in accordance with Section 12 hereof) that, (i) in connection with the subject of the
Proceeding out of which the claim for indemnification has arisen, Indemnitee failed to act in good faith and in a manner Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company, or (ii) with respect to any criminal action or proceeding, Indemnitee had reasonable cause to believe that Indemnitee's conduct was unlawful, then any such case, Indemnitee will not be entitled to payment of Indemnifiable Amounts hereunder.
(b) If indemnification is requested under Section 3(b) and:
(i) it has been finally adjudicated by a court of competent jurisdiction (or arbitrator in an arbitration proceeding commenced by Indemnitee in accordance with Section 12 hereof) that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, Indemnitee failed to act in good faith and in a manner Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company, then Indemnitee will not be entitled to payment of Indemnifiable Expenses hereunder; or
(ii) it has been finally adjudicated by a court of competent jurisdiction (or arbitrator in an arbitration proceeding commenced by Indemnitee in accordance with Section 12 hereof) that Indemnitee is liable to the Company with respect to any claim, issue or matter involved in the Proceeding out of which the claim for indemnification has arisen, including, without limitation, a claim that Indemnitee received an improper personal benefit, then no Indemnifiable Expenses will be paid with respect to such claim, issue or matter unless the court in which such Proceeding was brought determines upon application that, despite the adjudication of liability, in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to such Indemnifiable Expenses as such court deems proper.
(c) Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:
(i) for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision; or
(ii) for (i) an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law, or (ii) any reimbursement of the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act; or
(iii) except as provided in Sections 12(d) and 22 of this Agreement, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the
board of directors of the Company authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.
5. Procedure for Payment of Indemnifiable Amounts. Indemnitee shall submit to the Company a written request specifying the Indemnifiable Amounts for which Indemnitee seeks payment under Section 3 of this Agreement and the basis for the request. The Company shall pay such Indemnifiable Amounts to Indemnitee within fifteen (15) days of receipt of the request. At the request of the Company, Indemnitee shall furnish such documentation and information as is reasonably available to Indemnitee and necessary to establish that Indemnitee is entitled to indemnification hereunder.
6. Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, if Indemnitee is, by reason of Indemnitee's Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in connection therewith.
7. Indemnification for Expenses When Indemnitee is Partly Successful. Notwithstanding any provision to the contrary contained herein, if, in any Proceeding, Indemnitee is successful, on the merits or otherwise, as to one or more but fewer than all claims, counts, issues or matters in such Proceeding, the Company shall indemnify Indemnitee in accordance with Section 3 of this Agreement in connection with each such successful claim, count, issue or matter. For purposes of this Agreement, and, without limiting the generality of the foregoing, the termination of any claim, count, issue or matter in such a Proceeding by dismissal, with or without prejudice, is to be construed as a successful result as to such claim, count, issue or matter from the perspective of the Person requesting such dismissal.
8. Effect of Certain Resolutions. Neither the settlement or termination of any Proceeding nor the failure of the Company to award indemnification or to determine that indemnification is payable creates an adverse presumption that Indemnitee is not entitled to indemnification hereunder. In addition, the termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent does not create a presumption that Indemnitee did not act in good faith and in a manner that Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company or, with respect to any criminal action or proceeding, had reasonable cause to believe that Indemnitee's action was unlawful.
9. Agreement to Advance Expenses; Conditions. The Company shall, to the extent not prohibited by law, pay to Indemnitee all Expenses incurred by Indemnitee in connection with a Proceeding, including those incurred by Indemnitee in connection with any Proceeding by or in the right of the Company, in advance of the final disposition of the Proceeding to which the Indemnifiable Expenses relate, if Indemnitee furnishes the Company with a written undertaking to repay the amount of such Expenses advanced to Indemnitee if it is finally determined by a court of competent jurisdiction that Indemnitee is not entitled under this Agreement to indemnification. This undertaking is an unlimited general obligation of Indemnitee, which the
Company shall accept without regard to the financial ability of Indemnitee to make repayment, and in no event is be required to be secured.
10. Procedure for Advance Payment of Expenses. Indemnitee shall submit to the Company a written request specifying the Expenses for which Indemnitee seeks an advancement under Section 9 of this Agreement, together with documentation evidencing that Indemnitee has incurred such Expenses. The Company shall pay Expenses under Section 9 no later than fifteen (15) days after the Company's receipt of such request.
11. Procedure Upon Request for Payment of Indemnifiable Amounts and Expenses.
(a) Upon written request by Indemnitee for payment pursuant to Sections 5 and 10 of this Agreement, a determination, if required by applicable law, with respect to Indemnitee's entitlement thereto shall be made in the specific case: (i) if a Change in Control shall have occurred, by Independent Counsel in a written opinion to the board of directors, a copy of which shall be delivered to Indemnitee; or (ii) if a Change in Control shall not have occurred, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the board of directors, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the board of directors, (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the board of directors, a copy of which shall be delivered to Indemnitee or (D) if so directed by the board of directors, by the stockholders of the Company; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or Indemnifiable Expenses (including attorneys' fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee's entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(b) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 11(a) hereof, the Independent Counsel shall be selected as provided in this Section 11(b). If a Change in Control shall not have occurred, the Independent Counsel shall be selected by the board of directors, and the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected. If a Change in Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the board of directors, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within ten (10) days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as
the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Section 1 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within twenty (20) days after the later of submission by Indemnitee of a written request for payment pursuant to Sections 5 and 10 hereof and the final disposition of the Proceeding, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other's selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 11(a) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 12(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).
12. Remedies of Indemnitee.
(a) Right to Petition. If Indemnitee makes a request for payment of Indemnifiable Amounts under Section 5 above or a request for an advancement of Expenses under Section 10 above and the Company fails to make such payment or advancement in a timely manner pursuant to the terms of this Agreement, Indemnitee may petition the Chancery Court of the State of Delaware (the "Delaware Court") in accordance with Section 20 hereof to enforce the Company's obligations under this Agreement. Alternatively, Indemnitee, at his 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 ninety (90) days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a). The Company shall not oppose Indemnitee's right to seek any such adjudication or award in arbitration.
(b) Burden of Proof. In any action brought under Section 12(a) above, the Company has the burden of proving by a preponderance of the evidence that Indemnitee is not entitled to payment of Indemnifiable Amounts hereunder; provided, however, that if prior to the commencement of such action, this form of agreement has been approved by the holders of a majority of the voting power of the capital stock of the Company, the Company has the burden of proving by clear and convincing evidence that Indemnitee is not entitled to such indemnification.
(c) Reliance as Safe Harbor. For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee's action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties,
or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with the reasonable care by the Enterprise. The provisions of this Section 12(c) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.
(d) Expenses. The Company shall reimburse Indemnitee in full for any Indemnifiable Expenses incurred by Indemnitee in connection with investigating, preparing for, litigating, defending or settling any action brought by Indemnitee under Section 12(a) above, except where such action is resolved wholly in favor of the Company.
(e) Validity of Agreement. The Company is precluded from asserting in any Proceeding, including, without limitation, an action under Section 12(a) above, that the provisions of this Agreement are not valid, binding and enforceable or that there is insufficient consideration for this Agreement and shall stipulate that the Company is bound by all the provisions of this Agreement.
(f) Failure to Act Not a Defense. The failure of the Company (including its board of directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Expenses under this Agreement is not a defense in any action brought under Section 12(a) above, and does not create a presumption that such payment or advancement is not permissible.
(g) Indemnitee's Right to Counsel. If the Company fails to comply with any of its obligations under this Agreement or if the Company or any other Person takes any action to declare this Agreement void or unenforceable, or institutes any action, suit or proceeding to deny or to recover from Indemnitee the benefits provided to Indemnitee hereunder, Indemnitee may retain counsel of Indemnitee's choice, at the expense of the Company, to represent Indemnitee in connection with any such matter.
13. Notice by Indemnitee. Indemnitee shall notify the Company promptly upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding that may result in the payment of Indemnifiable Amounts or the advancement of Expenses hereunder; provided, however, that the failure to give any such notice does not disqualify Indemnitee from the right, or otherwise affect in any manner any right of Indemnitee, to receive payments of Indemnifiable Amounts or advancements of Expenses except to the extent the Company's ability to defend in such Proceeding is prejudiced thereby.
14. Representations and Warranties of the Company. The Company represents and warrants to Indemnitee as follows:
(a) Authority. The Company has all necessary power and authority to enter into and be bound by the terms of this Agreement, and the execution, delivery and performance of this Agreement and the obligations of the Company contemplated hereby have been duly authorized by the Company.
(b) Enforceability. This Agreement is valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.
15. Expenses. During Indemnitee's service as a director and/or officer, the Company shall promptly reimburse Indemnitee for all reasonable out-of-pocket expenses incurred by Indemnitee in connection with Indemnitee's service as a director and or officer or member of any board committee.
16. Contract Rights Not Exclusive. The rights to payment of Indemnifiable Amounts and advancement of Expenses in this Agreement are in addition to any other rights that Indemnitee has under applicable law, the Company's By-laws or its Certificate, as each may be amended, modified or supplemented from time to time (collectively, the "Organization Documents"), or any other agreement, vote of stockholders or directors (or a committee of directors), or otherwise, both as to action in Indemnitee's official capacity and as to action in any other capacity as a result of Indemnitee's serving as a director and/or officer of the Company.
17. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Indemnifiable Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).
18. Successors. This Agreement is to (a) be binding upon all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law), and (b) be binding on and inure to the benefit of the heirs, personal representatives, executors and administrators of Indemnitee. This Agreement will continue to benefit Indemnitee and such heirs, personal representatives, executors and administrators after Indemnitee has ceased to have Corporate Status.
19. Subrogation. If any payment of Indemnifiable Amounts is made under this Agreement, the Company is to be subrogated to the extent of such payment to all of the rights of contribution or recovery of Indemnitee against other Persons, and Indemnitee shall take, at the request of the Company, all reasonable action necessary to secure such rights, including the execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
20. Governing Law; Change in Law; Consent to Jurisdiction. This Agreement is to be governed by and construed and enforced under the laws of the State of Delaware, without giving effect to the provisions thereof relating to conflicts of law (the "Governing Law"). If a change in the Governing Law (whether by statute or judicial decision) permits broader
indemnification or advancement of Expenses than is provided under the terms of the Organization Documents or this Agreement, Indemnitee will be entitled to such broader indemnification and advancements, and this Agreement will be deemed to be amended to such extent. The Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought (except for an arbitration proceeding commenced by Indemnitee in accordance with Section 12 hereof) only in the Delaware Court, and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, irrevocably RL&F Service Corp., One Rodney Square, 10th Floor, 10th and King Streets, Wilmington, Delaware 19801 as its agent in the State of Delaware as such party's agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.
21. Severability. Whenever possible, each provision of this Agreement is to be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, is determined by a court of competent jurisdiction (or arbitrator in an arbitration proceeding commenced by Indemnitee in accordance with Section 12 hereof) to be illegal, invalid or unenforceable, in whole or in part, such provision or clause will be limited or deemed to be modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement will remain fully enforceable and binding on the parties.
22. Indemnitee as Plaintiff. Except as provided in Section 12 of this Agreement, Indemnitee is not entitled to payment of Indemnifiable Amounts or advancement of Expenses with respect to any Proceeding brought by Indemnitee against the Company, any Entity that it controls, or any director or officer thereof or any third party, unless the Company consents to the initiation of such Proceeding; provided, however, that this Section 22 does not apply to affirmative defenses asserted by Indemnitee or any counterclaims by Indemnitee that are resolved successfully (from Indemnitee's perspective) in an action brought against Indemnitee.
23. Modifications and Waiver. Except as provided in Section 20 above with respect to changes in the Governing Law that broaden the right of Indemnitee to be indemnified by the Company, no supplement, modification or amendment of this Agreement will be effective unless executed in writing by each of the parties hereto. No waiver of any of the provisions of this Agreement constitutes a waiver of any other provisions of this Agreement, nor does such waiver constitute a continuing waiver of the provisions subject to such waiver.
24. General Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and
receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed to such address as may have been furnished by any party to the others.
25. Enforcement.
(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director or officer of the Company.
(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the Company and Indemnitee with respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Certificate, the By-laws, applicable insurance and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.
26. Duration of Agreement. This Agreement shall continue until and
terminate upon the later of: (a) ten (10) years after the date that Indemnitee
shall have ceased to serve as a director or officer of the Company or (b) one
(1) year after the final termination of any Proceeding then pending in respect
of which Indemnitee is granted rights of indemnification or advancement of
Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to
this Agreement relating thereto. This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of
Indemnitee and his heirs, executors and administrators.
[Signature page follows]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
IPG PHOTONICS CORPORATION
EXHIBIT 10.14
OPTION AGREEMENT
OPTIONEE: _______________ GRANT DATE: ___________________________
SHARES GRANTED: _______________________
PRICE PER SHARE: ______________________
OPTION TYPE: NON-QUALIFIED STOCK OPTION
OPTION PLAN: PLAN 1
OPTION ID: PLAN 1-_____________________
IPG Photonics Corporation is pleased to report that the IPG Board of Directors has granted to you (the "Optionee") a stock option (the "Option") to purchase shares of IPG Common Stock, $0.0001 par value, according to the terms in this Option Agreement:
Shares will vest in accordance with the following schedule:
By signing this Option Agreement, you agree that (1) this Option is granted
under the IPG Photonics 2000 Incentive Compensation Plan (the "Plan"), as
amended, and (2) you will be bound by the terms of the Plan (attached as Exhibit
A) and the 2006 Option Plan Terms & Conditions (attached as Exhibit B), the
terms of which are incorporated by reference in their entirety into this Option
Agreement. You acknowledge that you have received a copy of the Plan and the
Option Terms & Conditions.
Nothing in this Option Agreement, the Plan, or Option Terms and Conditions shall confer on the Optionee any right to continue any employment or other service provider relationship for any period of specific duration. This Option Agreement shall be governed by the substantive laws of Delaware, and this Option Agreement shall not be modified except in writing signed by Optionee and IPG.
------------------------------------- ---------------------------------------- IPG Photonics Corporation Date ------------------------------------- ---------------------------------------- Date |
NON-QUALIFIED STOCK
OPTION AGREEMENT TERMS AND CONDITIONS UNDER
IPG PHOTONICS CORPORATION 2000 INCENTIVE COMPENSATION PLAN
1. Definitions; Section References. All terms used in this Agreement that are
not otherwise defined shall have the meanings ascribed to them in the IPG
Photonics Corporation 2000 Incentive Compensation Plan, as amended from time to
time (the "Plan") or the Option Agreement ("Option Agreement") executed by the
Optionee and IPG Photonics Corporation, a Delaware corporation (the "Company").
Unless otherwise indicated, all section references are to sections of this
Agreement. If the Notice states that the Option is an Incentive Stock Option,
then the Option is intended to be incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended, and subject to the
limitations and treatment thereof.
2. Term and Exercise of Option Shares. The term and exercise of the Option shall be as follows:
(a) The term of the Option granted shall commence as of Grant Date and shall end on the Expiration Date, unless earlier terminated in accordance with Section 5. No option may be exercised after the Expiration Date.
(b) The Option shall only be exercised to the extent the Option has Vested and has not been previously exercised. The Option granted shall be exercised by the Optionee by delivering the following to the Secretary of the Company or to any other person as may be designated by the Company from time to time, on any business day prior to or on the Expiration Date:
(i) A signed Notice of Exercise of Stock Option in the form prescribed by the Company from time to time specifying the number of Shares the Optionee desires to purchase;
(ii) A signed Stock Option Purchase Agreement in the form prescribed by the Company from time to time (The Notice of Exercise of Stock Option and Stock Purchase Agreement attached are available from the Secretary of the Company);
(iii) Payment in full of the purchase price, subject to the requirements of
Section 4; and
(iv) Such other documents or agreements requested by the Secretary or the Committee.
(c) For the first six months following an IPO of the Company, Optionee agrees that Optionee may not sell, exchange, transfer, or otherwise dispose of any Shares acquired upon exercise of the Option without the consent of the Company, which consent may be withheld in the Company's absolute and sole discretion.
4. Exercise Price.
(a) The price per Share at which the Option shall be exercisable shall be the Exercise Price as defined in the Notice.
(b) The exercise price of the Shares subject to this Agreement may be paid by
(i) certified or bank check; (ii) the tender of unrestricted Shares already
owned by the Optionee; or (iii) such other means the Committee determines are
consistent with the purpose of the Award and applicable law.
(c) The Optionee may satisfy the applicable withholding tax obligations by paying the amount of any taxes in cash within thirty (30) days of the date of exercise. Shares or other securities of the Company may, subject to compliance with Section 16 of the Securities Exchange Act of 1934 and the rules promulgated thereunder, if applicable, be delivered to the Company or deducted from the number of Shares to be delivered to the Optionee to satisfy the obligation in full or in part as long as such withholding of Shares does not violate any applicable laws, rules, or regulations of federal, state, or local authorities. The number of Shares or other securities of the Company to be deducted shall be determined by reference to the Fair Market Value of
BY SIGNING THE OPTION AGREEMENT, YOU AGREE TO THESE TERMS & CONDITIONS. READ
THEM CARFULLY.
such Shares or Fair Market Value of such other securities as determined by the Committee on the applicable date.
5. Termination of Option.
(a) Death, Disability or Retirement. In the event of termination of the Optionee's employment due to Disability or Retirement, this Option may thereafter be exercised by the Optionee within ninety (90) days following the date of Disability or Retirement, to the extent it was exercisable at the time such event occurred. The Committee may at any time and in its sole discretion accelerate the exercisability of this Option. Upon the death of an Optionee, Options shall be exercisable for a period of twelve (12) months from the date of death or until the Expiration Date.
(b) Separation from Service for Cause. If Optionee's employment by the Company, an Affiliate or Group Company or other service provider relationship with the Company, an Affiliate or Group Company terminates involuntarily for Cause, any unexercised Option held by Optionee and not in fact exercised prior to termination shall immediately expire and all rights under such Option shall immediately be forfeited.
(c) Other Terminations of Employment. If the Optionee's employment is terminated for any reason other than for Cause or other than due to death, Disability or Retirement:
(i) all non-Vested portions of Options held by the Optionee on the date of the termination of his or her employment shall immediately be forfeited by the Optionee as of such date; and
(ii) all Vested portions of Options held by the Optionee on the date of the termination of his or her employment shall remain exercisable until the earlier of (i) the end of the 90-day period following the date of the termination of the Optionee's employment or (ii) the date the Options would otherwise expire.
6. Rights as a Stockholder; Effect of Option. The Optionee shall have no rights as a stockholder of the Company with respect to any Shares covered by this Option until the issuance of a stock certificate for those Shares. Once this Option or any portion thereof is exercised and Shares are transferred to the Optionee, any shareholder agreements that apply to the Shares shall be binding on the Optionee. This Option shall not be deemed to confer upon the Optionee any rights to continue in the employ of the Company, an Affiliate or Group Company. Neither the Optionee nor his or her transferee is or will be obligated by the grant of the Option to exercise it.
7. Changes in Capitalization.
(a) The grant of an Option pursuant to this Agreement shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets.
(b) If, while this Option is outstanding, the outstanding Shares have increased, decreased, changed into, or been exchanged for a different number or kind of shares or securities of the Company through reorganization, merger, recapitalization, reclassification, stock split, reverse stock split, stock dividend, or similar transaction, appropriate and proportionate adjustments shall be made by the Committee to the number and/or kind of Shares which are subject to purchase under this Option and for the Option exercise price or prices applicable to this Option. Such adjustments will be made so that the same proportion of the Company's issued and outstanding Shares in each instance shall remain subject to purchase at the same aggregate exercise price.
(c) In the event of a change in the Shares of the Company as presently constituted, which is limited to a change of all its authorized shares with par value into the same number of shares with a different par value or without par value, the Shares resulting
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THEM CARFULLY.
from any such change shall be deemed to be Shares within the meaning of this Agreement.
(d) In the event of a merger, consolidation, or acquisition of substantially all of the Company's Shares or assets, the Committee may take such actions with respect to outstanding Options as the Committee deems appropriate.
(e) If any fractional share would result from any such adjustment under this
Section 7, the Company shall not issue such fractional share, but shall round
any portion of a share equal to .500 or greater up, and any portion of a share
equal to less than .500 down, in each case to the nearest whole number.
8. Nondisclosure, Noncompete, and Nonsolicit.
(a) Nondisclosure and Nonuse of Confidential Information. Optionee agrees that Optionee will not at any time, whether during or after the Optionee's Service, use or reveal to anyone outside the Company any of the trade secrets or confidential information of the Company, its customers or suppliers, or any information received in confidence from third parties by the Company, except to the extent that such disclosure or use is directly related to and required by Optionee's performance of duties assigned to the Optionee by the Company, an Affiliate or Group Company. Confidential Information of the Company is any information or material (a) generated or collected by or used in the operation of the Company, an Affiliate or Group Company that relates to the actual or anticipated business, marketing and sales, strategic planning, products, services, research and development, or production and/or manufacturing processes, of the Company, an Affiliate or Group Company or its customers or suppliers, including its and their organization, personnel, customers and finances; or (b) suggested by or resulting from any task assigned to Optionee or work performed by Optionee for or on behalf of the Company, an Affiliate or Group Company not otherwise readily available to members of the general public.
(b) Forfeiture for Competition. Optionee acknowledges and agrees that (i) in the course of the Optionee's Service, Optionee shall become familiar with the trade secrets of the Company, its Affiliates and Group Companies and with other Confidential Information concerning the Company, its Affiliates and Group Companies, (ii) Optionee's Services to the Company, its Affiliates and Group Companies are unique in nature and of an extraordinary value to the Company, its Affiliates and Group Companies, and (iii) the Company, its Affiliates and Group Companies could be irreparably damaged if Optionee were to provide similar services to any person or entity competing with the Company, an Affiliate or Group Company or engaged in a similar business. In connection with the issuance to Optionee of the Option hereunder, and in consideration for and as an inducement to the Company to enter into this Agreement, the Optionee covenants and agrees that during the period beginning on the Grant Date and ending on the first anniversary of the date of the termination of the Optionee's Service, the Optionee shall not, directly or indirectly, either for himself or for or through any other Person, without the express written consent of the Company, anywhere in the world, engage in any activity that is, or participate or invest in, or provide or facilitate the provision of financing to, or assist (whether as owner, part-owner, shareholder, member, partner, director, officer, trustee, employee, agent or consultant, or in any other capacity) any business, organization or Person other than the Company (or any subsidiary of the Company), and including any such business, organization or person involving, or which is, a family member of Optionee, whose business, activities, products or services are competitive with the products, technologies or services offered or proposed to be offered by the Company, an Affiliate or Group Company. The Optionee agrees that this covenant is reasonable with respect to its duration, geographical area and scope. For purposes of this Agreement, the term "participate in" includes having any direct or indirect interest in any Person, whether as a sole proprietor, owner, shareholder, partner, joint venture, creditor or otherwise, or rendering any direct or indirect service or assistance to any Person (whether as a director, officer, manager, supervisor, employee, agent, consultant or otherwise), other than owning up to 3% of the outstanding stock of any class that is publicly traded.
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(c) Nonsolicitation. Optionee hereby agrees that during the period commencing on the Grant Date and ending on the date which is the later to occur of (i) two (2) years after the Grant Date and (ii) eighteen (18) months after the date of the termination of Optionee's Service, the Optionee will not, without the express written consent of the Company, (w) induce or attempt to induce for or on behalf of himself or herself or any such competitor any officer, employee or former employee of the Company, its Affiliates or Group Companies, who was employed during the one (1) year period immediately preceding the date on which Optionee's Service with the Company, an Affiliate or Group Company was terminated for any reason, (x) encourage for or on behalf of himself or any such competitor any such officer or employee to terminate his or her Service to the Company, an Affiliate or Group Company, (y) solicit for or on behalf of himself or any such competitor any client or supplier of the Company, an Affiliate or Group Company, or (z) divert to any Person any client or business opportunity of the Company, an Affiliate or Group Company.
(d) Judicial Modification. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 8 is invalid or unenforceable, the parties agree that (i) the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or geographic area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, (ii) the parties shall request that the court exercise that power, and (iii) this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment or decision may be appealed.
(e) Remedy for Breach. The Optionee agrees that in the event of a breach or threatened breach of any of the covenants contained in this Section 8, in addition to any other penalties or restrictions that may apply under any employment agreement, state law, or otherwise, the Optionee shall forfeit:
(i) any and all Options granted or transferred to him or her under the Plan and this Agreement, including vested Options; and
(ii) the profit the Optionee has realized on the exercise of any Options, which is the difference between the Exercise Price of the Options and the applicable Fair Market Value of the Shares (the Optionee may be required to repay such difference to the Company).
The forfeiture for competition provisions of this Section 8 shall continue to apply, in accordance with their terms, after the noncompete provisions of any employment or other agreement between the Company and the Optionee have lapsed.
9. Investment Representations. The Committee or the Secretary may require the Optionee to furnish to the Company, prior to the issuance of any Shares upon the exercise of all or any part of this Option, an agreement in which the Optionee represents that the Shares acquired upon exercise thereof are being acquired for investment and not with a view to the sale or distribution thereof, and which provides for certain share transfer restrictions and other related matters.
10. Compliance with Securities Laws. Anything in this Agreement to the contrary notwithstanding, if, at any time specified herein for the issue of Shares to the Optionee, any law, or any regulation or requirement of the Securities and Exchange Commission or any other governmental authority having jurisdiction shall require either the Company or the Optionee to take any action in connection with the Shares then to be issued, the issue of the Shares shall be deferred until the action shall have been taken; however, the Company shall have no liability whatsoever as a result of the non-issuance of the Shares, except to refund to the Optionee any consideration tendered in respect of the exercise price.
11. Governing Law: Consent to Jurisdiction. This Agreement shall be construed by, enforced in accordance with and governed by the substantive laws of the State of
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Delaware without giving effect to its conflict of laws provisions thereof. The Company and the Optionee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the "Delaware Court"), and not in any other state or federal court in the United States of America or any court in any other country, and (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement.
12. Notice. Any notice which either party hereto may be required or permitted to give to the other shall be in writing, and may be delivered personally or by mail, postage prepaid, if to the Company, addressed to the Company at the following address: IPG Photonics Corporation, 50 Old Webster Road, Oxford, MA 01540, USA, Attention: Secretary, or at any other address as the Company, by notice to the Optionee, may designate in writing from time to time; and, if to the Optionee, to the last know address of the Optionee or at any other address as the Optionee, by notice to the Company, may designate in writing from time to time.
13. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the heirs, beneficiaries, legal representatives and successors of the parties. Any successors to the parties to this Agreement shall be entitled to all of the rights of and obligated to abide by all provisions of any shareholder agreements that apply to the Shares held by such successors.
14. Severability. In the event that any one or more of the provisions or portion thereof contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of this Agreement and this Agreement shall be construed as if the invalid, illegal, or unenforceable provision or portion thereof had never been contained herein.
15. Entire Agreement. This Agreement, the Notice and the Plan constitute and contain the entire Agreement and understanding between the parties with respect to the subject matter hereof and supersede any and all prior agreements, if any, understandings and negotiations relating thereto. No promise, understanding, representation, inducement, condition or warranty not set forth herein has been made or relied upon by any party hereto.
16. Waiver. No waiver by either party of the application of any term, provision or condition of this Agreement, or a breach thereof by the other party, shall constitute a waiver of any succeeding breach of the same or any other provision hereof. No such waiver shall be valid unless executed in writing by the party making the waiver.
17. Transferability. The Optionee shall not transfer, sell, assign or otherwise dispose of the Option other than by his or her will or the laws of descent and distribution. Any attempted transfer, sale, assignment or other disposition of the Option, or of Optionee's rights and obligations under this Agreement, contrary to the provisions of this Agreement shall be null and void.
18. Subject to Plan. This Option is granted under and subject to the terms of the Plan. In the event of any conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control.
19. Plan and Agreement Not a Contract of Employment or Service. Neither the Plan nor this Agreement is a contract of employment or Service, and no terms of the Optionee's employment or Service will be affected in any way by the Plan, this Agreement or related instruments, except to the extent specifically expressed therein. Neither the Plan nor this Agreement will be construed as conferring any legal rights of the Optionee to continue to be employed or remain in Service with the Company, nor will it interfere with the right of the Company, an Affiliate or Group Company to discharge the Optionee or to deal with him or her regardless of the existence of the Plan, this Agreement or the Option.
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20. Counterparts. The parties may execute this Agreement in one or more counterparts, all of which together shall constitute but one Agreement.
[END OF DOCUMENT]
BY SIGNING THE OPTION AGREEMENT, YOU AGREE TO THESE TERMS & CONDITIONS. READ
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EXHIBIT 10.15
OPTION AGREEMENT
OPTIONEE: ______________ GRANT DATE: ___________________________
SHARES GRANTED: _______________________
PRICE PER SHARE: ______________________
OPTION TYPE: NON-QUALIFIED STOCK OPTION
OPTION PLAN: 2006 PLAN - PLAN 3
OPTION ID: 2006 PLAN- PLAN 3-__________
IPG Photonics Corporation is pleased to report that the IPG Board of Directors has granted to you (the "Optionee") a stock option (the "Option") to purchase shares of IPG Common Stock, $0.0001 par value, according to the terms in this Option Agreement:
Shares will vest in accordance with the following schedule:
By signing this Option Agreement, you agree that (1) this Option is granted
under the IPG Photonics 2006 Incentive Compensation Plan (the "Plan"), as
amended, and (2) you will be bound by the terms of the Plan (attached as Exhibit
A) and the 2006 Option Plan Terms & Conditions (attached as Exhibit B), the
terms of which are incorporated by reference in their entirety into this Option
Agreement. You acknowledge that you have received a copy of the Plan and the
Option Terms & Conditions.
Nothing in this Option Agreement, the Plan, or Option Terms and Conditions shall confer on the Optionee any right to continue any employment or other service provider relationship for any period of specific duration. This Option Agreement shall be governed by the substantive laws of Delaware, and this Option Agreement shall not be modified except in writing signed by Optionee and IPG.
------------------------------------ --------------------- IPG Photonics Corporation Date ------------------------------------ --------------------- Date |
NON-QUALIFIED STOCK
OPTION AGREEMENT TERMS AND CONDITIONS UNDER
IPG PHOTONICS CORPORATION 2006 INCENTIVE COMPENSATION PLAN
1. Definitions; Section References. All terms used in this Agreement that are
not otherwise defined shall have the meanings ascribed to them in the IPG
Photonics Corporation 2006 Incentive Compensation Plan, as amended from time to
time (the "Plan") or the Option Agreement ("Option Agreement") executed by the
Optionee and IPG Photonics Corporation, a Delaware corporation (the "Company").
Unless otherwise indicated, all section references are to sections of this
Agreement. If the Notice states that the Option is an Incentive Stock Option,
then the Option is intended to be incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended, and subject to the
limitations and treatment thereof.
2. Term and Exercise of Option Shares. The term and exercise of the Option shall be as follows:
(a) The term of the Option granted shall commence as of Grant Date and shall end on the Expiration Date, unless earlier terminated in accordance with Section 5. No option may be exercised after the Expiration Date.
(b) The Option shall only be exercised to the extent the Option has Vested and has not been previously exercised. The Option granted shall be exercised by the Optionee by delivering the following to the Secretary of the Company or to any other person as may be designated by the Company from time to time, on any business day prior to or on the Expiration Date:
(1) A signed Notice of Exercise of Stock Option in the form prescribed by the Company from time to time specifying the number of Shares the Optionee desires to purchase;
(ii) A signed Stock Option Purchase Agreement in the form prescribed by the Company from time to time (The Notice of Exercise of Stock Option and Stock Purchase Agreement attached are available from the Secretary of the Company);
(iii) Payment in full of the purchase price, subject to the requirements of
Section 4; and such other documents or agreements requested by the
Secretary or the Committee.
(c) For the first six months following an IPO of the Company, Optionee agrees that Optionee may not sell, exchange, transfer, or otherwise dispose of any Shares acquired upon exercise of the Option without the consent of the Company, which consent may be withheld in the Company's absolute and sole discretion.
4. Exercise Price.
(a) The price per Share at which the Option shall be exercisable shall be the Exercise Price as defined in the Notice.
(b) The exercise price of the Shares subject to this Agreement may be paid by
(i) certified or bank check; (ii) the tender of unrestricted Shares already
owned by the Optionee; or (iii) such other means the Committee determines are
consistent with the purpose of the Award and applicable law.
(c) The Optionee may satisfy the applicable withholding tax obligations by paying the amount of any taxes in cash within thirty (30) days of the date of exercise. Shares or other securities of the Company may, subject to compliance with Section 16 of the Securities Exchange Act of 1934 and the rules promulgated thereunder, if applicable, be delivered to the Company or deducted from the number of Shares to be delivered to the Optionee to satisfy the obligation in full or in part as long as such withholding of Shares does not violate any applicable laws, rules, or regulations of federal, state, or local authorities. The number of Shares or other securities of the Company to be deducted shall be determined by reference to the Fair Market Value of such Shares or Fair Market Value of such other securities as determined by the Committee on the applicable date.
5. Termination of Option.
(a) Death, Disability or Retirement. In the event of termination of the Optionee's employment due to Disability or Retirement, this Option may thereafter be exercised by the Optionee within ninety (90) days following the date of Disability or Retirement, to the extent it was exercisable at the time such event occurred. The Committee may at any time and in its sole discretion accelerate the exercisability of this Option. Upon the death of an Optionee, Options shall be exercisable for a period of twelve (12) months from the date of death or until the Expiration Date.
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(b) Separation from Service for Cause. If Optionee's employment by the Company, an Affiliate or Group Company or other service provider relationship with the Company, an Affiliate or Group Company terminates involuntarily for Cause, any unexercised Option held by Optionee and not in fact exercised prior to termination shall immediately expire and all rights under such Option shall immediately be forfeited.
(c) Other Terminations of Employment. If the Optionee's employment is terminated for any reason other than for Cause or other than due to death, Disability or Retirement:
(i) all non-Vested portions of Options held by the Optionee on the date of the termination of his or her employment shall immediately be forfeited by the Optionee as of such date; and
(ii) all Vested portions of Options held by the Optionee on the date of the termination of his or her employment shall remain exercisable until the earlier of (i) the end of the 90-day period following the date of the termination of the Optionee's employment or (ii) the date the Options would otherwise expire.
6. Rights as a Stockholder; Effect of Option. The Optionee shall have no rights as a stockholder of the Company with respect to any Shares covered by this Option until the issuance of a stock certificate for those Shares. Once this Option or any portion thereof is exercised and Shares are transferred to the Optionee, any shareholder agreements that apply to the Shares shall be binding on the Optionee. This Option shall not be deemed to confer upon the Optionee any rights to continue in the employ of the Company, an Affiliate or Group Company. Neither the Optionee nor his or her transferee is or will be obligated by the grant of the Option to exercise it.
7. Changes in Capitalization.
(a) The grant of an Option pursuant to this Agreement shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets.
(b) If, while this Option is outstanding, the outstanding Shares have increased, decreased, changed into, or been exchanged for a different number or kind of shares or securities of the Company through reorganization, merger, recapitalization, reclassification, stock split, reverse stock split, stock dividend, or similar transaction, appropriate and proportionate adjustments shall be made by the Committee to the number and/or kind of Shares which are subject to purchase under this Option and for the Option exercise price or prices applicable to this Option. Such adjustments will be made so that the same proportion of the Company's issued and outstanding Shares in each instance shall remain subject to purchase at the same aggregate exercise price.
(c) In the event of a change in the Shares of the Company as presently constituted, which is limited to a change of all its authorized shares with par value into the same number of shares with a different par value or without par value, the Shares resulting from any such change shall be deemed to be Shares within the meaning of this Agreement.
(d) In the event of a merger, consolidation, or acquisition of substantially all of the Company's Shares or assets, the Committee may take such actions with respect to outstanding Options as the Committee deems appropriate.
(e) If any fractional share would result from any such adjustment under this
Section 7, the Company shall not issue such fractional share, but shall round
any portion of a share equal to .500 or greater up, and any portion of a share
equal to less than .500 down, in each case to the nearest whole number.
8. Nondisclosure, Noncompete, and Nonsolicit.
(a) Nondisclosure and Nonuse of Confidential Information. Optionee agrees that Optionee will not at any time, whether during or after the Optionee's Service, use or reveal to anyone outside the Company any of the trade secrets or confidential information of the Company, its customers or suppliers, or any information received in confidence from third parties by the Company, except to the extent that such disclosure or use is directly related to and required by Optionee's performance of duties assigned to the Optionee by the Company, an Affiliate or Group Company. Confidential Information of the Company is any information or material (a) generated or collected by or used in the operation of the Company, an Affiliate or Group Company that relates to the actual or anticipated business, marketing and sales, strategic planning, products, services, research and development, or production and/or manufacturing processes, of the Company, an Affiliate or Group Company or its customers or suppliers, including its and
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their organization, personnel, customers and finances; or (b) suggested by or resulting from any task assigned to Optionee or work performed by Optionee for or on behalf of the Company, an Affiliate or Group Company not otherwise readily available to members of the general public.
(b) Forfeiture for Competition. Optionee acknowledges and agrees that (i) in the course of the Optionee's Service, Optionee shall become familiar with the trade secrets of the Company, its Affiliates and Group Companies and with other Confidential Information concerning the Company, its Affiliates and Group Companies, (ii) Optionee's Services to the Company, its Affiliates and Group Companies are unique in nature and of an extraordinary value to the Company, its Affiliates and Group Companies, and (iii) the Company, its Affiliates and Group Companies could be irreparably damaged if Optionee were to provide similar services to any person or entity competing with the Company, an Affiliate or Group Company or engaged in a similar business. In connection with the issuance to Optionee of the Option hereunder, and in consideration for and as an inducement to the Company to enter into this Agreement, the Optionee covenants and agrees that during the period beginning on the Grant Date and ending on the first anniversary of the date of the termination of the Optionee's Service, the Optionee shall not, directly or indirectly, either for himself or for or through any other Person, without the express written consent of the Company, anywhere in the world, engage in any activity that is, or participate or invest in, or provide or facilitate the provision of financing to, or assist (whether as owner, part-owner, shareholder, member, partner, director, officer, trustee, employee, agent or consultant, or in any other capacity) any business, organization or Person other than the Company (or any subsidiary of the Company), and including any such business, organization or person involving, or which is, a family member of Optionee, whose business, activities, products or services are competitive with the products, technologies or services offered or proposed to be offered by the Company, an Affiliate or Group Company. The Optionee agrees that this covenant is reasonable with respect to its duration, geographical area and scope. For purposes of this Agreement, the term "participate in" includes having any direct or indirect interest in any Person, whether as a sole proprietor, owner, shareholder, partner, joint venture, creditor or otherwise, or rendering any direct or indirect service or assistance to any Person (whether as a director, officer, manager, supervisor, employee, agent, consultant or otherwise), other than owning up to 3% of the outstanding stock of any class that is publicly traded.
(c) Nonsolicitation. Optionee hereby agrees that during the period commencing on the Grant Date and ending on the date which is the later to occur of (i) two (2) years after the Grant Date and (ii) eighteen (18) months after the date of the termination of Optionee's Service, the Optionee will not, without the express written consent of the Company, (w) induce or attempt to induce for or on behalf of himself or herself or any such competitor any officer, employee or former employee of the Company, its Affiliates or Group Companies, who was employed during the one (1) year period immediately preceding the date on which Optionee's Service with the Company, an Affiliate or Group Company was terminated for any reason, (x) encourage for or on behalf of himself or any such competitor any such officer or employee to terminate his or her Service to the Company, an Affiliate or Group Company, (y) solicit for or on behalf of himself or any such competitor any client or supplier of the Company, an Affiliate or Group Company, or (z) divert to any Person any client or business opportunity of the Company, an Affiliate or Group Company.
(d) Judicial Modification. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 8 is invalid or unenforceable, the parties agree that (i) the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or geographic area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, (ii) the parties shall request that the court exercise that power, and (iii) this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment or decision may be appealed.
(e) Remedy for Breach. The Optionee agrees that in the event of a breach or threatened breach of any of the covenants contained in this Section 8, in addition to any other penalties or restrictions that may apply under any employment agreement, state law, or otherwise, the Optionee shall forfeit:
(i) any and all Options granted or transferred to him or her under the Plan and this Agreement, including vested Options; and
(ii) the profit the Optionee has realized on the exercise of any Options, which is the difference between the Exercise Price of the Options and the applicable Fair Market Value of the Shares (the Optionee may be required to repay such difference to the Company).
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The forfeiture for competition provisions of this Section 8 shall continue to apply, in accordance with their terms, after the noncompete provisions of any employment or other agreement between the Company and the Optionee have lapsed.
9. Investment Representations. The Committee or the Secretary may require the Optionee to furnish to the Company, prior to the issuance of any Shares upon the exercise of all or any part of this Option, an agreement in which the Optionee represents that the Shares acquired upon exercise thereof are being acquired for investment and not with a view to the sale or distribution thereof, and which provides for certain share transfer restrictions and other related matters.
10. Compliance with Securities Laws. Anything in this Agreement to the contrary notwithstanding, if, at any time specified herein for the issue of Shares to the Optionee, any law, or any regulation or requirement of the Securities and Exchange Commission or any other governmental authority having jurisdiction shall require either the Company or the Optionee to take any action in connection with the Shares then to be issued, the issue of the Shares shall be deferred until the action shall have been taken; however, the Company shall have no liability whatsoever as a result of the non-issuance of the Shares, except to refund to the Optionee any consideration tendered in respect of the exercise price.
11. Governing Law: Consent to Jurisdiction. This Agreement shall be construed by, enforced in accordance with and governed by the substantive laws of the State of Delaware without giving effect to its conflict of laws provisions thereof. The Company and the Optionee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the "Delaware Court"), and not in any other state or federal court in the United States of America or any court in any other country, and (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement.
12. Notice. Any notice which either party hereto may be required or permitted to give to the other shall be in writing, and may be delivered personally or by mail, postage prepaid, if to the Company, addressed to the Company at the following address: IPG Photonics Corporation, 50 Old Webster Road, Oxford, MA 01540, USA, Attention: Secretary, or at any other address as the Company, by notice to the Optionee, may designate in writing from time to time; and, if to the Optionee, to the last know address of the Optionee or at any other address as the Optionee, by notice to the Company, may designate in writing from time to time.
13. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the heirs, beneficiaries, legal representatives and successors of the parties. Any successors to the parties to this Agreement shall be entitled to all of the rights of and obligated to abide by all provisions of any shareholder agreements that apply to the Shares held by such successors.
14. Severability. In the event that any one or more of the provisions or portion thereof contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of this Agreement and this Agreement shall be construed as if the invalid, illegal, or unenforceable provision or portion thereof had never been contained herein.
15. Entire Agreement. This Agreement, the Notice and the Plan constitute and contain the entire Agreement and understanding between the parties with respect to the subject matter hereof and supersede any and all prior agreements, if any, understandings and negotiations relating thereto. No promise, understanding, representation, inducement, condition or warranty not set forth herein has been made or relied upon by any party hereto.
16. Waiver. No waiver by either party of the application of any term, provision or condition of this Agreement, or a breach thereof by the other party, shall constitute a waiver of any succeeding breach of the same or any other provision hereof. No such waiver shall be valid unless executed in writing by the party making the waiver.
17. Transferability. The Optionee shall not transfer, sell, assign or otherwise dispose of the Option other than by his or her will or the laws of descent and distribution. Any attempted transfer, sale, assignment or other disposition of the Option, or of Optionee's rights and obligations under this Agreement, contrary to the provisions of this Agreement shall be null and void.
BY SIGNING THE OPTION AGREEMENT, YOU AGREE TO THESE TERMS & CONDITIONS. READ
THEM CAREFULLY.
18. Subject to Plan. This Option is granted under and subject to the terms of the Plan. In the event of any conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control.
19. Plan and Agreement Not a Contract of Employment or Service. Neither the Plan nor this Agreement is a contract of employment or Service, and no terms of the Optionee's employment or Service will be affected in any way by the Plan, this Agreement or related instruments, except to the extent specifically expressed therein. Neither the Plan nor this Agreement will be construed as conferring any legal rights of the Optionee to continue to be employed or remain in Service with the Company, nor will it interfere with the right of the Company, an Affiliate or Group Company to discharge the Optionee or to deal with him or her regardless of the existence of the Plan, this Agreement or the Option.
20. Counterparts. The parties may execute this Agreement in one or more counterparts, all of which together shall constitute but one Agreement.
[END OF DOCUMENT]
BY SIGNING THE OPTION AGREEMENT, YOU AGREE TO THESE TERMS & CONDITIONS. READ
THEM CAREFULLY.
EXHIBIT 10.16
OPTION AGREEMENT
OPTIONEE: GRANT DATE: ___________________________
SHARES GRANTED: _______________________
PRICE PER SHARE: ______________________
OPTION TYPE: NON-QUALIFIED STOCK OPTION
OPTION PLAN: DIRECTORS PLAN-PLAN 4
OPTION ID: DIRECTORS PLAN-PLAN 4-______
IPG Photonics Corporation is pleased to report that the IPG Board of Directors has granted to you (the "Optionee") a stock option (the "Option") to purchase shares of IPG Common Stock, $00001 par value, according to the terms in this Option Agreement:
Shares will vest in accordance with the following schedule:
By signing this Option Agreement, you agree that (I) this Option is granted under the IPG Photonics Corporation Non-Employee Directors Plan (the "Plan"), as amended, and (2) you will be bound by the terms of the Plan attached as Exhibit A and the IPG Photonics Corporation Non-Qualified Stock Option Agreement Plan Terms & Conditions (revision 6_06) attached as Exhibit B (the "Option Terms and Conditions"), the terms of which are incorporated by reference in their entirety into this Option Agreement. You acknowledge that you have received a copy of the Plan and the Option Terms & Conditions.
Nothing in this Option Agreement, the Plan, or Option Terms and Conditions shall confer on the Optionee any right to continue any service provider relationship for any period of specific duration. This Option Agreement shall be governed by the substantive laws of Delaware, and this Option Agreement shall not be modified except in writing signed by Optionee and IPO.
------------------------------------- ---------------------------------------- IPG Photonics Corporation Date ------------------------------------- ---------------------------------------- Date |
NON-QUALIFIED STOCK
OPTION AGREEMENT TERMS AND CONDITIONS UNDER
IPG PHOTONICS CORPORATION NON-EMPLOYEE DIRECTORS STOCK PLAN
1. Definitions; Section References. All terms used in this Agreement that are not otherwise defined shall have the meanings ascribed to them in the IPG Photonics Corporation Non-Employee Directors Stock Plan, as amended from time to time (the "Plan") or the Option Agreement ("Option Agreement") executed by the Optionee and IPG Photonics Corporation, a Delaware corporation (the "Company"). Unless otherwise indicated, all section references are to sections of this Agreement.
2. Term and Exercise of Option Shares. The term and exercise of the Option shall be as follows:
(a) The term of the Option granted shall commence as of Grant Date and shall end on the tenth (10th) anniversary of the Grant Date (the "Expiration Date"), unless earlier terminated in accordance with Section 5. No option may be exercised after the Expiration Date.
(b) The Option shall only be exercised to the extent the Option has Vested and has not been previously exercised. The Option granted shall be exercised by the Optionee by delivering the following to the Secretary of the Company or to any other person as may be designated by the Company from time to time, on any business day prior to or on the Expiration Date:
(i) A signed Notice of Exercise of Stock Option in the form prescribed by the Company from time to time specifying the number of Shares the Optionee desires to purchase;
(ii) A signed Stock Option Purchase Agreement in the form prescribed by the Company from time to time (The Notice of Exercise of Stock Option and Stock Purchase Agreement are available from the Secretary of the Company);
(iii) Payment in full of the exercise price, subject to the requirements of
Section 4; and
Such other documents or agreements requested by the Secretary or the Committee.
(c) For the first six months following the first date that the Common Stock is registered under the Exchange Act and offered for sale to the public, Optionee agrees that Optionee may not sell, exchange, transfer, or otherwise dispose of any Shares acquired upon exercise of the Option without the consent of the Company, which consent may be withheld in the Company's absolute and sole discretion.
4. Exercise Price.
(a) The price per Share at which the Option shall be exercisable shall be the Exercise Price as defined in the Notice.
(b) The exercise price of the Shares subject to this Agreement may be paid by
(i) certified or bank check; (ii) the tender of unrestricted Shares already
owned by the Optionee; or (iii) such other means the Committee determines are
consistent with the purpose of the Award and applicable law.
(c) Shares or other securities of the Company may, subject to compliance with
Section 16 of the Securities Exchange Act of 1934 and the rules promulgated
thereunder, if applicable, be delivered to the Company or deducted from the
number of Shares to be delivered to the Optionee to satisfy the obligation in
full or in part as long as such withholding of Shares does not violate any
applicable laws, rules, or regulations of federal, state, or local authorities.
The number of Shares or other securities of the Company to be deducted shall be
determined by reference to the Fair Market Value of such Shares or Fair Market
Value of such other securities as determined by the Committee on the applicable
date. The Optionee may also satisfy the applicable withholding tax obligations
by paying the amount of any taxes in cash within thirty (30) days of the date of
exercise.
5. Termination of Option.
(a) Death, Disability or Retirement. In the event of termination of the Optionee's Service due to death, Disability or Retirement, all non-Vested portions of this Options shall immediately become vested, and all Vested portions of this Option shall remain exercisable until the earlier of (i) the end of the 12-month period following the date of the Optionee's death or the date of the termination of his or her Service for disability or Retirement, as the case may be, or (ii) the date the Options would otherwise expire.
(b) Separation from Service for Cause. If Optionee's Service with the Company terminates for Cause, any unexercised Option held by Optionee and not in fact exercised prior to termination shall immediately expire and all rights under such Option shall immediately be forfeited.
BY SIGNING THE OPTION AGREEMENT, YOU AGREE TO THESE TERMS & CONDITIONS. READ
THEM CAREFULLY.
(c) Other Terminations of Service. If the Optionee's Service is terminated for any reason other than for Cause, death, Disability or Retirement:
(i) all non-Vested portions of Options held by the Optionee on the date of the termination of his or her Service shall immediately be forfeited by the Optionee as of such date; and
(ii) all Vested portions of Options held by the Optionee on the date of the termination of his or her Service shall remain exercisable until the earlier of (i) the end of the 90-day period following the date of the termination of the Optionee's Service, or (ii) the date the Options would otherwise expire.
6. Rights as a Stockholder; Effect of Option. The Optionee shall have no rights as a stockholder of the Company with respect to any Shares covered by this Option until the issuance of a stock certificate for those Shares. Once this Option or any portion thereof is exercised and Shares are transferred to the Optionee, any shareholder agreements that apply to the Shares shall be binding on the Optionee. This Option shall not be deemed to confer upon the Optionee any rights to continue in the Service of the Company. Neither the Optionee nor his or her transferee is or will be obligated by the grant of the Option to exercise it.
7. Changes in Capitalization.
(a) The grant of an Option pursuant to this Agreement shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets.
(b) If, while this Option is outstanding, the outstanding Shares have increased, decreased, changed into, or been exchanged for a different number or kind of shares or securities of the Company through reorganization, merger, recapitalization, reclassification, stock split, reverse stock split, stock dividend, or similar transaction, appropriate and proportionate adjustments shall be made by the Committee to the number and/or kind of Shares which are subject to purchase under this Option and for the Option exercise price or prices applicable to this Option. Such adjustments will be made so that the same proportion of the Company's issued and outstanding Shares in each instance shall remain subject to purchase at the same aggregate exercise price.
(c) In the event of a change in the Shares of the Company as presently constituted, which is limited to a change of all its authorized shares with par value into the same number of shares with a different par value or without par value, the Shares resulting from any such change shall be deemed to be Shares within the meaning of this Agreement.
(d) In the event of a merger, consolidation, or acquisition of substantially all of the Company's Shares or assets, the Committee may take such actions with respect to outstanding Options as the Committee deems appropriate.
(e) If any fractional share would result from any such adjustment under this
Section 7, the Company shall not issue such fractional share, but shall round
any portion of a share equal to .500 or greater up, and any portion of a share
equal to less than .500 down, in each case to the nearest whole number.
8. Investment Representations. The Committee or the Secretary may require the Optionee to furnish to the Company, prior to the issuance of any Shares upon the exercise of all or any part of this Option, an agreement in which the Optionee represents that the Shares acquired upon exercise thereof are being acquired for investment and not with a view to the sale or distribution thereof, and which provides for certain share transfer restrictions and other related matters.
9. Compliance with Securities Laws. Anything in this Agreement to the contrary notwithstanding, if, at any time specified herein for the issue of Shares to the Optionee, any law, or any regulation or requirement of the Securities and Exchange Commission or any other governmental authority having jurisdiction shall require either the Company or the Optionee to take any action in connection with the Shares then to be issued, the issue of the Shares shall be deferred until the action shall have been taken; however, the Company shall have no liability whatsoever as a result of the non-issuance of the Shares, except to refund to the Optionee any consideration tendered in respect of the exercise price.
10. Governing Law: Consent to Jurisdiction. This Agreement shall be construed by, enforced in accordance with and governed by the substantive laws of the State of Delaware without giving effect to its conflict of laws provisions thereof. The Company and the Optionee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the "Delaware Court"), and not in any other state or federal court in the United States of America or any court in any other
BY SIGNING THE OPTION AGREEMENT, YOU AGREE TO THESE TERMS & CONDITIONS. READ
THEM CAREFULLY.
country, and (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement.
11. Notice. Any notice which either party hereto may be required or permitted to give to the other shall be in writing, and may be delivered personally or by mail, postage prepaid, if to the Company, addressed to the Company at the following address: IPG Photonics Corporation, 50 Old Webster Road, Oxford, MA 01540, USA, Attention: Secretary, or at any other address as the Company, by notice to the Optionee, may designate in writing from time to time; and, if to the Optionee, to the last know address of the Optionee or at any other address as the Optionee, by notice to the Company, may designate in writing from time to time.
12. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the heirs, beneficiaries, legal representatives and successors of the parties. Any successors to the parties to this Agreement shall be entitled to all of the rights of and obligated to abide by all provisions of any shareholder agreements that apply to the Shares held by such successors.
13. Severability. In the event that any one or more of the provisions or portion thereof contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of this Agreement and this Agreement shall be construed as if the invalid, illegal, or unenforceable provision or portion thereof had never been contained herein.
14. Entire Agreement. This Agreement, the Notice and the Plan constitute and contain the entire Agreement and understanding between the parties with respect to the subject matter hereof and supersede any and all prior agreements, if any, understandings and negotiations relating thereto. No promise, understanding, representation, inducement, condition or warranty not set forth herein has been made or relied upon by any party hereto.
15. Waiver. No waiver by either party of the application of any term, provision or condition of this Agreement, or a breach thereof by the other party, shall constitute a waiver of any succeeding breach of the same or any other provision hereof. No such waiver shall be valid unless executed in writing by the party making the waiver.
16. Transferability. The Optionee shall not transfer, sell, assign or otherwise dispose of the Option other than by his or her will or the laws of descent and distribution. Any attempted transfer, sale, assignment or other disposition of the Option, or of Optionee's rights and obligations under this Agreement, contrary to the provisions of this Agreement shall be null and void.
17. Subject to Plan. This Option is granted under and subject to the terms of the Plan. In the event of any conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control.
18. Plan and Agreement Not a Contract of Employment or Service. Neither the Plan nor this Agreement is a contract of employment or Service, and no terms of the Optionee's Service will be affected in any way by the Plan, this Agreement or related instruments, except to the extent specifically expressed therein. Neither the Plan nor this Agreement will be construed as conferring any legal rights of the Optionee to continue to remain in Service with the Company, nor will it interfere with the right of the Company to remove the Optionee or to deal with him or her regardless of the existence of the Plan, this Agreement or the Option.
19. Counterparts. The parties may execute this Agreement in one or more counterparts, all of which together shall constitute but one Agreement.
[END OF DOCUMENT]
BY SIGNING THE OPTION AGREEMENT, YOU AGREE TO THESE TERMS & CONDITIONS. READ
THEM CAREFULLY.
EXHIBIT 10.17
CONFIDENTIALITY, NON-COMPETITION AND
CONFIRMATORY ASSIGNMENT AGREEMENT
This CONFIDENTIALITY, NON-COMPETITION AND CONFIRMATORY ASSIGNMENT AGREEMENT (this "Agreement") is made effective as of _______________ by and among IPG Photonics Corporation, a Delaware corporation (the "Company"), and _________________________________ (the "Employee").
WITNESSETH
WHEREAS, the Company is a manufacturer of fiber amplifiers, fiber lasers and associated products.
WHEREAS, the Company's business is conducted throughout the world and the reputation and goodwill of the Company are an integral part of its business success; and
WHEREAS, in consideration and as a condition of any employment (or continued employment) by the Company, Employee agrees to the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:
Section 1. Confidentiality. Employee represents, warrants and covenants that he or she has not revealed and will not at any time, whether during or after the termination of his or her employment, reveal to anyone outside the Company any of the trade secrets or confidential information of the Company, its customers or suppliers, or any information received in confidence from third parties by the Company. Confidential information of the Company is any information or material (a) generated or collected by or used in the operation of the Company that relates to the actual or anticipated business, marketing and sales, strategic planning, products, services, research and development, or production and/or manufacturing processes, of the Company or its customers or suppliers, including its and their organization, personnel, customers and finances; or (b) suggested by or resulting from any task assigned to Employee or work performed by Employee for or on behalf of the Company. Employee will deliver to the Company copies of all confidential information upon the earlier of (a) a request by the Company, or (b) termination of Employee's employment. Upon termination of Employee's employment, Employee will not retain any such materials or copies.
Confidential Information shall not include (i) any information that is in
the public domain at time of disclosure or thereafter comes into the public
domain (other than by breach of this Agreement by Employee); or (ii) any
information which is disclosed to Employee in good faith by a third party
unaffiliated with the Company with the legal right to make such disclosure; or
(iii) any information which the Company authorizes its unrestricted use in
writing.
Further, Employee represents, warrants and covenants that during his or her employment he or she did not and will not take, use or permit to be used
any notes, memoranda, reports, lists, records, drawings, sketches, specifications, software programs, data, documentation or other materials of any nature relating to any matter within the scope of the business of the Company or concerning any of its dealings or affairs otherwise than for the benefit of the Company. Employee further agrees that he or she has not used or permitted to be used and shall not, after the termination of his or her employment, use or permit to be used any such notes, memoranda, reports, lists, records, drawings, sketches, specifications, software programs, data, documentation or other materials, it being agreed that all of the foregoing shall be and remain the sole and exclusive property of the Company and that immediately upon the termination of Employee's employment he or she shall deliver all of the foregoing, and all copies thereof, to the Company, at its main office.
Employee understands that the Company has received and will receive from third parties information that is confidential or proprietary ("Third-Party Information") and that is subject to restrictions on the Company regarding its use and disclosure. Employee, both during and after termination of his or her employment will hold Third-Party Information in the strictest confidence and will not disclose or use Third-Party Information except as permitted by the agreement between the Company and the relevant third party, unless expressly authorized to act otherwise by the Company.
Employee agrees to report known or suspected unauthorized disclosures of confidential or proprietary information of the Company by any other person immediately to an officer of the Company.
Section 2. Non-Competition; Non-Solicitation. In view of the fact that any activity of the Employee in violation of the terms hereof would adversely affect the Company and its subsidiaries (as defined below), and to preserve the goodwill associated with the Company's business, the Employee hereby agrees to the following restrictions on his activities:
(a) Non-Competition. The Employee hereby agrees that one (1) year after the date on which the Employee's employment with the Company and its subsidiaries terminates for any reason (the "Non-Competition Period"), Employee will not, without the express written consent of the Company, directly or indirectly, anywhere in the world, engage in any activity which is, or participate or invest in, or provide or facilitate the provision of financing to, or assist (whether as owner, part-owner, shareholder, member, partner, director, officer, trustee, employee, agent or consultant, or in any other capacity) any business, organization or person other than the Company (or any subsidiary of the Company), and including any such business, organization or person involving, or which is, a family member of the Employee, whose business, activities, products or services are competitive with the products/technologies/services listed on the signature page hereof. The Employee hereby acknowledges that, because of the global-based nature of the Company's business, the geographic scope as set forth above is reasonable and fair.
(b) Non-Solicitation. The Employee hereby agrees that during the period commencing on the date hereof and ending on the date which is the later of (i) two (2) years after the date hereof and (ii) eighteen (18) months after the date on which the Employee's employment with the Company and its subsidiaries terminates for any reason, he will not, without the express written consent of the Company, (w) hire or engage or attempt to hire or engage for or on behalf of himself or herself or any such competitor any
officer or employee of the Company or any of its subsidiaries, or any former employee of the Company and any of its subsidiaries who was employed during the one (1) year period immediately preceding the date on which the Employee's employment or service relationship with the Company or any of its subsidiaries was terminated for any reason, (x) encourage for or on behalf of himself or any such competitor any such officer or employee to terminate his or her relationship or employment with the Company or any of its subsidiaries, (y) solicit for or on behalf of himself or any such competitor any client or supplier of the Company or any of its subsidiaries or (z) divert to any person (as hereinafter defined) any client or business opportunity of the Company or any of any of its subsidiaries.
The Board of Directors, with prior notice and adequate disclosure of any opportunity or proposed activity, shall be entitled to interpret the provisions of this Agreement and exempt any opportunity or activity of the Employee which the Board of Directors, in its reasonable judgment, believes is in the interests of, or not opposed to the interests of, the Company or any of its subsidiaries.
Notwithstanding anything herein to the contrary, the Employee may make passive investments in any enterprise the shares of which are publicly traded if such investment constitutes less than three percent (3%) of the equity of such enterprise.
Neither the Employee nor any business entity controlled by the Employee is a party to any contract, commitment, arrangement or agreement which could, following the date hereof, restrain or restrict the Company or any subsidiary of the Company from carrying on its business or restrain or restrict the Employee from performing his or her employment obligations, and as of the date of this Agreement the Employee has no business interests whatsoever in or relating to the industries in which the Company and its subsidiaries currently engage other than Employee's interest in the Company and other than interests in public companies of less than three percent (3%).
For purposes of this Agreement, any reference to the "subsidiaries" of the Company shall be deemed to include all entities directly or indirectly controlled by it through an ownership of more than fifty percent (50%) of the voting interests. As used in this Agreement, the term "person" shall mean an individual, a corporation, an association, a partnership, a limited liability company, an estate, a trust, and any other entity or organization.
Section 3. Scope of Agreement. The parties acknowledge that the time, scope, geographic area and other provisions of this Agreement have been specifically negotiated by sophisticated parties and agree that (a) all such provisions are reasonable and fair to the parties hereto under the circumstances of the transactions contemplated hereby, and (b) are given as an integral and essential part of the transactions contemplated hereby. The Employee has independently consulted with Employee's counsel and has been advised in all respects concerning the reasonableness and fairness of the covenants contained herein, with specific regard to the business to be conducted by Company and its subsidiaries, and represents that the Agreement is intended to be, and shall be, fully enforceable and effective in accordance with its terms.
Section 4. Acknowledgement Regarding Inventions/Receipt of Fair Compensation. Employee hereby confirms, acknowledges and agrees that all inventions, modifications, discoveries, designs, developments, improvements,
processes, know-how, or intellectual property rights whatsoever (collectively, "Developments") that he or she (either alone or with others) has conceived, made or reduced to practice at any time or times while employed by the Company or any of its subsidiaries that:
(a) related to fixtures for and methods of manufacture of fiber amplifiers and certain aspects of fiber amplifiers, or otherwise relate to the business of the Company from time to time, or any customer or supplier to the Company, or any of the products or services being developed, manufactured or sold by the Company or any of the products which may be used in connection therewith,
(b) resulted from tasks assigned to the Employee by the Company or any of its subsidiaries to the business, or
(c) resulted from the use of premises or personal property (whether tangible or intangible) owned, leased or contracted for or by the Company or any of its subsidiaries,
are the sole and absolute property of the Company, its successors and assigns. Employee acknowledges that all Developments were made as a "work for hire" and all proprietary rights which the Employee may have acquired in such Developments were assigned to the Company. The Employee hereby acknowledges he or she has not created any Developments that do not satisfy the provisions of Section 4(a), (b) or (c). Employee hereby confirms, acknowledges and agrees that Employee has received mutually-agreed upon compensation from the Company in consideration for the Company's ownership rights to the Developments set forth in this Section 4 and that such consideration is fair and reasonable.
Employee will make and maintain adequate and current records of and communicate to the Company (or any persons designated by it) promptly and fully each Development without publishing the same. Further, Employee will, both during and after the period of his or her employment by the Company, execute all appropriate documents and give the Company all assistance it reasonably requires to perfect, protect and use its rights to the Developments. In the event the Company is unable, after reasonable effort, to secure Employee's signature on any letter patent, copyright or other analogous protection relating to a Development, Employee hereby irrevocably appoints the Company and its duly authorized officers and agents as Employee's agent and attorney-in-fact, to execute and file any such application or applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent, copyright or other protection with the same legal force and effect as if signed by Employee.
Employee has attached hereto, as Addendum A, a list describing all Inventions which were made by Employee prior to his employment by the Company ("Prior Inventions"), which belong to Employee and which relate in any way to the Company's business, products, services, research or development, and which are not assigned to the Company. If no such list is attached, Employee represents that there are no such Prior Inventions. If in the course of employment by the Company, Employee incorporates into a Company product or process a Prior Invention, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make, have made, modify, use and sell such Prior Invention as part of or in connection with such product or process.
Section 5. Use of Voice, Image and Likeness; Publication of Statements. Employee gives the Company permission to use Employee's voice, image or likeness, with or without using Employee's name, for the purposes of advertising and promoting the Company, except to the extent expressly prohibited by law. To ensure that the Company delivers a consistent message about its products, services and operations to the public, and further in recognition that even positive statements may have a detrimental effect on the Company in certain securities transactions and other contexts, Employee agrees that any statement about the Company which he or she creates, publishes or posts during Employee's period of employment and for six (6) months thereafter, on any media accessible by the public, including but not limited to electronic bulletin boards and Web-based chat rooms, shall first be reviewed and approved by an officer of the Company before it is released in the public domain.
Section 6. No Employment Obligation. Employee understands that this Agreement does not create an obligation on the Company or entity to continue Employee's employment or to exploit any Developments. Employee acknowledges that nothing in this Agreement shall interfere with or restrict in any way the rights of the Company, , to discharge Employee at any time for any reason whatsoever, with or without cause, except as may be expressly provided in a separate agreement between the Company and Employee.
Section 7. Certain Remedies; Severability. It is specifically understood and agreed that any breach of the provisions of this agreement by the Employee will result in irreparable injury to the Company and its subsidiaries, that the remedy at law alone will be an inadequate remedy for such breach and that, in addition to any other remedy it may have, the Company and upon authorization by the Board of Directors of the Company its subsidiaries shall be entitled to enforce the specific performance of this agreement by the Employee through both temporary and permanent injunctive relief without the necessity of proving actual damages, but without limitation of their right to damages and any and all other remedies available to them, it being understood that injunctive relief is in addition to, and not in lieu of, such other remedies.
In the event that any covenant contained in this Agreement shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it shall be interpreted to extend only over the maximum period of time for which it may be enforceable and/or over the maximum geographical area as to which it may be enforceable and/or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action. The existence of any claim or cause of action which the Employee may have against the Company or any of its subsidiaries shall not constitute a defense or bar to the enforcement of any of the provisions of this Agreement. Employee agrees that Employee will not assert, and it should not be considered, that any provision contained in this Agreement prevents him or her from earning a living or is otherwise void, voidable, or unenforceable or should be voided or held to be unenforceable.
Section 8. Jurisdiction. The parties hereby irrevocably submit to the non-exclusive jurisdiction of the courts of The Commonwealth of Massachusetts to construe and enforce the covenants contained in this Agreement. In the event that the courts of any state shall hold such covenants unenforceable (in whole or in part) by reason of the breadth of such scope or otherwise, it
is the intention of the parties hereto that such determination shall not bar or in any way affect the right of the Company or upon authorization by the Board of Directors of the Company any its subsidiaries to the relief provided for herein in the courts of any other state within the geographic scope of such covenants, as to breaches of such covenants in such other respective states, the above covenants as they relate to each state being, for this purpose, severable into diverse and independent covenants.
Section 9. Notices. Any notice or demand which is required or provided to
be given under this Agreement shall be deemed to have been sufficiently given
and received for all purposes when delivered by hand, telecopy, telex or other
method of facsimile, or five days after being sent by certified or registered
mail, postage and charges prepaid, return receipt requested, or two days after
being sent by overnight delivery providing receipt of delivery, to the following
addresses: if to the Company, 50 Old Webster Road, Oxford, MA 01540, Facsimile:
508-373-1101, Attn: CEO, or at any other address designated by the Company to
the Employee in writing; and if to the Employee, to the home address of Employee
as designated in the current personnel files maintained by the Company, or at
any other address designated by the Employee to the Company in writing.
Section 10. Miscellaneous. This Agreement shall be governed by and construed under the laws of The Commonwealth of Massachusetts (without regard to its conflict of laws principles) and shall not be modified or discharged in whole or in part except by an agreement in writing signed by the Company and the Employee. The failure of any of the parties to require the performance of a term or obligation or to exercise any right under this Agreement or the waiver of any breach hereunder shall not prevent subsequent enforcement of such term or obligation or exercise of such right or the enforcement at any time of any other right hereunder or be deemed a waiver of any subsequent breach of the provision so breached, or of any other breach hereunder. Employee's obligations under this Agreement shall survive the termination of Employee's employment regardless of the manner of such termination and shall be binding upon by Employee's heirs, executors, administrators and legal representatives. The Company shall have the right to assign this Agreement to its affiliates, successors and assigns but this Agreement may not be assigned by the Employee. This Agreement supersedes all prior understandings and agreements between the parties relating to the subject matter hereof.
Section 11. No Conflicting Agreements. Employee warrants that Employee is not bound by the terms of a confidentiality agreement or other agreement with a third party that would conflict with Employee's obligations hereunder.
Section 12. Third Party Beneficiaries. The parties hereto acknowledge and agree that the Investors named in that certain Stock Purchase Agreement dated August 30, 2000 are third party beneficiaries of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Confidentiality, Non-Competition Agreement and Confirmatory Assignment Agreement under seal as of the date first set forth above.
COMPANY:
IPG PHOTONICS CORPORATION
EMPLOYEE:
Section 2(a) Non-Competition
Limitation: ____________________________________________________________________
[FOR USE IN CALIFORNIA, ILLINOIS,
KANSAS, MINNESOTA AND WASHINGTON ONLY]
ADDENDUM TO CONFIDENTIALITY AGREEMENT
This addendum is made and entered into this ___ day of _________, by and between IPG Photonics Corporation, its subsidiaries and affiliates, with an office and place of business at 50 Old Webster Road, Oxford, MA 01540 (the "Company") and __________________, residing at _______________________________ ("Employee") and incorporated by reference into the Confidentiality, Non-Competition and Confirmatory Assignment Agreement dated ____________________ between the Company and Employee.
Employee understands and agrees that the provisions of paragraph 4 of the Confidentiality Agreement, on assignment of inventions do not apply to an invention for which no equipment, supplies, facility or trade-secret information of the Company was used and which was developed entirely on the Employee's own time and (1) which does not relate (a) directly to the business of the Company or (b) to the Company's demonstrably anticipated research or development or (2) which does not result from any work performed by the Employee for the Company.
Attest: IPG PHOTONICS CORPORATION ------------------------------------- ---------------------------------------- Corporate Officer In the presence of: ------------------------------------- ---------------------------------------- Employee |
EXHIBIT 10.18
CONSTRUCTION LOAN AGREEMENT
This AGREEMENT made as of the 28th day of April, 2000 by and between IPG PHOTONICS CORPORATION, a Delaware corporation with its principal place of business at 660 Main Street, Sturbridge, Massachusetts 01566 (the "Borrower") and FAMILY BANK, FSB, a federal savings bank, at its office at 370 Main Street, Worcester, Massachusetts 01608 (the "Lender").
WITNESSETH:
In consideration of the mutual covenants herein contained and other good and valuable consideration, receipt whereof is hereby acknowledged, the parties hereto hereby agree as follows:
1. RECITALS
1.1 Borrower owns certain real estate located on Old Webster Road, Oxford,
Massachusetts (hereinafter referred to as the "Premises") and more particularly
described in Exhibit A annexed hereto, and proposes to incur certain costs and
expenses in connection with the construction of two office/assembly buildings on
the Premises (hereinafter called the "Improvements") in accordance with (i) the
plans, drawings, and specifications described in Exhibit B annexed hereto, and
(ii) plans, drawings and specifications to be developed and prepared after the
date hereof which future plans, drawings and specifications and all amendments
must be approved in writing by Lender prior to the use thereof by Borrower (all
such existing and future plans, drawings and specifications being hereinafter
collectively referred to as the "Plans"); and
1.2 Borrower simultaneously herewith is executing or causing to be executed and delivering to Lender:
1.2.1 a Promissory Note dated of even date herewith by Borrower in the principal amount of $6,500,000.00 (the "Note");
1.2.2 a Mortgage and Security Agreement dated of even date herewith by Borrower with respect to the Premises (the "Mortgage");
1.2.3 a Collateral Assignment of Construction Contract dated of even date herewith by Borrower (the "Construction Assignment");
1.2.4 a Collateral Assignment of Architect's Contract and Plans and Specifications dated of even date herewith by Borrower (the "Architect and Plans and Specifications Assignment");
1.2.5 a Collateral Assignment of Licenses, Permits and Agreements dated of even date herewith by Borrower (the "Permits Assignment");
1.2.6 UCC Financing Statements against Borrower to be filed with the Massachusetts Secretary of State, the Clerks of the Towns of Oxford and Sturbridge, and the Worcester District Registry of Deeds (the "Financing Statements");
1.2.7 Unlimited Guaranty dated of even date herewith with respect to the obligations of Borrower to Lender by IP Fibre Devices (UK) Limited (the
"Corporate Guaranty");
1.2.8 Unlimited Guaranty dated of even date herewith with respect to the obligations of Borrower to Lender by Valentin P. Gapontsev (the "Individual Guaranty"); and
1.2.9 an Assignment of Life Insurance Policy as Collateral with respect to a life insurance policy on the life of Valentin P. Gapontsev in the minimum amount of $3,000,000.00 (the "Life Insurance Assignment").
(The Note, the Mortgage, the Construction Assignment, the Architect and Plans and Specifications Assignment, the Permits Assignment, the Financing Statements, the Corporate Guaranty, the Individual Guaranty and the Life Insurance Assignment are hereinafter collectively referred to as the "Security Instruments".)
1.3 Borrower has entered into an agreement dated March 10, 2000 (hereinafter referred to as the "Construction Contract") with Aho Construction, Inc. (hereinafter referred to as the "Contractor") to construct the Improvements (including all development and site work) on the Premises; and
1.4 Lender is willing to lend to Borrower sums of money to be evidenced by the Note of Borrower (the "Loan") upon the terms and covenants and subject to the conditions hereinafter set forth.
2. AGREEMENTS
2.1 Lender's Agreement to Advance Proceeds
Lender agrees (provided the terms, conditions, covenants and agreements hereof shall be observed and performed, and subject to the conditions hereinafter set forth) to make advances to Borrower of the proceeds of the Note from time to time up to a total amount not exceeding the principal amount thereof, such proceeds being hereinafter referred to as the "Loan Proceeds." The Loan Proceeds shall be advanced to finance construction of the Improvements.
2.2 Conditions Precedent
As conditions precedent to Lender's obligation to make advances from time to time of the Loan Proceeds, Borrower shall, at the time of the advance in question:
2.2.1 hold marketable title to the Premises in fee simple and full possession thereof, free and clear of all liens and encumbrances except such as are approved by Lender in writing and except such permitted exceptions as are set forth in Exhibit C annexed hereto;
2.2.2 have granted to Lender a fully perfected first mortgage on the Premises and Improvements, a fully perfected first security interest in accordance with the Uniform Commercial Code in the accounts receivable and inventory of the Borrower and the fixtures of the Borrower located or to be located on the Premises, an assignment of licenses, permits, agreement, plans and specifications pertaining to the Improvements and an assignment of leases and rents with respect to the Premises to secure the Note of Borrower and the obligations of Borrower under this Agreement;
2.2.3 have delivered to Lender a mortgagee's title insurance policy in the face amount of Six Million Five Hundred Thousand and 00/100 Dollars ($6,500,000.00) issued by First American Title Insurance Company (hereinafter referred to as the "Title Insurance Company") in the form of the American Land Title Association's standard form of mortgagee title insurance policy (or in such other form as may be required by statute); said policy to show no prior liens or encumbrances except and particularly approved in writing by Lender; to contain only standard exceptions, excluding, without limitation, any exceptions for lack of a survey or mechanics' and materialmen's liens, and to be in all respects satisfactory to Lender;
2.2.4 have entered into and delivered to Lender a written Construction Contract with Contractor, which Contract and Contractor first shall have been approved in writing by Lender, a collateral assignment of the Construction Contract in a form acceptable to Lender, and a performance bond issued by a surety acceptable to Lender and naming Lender as loss payee, securing performance of the Construction Contract;
2.2.5 have delivered to Lender evidence in form and substance satisfactory to Lender, that all public utilities necessary for the construction and operation of the Improvements upon the Premises for their intended purposes are available at the boundaries of the Premises and there is no impediment or restriction to connecting any of such facilities to the Improvements;
2.2.6 have delivered to Lender a certified survey showing the location and dimensions of the proposed Improvements, utilities, parking areas, rights-of-way and all easements affecting the Premises, and the points of access to the main road upon which the Premises front and including a certification that all proposed Improvements, if constructed in accordance with the Plans, will be in full compliance with all zoning laws and regulations applicable thereto;
2.2.7 have delivered to Lender an opinion of Borrower's counsel, in form and substance satisfactory to Lender, that the Loan has been duly authorized by Borrower; that the Note and the Security Instruments are binding obligations of Borrower or the guarantors, as applicable; that construction and operation of the Improvements, as contemplated hereunder, will not violate any applicable zoning or building code, law, ordinance or other governmental regulation; that all necessary action required by federal, state and/or local law to be taken pursuant to the construction and completion of the Improvements has been taken; and containing such other opinions as Lender may request;
2.2.8 have delivered to Lender written assurances satisfactory to Lender from Borrower's engineer, and Contractor that Lender shall have the same rights as Borrower to the continued use of the Plans and all services related thereto for the construction of the Improvements;
2.2.9 not be in default with respect to any of the provisions of this Agreement to be performed or observed;
2.2.10 have submitted to Lender all subcontractors' subcontracts requested by Lender; Lender reserving the right at any time to require submission of subcontracts from (i) each and every subcontractor and material supplier whose bid represents ten percent (10%) or more of the total construction costs and (ii) a sufficient number of subcontractors and material suppliers whose bids collectively represent not less than seventy percent (70%) of the total costs of construction, and Lender reserving the right to approve or
disapprove of each such subcontractor and subcontract;
2.2.11 have qualified for a first advance hereunder within thirty (30) days from the date hereof or such other date as may be agreed upon in writing by the parties hereto; and
2.2.12 have delivered to Lender copies of all partial waiver and subordination forms, releases, notices of contract, notices of identification, statements of account, statements of claim and other documents relating to the Improvements or the Premises by whomsoever filed.
2.3 Representations of Borrower
Borrower represents and warrants to Lender:
2.3.1 that at least one copy of the Plans has been deposited with Lender;
2.3.2 that the Plans have been filed with all governmental authorities having jurisdiction, that it has obtained all necessary approvals thereof and all necessary building, zoning, parking, street opening, access, and other permits from said authorities, and that construction and operation of the Improvements on the Premises will not violate (i) any zoning, building code, subdivision, or land use ordinance, regulation or law promulgated by any governmental agency, department or subdivision, including without limiting the generality of the foregoing, the United States Environmental Protection Agency and the Massachusetts Department of Environmental Protection or (ii) any restrictions of any kind affecting the Premises;
2.3.3 that all utilities and services necessary for the operation of the Improvements for their intended purpose (including, without limitation, water, gas, electricity, telephone, and storm and sanitary sewer facilities) are available at the boundary of the Premises, can be tapped into or installed by Borrower, and are of sufficient capacity to adequately meet all needs and requirements necessary for the operation of the Improvements for their intended purposes;
2.3.4 that there is unrestricted access for the passage of motor vehicles to and from the Premises to and from the main road upon which the Premises fronts and all required curb cut or access permits (if any) have been obtained;
2.3.5 that no part of the Premises is located in a designated flood hazard area (as defined in the Flood Disaster Protection Act of 1973, as amended by the National Flood Insurance Reform Act of 1994);
2.3.6 that all test borings and other engineering studies normally performed by prudent developers of similar projects on similar type land have been performed and have yielded results normally considered favorable to permit the utilization and development of the Premises for the purpose herein referred to;
2.3.7 that there are no easements across or affecting the Premises which will have any adverse effect upon the operation of the Improvements for their intended purpose, nor which will in any way interfere with the construction of the Improvements on the Premises;
2.3.8 that Borrower is the true, sole and lawful owner of the Premises, is lawfully seized and possessed of the same in fee simple, and has good right, full power and lawful authority to mortgage, grant, bargain, sell and convey the same and the Security Instruments, when properly filed and recorded, will all create valid liens on the Premises;
2.3.9 that the execution and delivery of, and the performance by Borrower of its obligations under this Agreement, the Note, and the Security Instruments have been authorized by all appropriate action; and that said instruments, upon delivery, will be the valid and binding obligations of Borrower, enforceable in accordance with their respective terms, and will not violate or conflict with any other agreements or instruments to which Borrower is a party or by which Borrower is bound;
2.3.10 that no litigation or proceedings are pending or threatened against Borrower or the Premises, or any properties adjacent to the Premises, which would or might affect the validity or priority of the lien of the Mortgage or other security for the Note on the Premises or which could or might materially affect Borrower's ability to perform this Agreement;
2.3.11 that the making of the Loan or Lender's acquisition of the Note or any of the Security Instruments will not subject Lender to any claim for a brokerage commission;
2.3.12 that all financial statements and other information furnished to the Lender by the Borrower and the guarantors in connection with the Loan, the Premises and the Improvements are true, accurate and complete in all material respects and fairly present the financial condition of the Borrower and the guarantors as of the respective dates of such statements;
2.3.13 that neither the Borrower nor any of the guarantors is subject to any contingent liabilities or obligations (whether for taxes, long-term commitments or otherwise) which are not accurately reflected in financial information furnished to the Lender in connection with the Loan; and
2.3.14 that each Borrower and guarantor has filed all required tax returns and paid all applicable federal, state and local taxes.
Each of the foregoing representations and warranties shall survive the making of the Loan and each advance of the Loan Proceeds hereunder, and Borrower shall indemnify and hold harmless Lender from and against any loss, damage or liability attributable to the breach thereof, including all fees and expenses incurred in the defense or settlement of any claim arising therefrom against Lender.
2.4 Covenants of Borrower
Until payment in full of the Note and all other sums required to be paid by Borrower under the Security Instruments and this Agreement, Borrower shall:
2.4.1 cause the Improvements to be constructed, equipped and completed, diligently and continuously and with all reasonable dispatch, in accordance with all laws, rules, regulations and requirements of all governmental authorities having jurisdiction with respect to the Improvements, the appropriate Board of Fire Underwriters, and the Plans and any modifications and additions to the Plans which may be deemed necessary or desirable by Lender
and/or Lender's construction representative, which modifications and additions to the Plans, Borrower agrees to provide within ten (10) days after Lender's request therefor;
2.4.2 in any event, cause the Improvements to be completed and ready for operation and occupancy on or before April 28, 2001 (the "Construction Completion Date");
2.4.3 make no material changes or amendments to the Plans and make no change orders without the prior written approval of Lender;
2.4.4 with respect to any amendments or supplements to the Plans, to which Lender shall have given its prior written approval, file all such amendments and supplements with, and obtain all necessary approvals from, all governmental authorities having jurisdiction thereof and promptly deliver true copies thereof to Lender;
2.4.5 permit Lender and its representatives to enter upon the Premises and inspect the Improvements at all times during normal business hours and examine all detailed plans, shop drawings, specifications and other books and records relating to the Premises and the Improvements;
2.4.6 not enter into any lease with respect to the Premises (excepting equipment leases) without first having submitted to the Lender a copy of said lease together with a duly executed subordination of lease agreement;
2.4.7 within five (5) days after construction of the foundation has been completed, deliver a certificate from an engineer or surveyor satisfactory to Lender to the effect that no part of the foundation or Improvements encroaches on any adjoining parcel of land, that the foundation is located on the Premises in accordance with the Plans, and that all Improvements then constructed are contained within the boundaries of the Premises and are in compliance with all applicable setback (front, side, and rear) requirements;
2.4.8 permit Lender to erect an appropriate sign on the Premises at such location as Lender, in its discretion, may determine, indicating that the Improvements are being financed by Lender;
2.4.9 furnish or cause to be furnished to Lender:
2.4.9.1 as soon as available, but in any event upon filing with applicable taxing authorities, a copy of each federal and state tax return of Borrower and any guarantors;
2.4.9.2 as soon as available, but in any event within fifteen
(15) days after the close of each fiscal month: (a) a statement of stockholders'
equity and a statement of changes in cash flow of Borrower for such fiscal
month; (b) income statement of Borrower for such fiscal month; and (c) balance
sheets of Borrower as of the end of such fiscal month-all such statements to be
in reasonable detail, including all supporting schedules and comments and any
management letters issued with respect to Borrower; the statements and balance
sheets to be certified as accurate and complete by the President or chief
financial officer of Borrower and acceptable to Lender in accordance with
generally accepted accounting principles, such statement to present fairly the
financial position and results of operations of Borrower;
2.4.9.3 as soon as available, but in any event within forty-
five (45) days after the close of each fiscal quarter: (a) a statement of stockholders' equity and a statement of changes in cash flow of IP Fibre Devices (UK) Limited for such fiscal quarter; (b) income statement of 113 Fibre Devices (UK) Limited for such fiscal quarter; and (c) balance sheets of IP Fibre Devices (CK) Limited as of the end of such fiscal quarter - all such statements to be in reasonable detail, including all supporting schedules and comments and any management letters issued with respect to IP Fibre Devices (UK) Limited; the statements and balance sheets to be certified as accurate and complete by the President or chief financial officer of IP Fibre Devices (UK) Limited and acceptable to Lender in accordance with generally accepted accounting principles, such statement to present fairly the financial position and results of operations of IP Fibre Devices (UK) Limited and to be stated in United States dollars;
2.4.9.4 as soon as available, but in any event within ninety (90) days after the close of each fiscal year: (a) a statement of stockholders' equity and a statement of changes in cash flow of each of Borrower and IP Fibre Devices (UK) Limited for such fiscal year: (b) income statement of each of Borrower and IP Fibre Devices (UK) Limited for such fiscal year; and (c) balance sheets of each of Borrower and IP Fibre Devices (UK) Limited as of the end of such fiscal year-all such statements to be in reasonable detail, including all supporting schedules and comments and any management letters issued with respect to each of Borrower and IP Fibre Devices (UK) Limited; the statements and balance sheets to be prepared upon audit by an independent certified public accountant selected by each of Borrower and IP Fibre Devices (UK) Limited and acceptable to Lender in accordance with generally accepted accounting principles, such statement to present fairly the financial position and results of operations of each of Borrower and IP Fibre Devices (UK) Limited and, in the case of IP Fibre Devices (UK) Limited, to be stated in United States dollars;
2.4.9.5 if Borrower becomes a public company, quarterly financial statements required to be filed with the Securities and Exchange Commission in lieu of the monthly statements required by Section 2.4.9.2 above and, promptly after the sending or making available or filing of the same, copies of all reports, proxy statements, and financial statements that Borrower sends or makes available to its stockholders and all registration statements and reports that the Borrower or any guarantor files with the Securities and Exchange Commission or any regulatory agency; and
2.4.9.6 as soon as available, but in any event within ninety (90) days after the end of each calendar year, complete, accurate, signed personal financial statements of Valentin P. Gapontsev, in form satisfactory to Lender;
2.4.10 furnish Lender such budgets and revisions of budgets as Lender may require in order to show the estimated cost of construction of Improvements and the amount of funds required, at any given time, to pay for the completion thereof;
2.4.11 in the event that any of the Improvements shall be damaged or destroyed by fire or any other casualty exceeding $250,000.00 as determined by an independent insurance adjuster, and Lender shall have agreed in its business judgment, after reviewing the delay, if any, caused by such casualty loss and the impact upon Borrower's business plans and prospects and financial condition, to make the proceeds of any fire insurance available, proceed with the restoration thereof and diligently prosecute the work of restoration to completion. No part of the cost of such restoration shall be made the basis of
any application for advances of Loan Proceeds under this Agreement unless all proceeds of insurance shall be first exhausted in the restoration of the damage to the Improvements;
2.4.12 cooperate fully with Lender with respect to any proceedings before any court, board or governmental agency which may in any way affect the rights of Lender hereunder or any rights obtained by Lender under any of the Security Instruments and, in connection therewith, permit Lender, at its election, to participate in any such proceedings;
2.4.13 make no changes in ownership beyond those permitted by Section 2.4.18 below, or in the nature of business of the Borrower or the active involvement of Valentin P. Gapontsev in the operations of the Borrower, without the prior written consent of the Lender, which consent shall not be unreasonably withheld or conditioned;
2.4.14 maintain its principal depository accounts with the Lender;
2.4.15 establish and maintain with the Lender a construction fund account for all funds used by Borrower for construction of the Improvements, including, without limitation, Loan Proceeds;
2.4.16 establish and maintain with Lender a segregated account into which shall be deposited all first round equity funds raised by Borrower through private placements during the term of the Loan;
2.4.17 maintain, at all times, a Debt Service Coverage Ratio of not less than 1.20:1.00, to be tested as of the end of each fiscal year of Borrower. For purposes of this Section 2.4.17, "Debt Service Coverage Ratio" means, for any applicable fiscal period, the ratio equal to (i) net profit of Borrower plus depreciation and amortization divided by (ii) (a) current maturities of long term debt and capital leases, plus (b) interest expense of Borrower;
2.4.18 not permit any transfer, sale, redemption, retirement, or other change in the ownership of more than twenty percent (20%) of the outstanding capital stock of Borrower, without Lender's prior written consent, which consent shall not be unreasonably withheld or conditioned;
2.4.19 permit the Lender to conduct quarterly field examination of Borrower at Borrower's cost and expense not exceeding $1,000.00 per examination; and
2.4.20 pay, perform and observe all obligations now existing, or arising in the future, to Massachusetts Capital Resource Company ("MCRC") or any other subordinated lender pertaining to financing provided with respect to the construction of the Improvements.
2.5 Total Project Budget
2.5.1 Borrower represents and warrants that Exhibit D attached hereto contains a complete and full enumeration of all costs (hard, soft, and land costs) which Borrower anticipates will be incurred in connection with the construction and development of the Improvements and in connection with the starting up of the operation of the Improvements; Exhibit D being hereinafter referred to as the "Total Project Budget."
2.5.2 The Total Project Budget will be financed in accordance with Exhibit D and this Agreement by:
2.5.2.1 $5,500,000.00 in equity funds or subordinated debt from MCRC, or binding commitments acceptable to Lender for equity injections or subordinated debt from MCRC in such amounts, to be provided by Borrower; and
2.5.2.2 the balance (not to exceed $6,500,000.00) from the Loan Proceeds.
2.5.3 It is understood and agreed that:
2.5.3.1 initial equity funds required to be provided by Borrower shall be fully expended in payment of items listed in the Total Project Budget prior to the disbursement of any of the Loan Proceeds by Lender, and any subordinated loans from MCRC shall be disbursed pari passu with Loan Proceeds disbursed by Lender;
2.5.3.2 the undistributed Loan Proceeds and subordinated loans to be disbursed by MCRC at all times shall equal or exceed the amount necessary to pay for the completion of the Improvements, including (i) all items set forth in the Total Project Budget; (ii) all incurred cost overruns and incurred costs for items not included in the Total Project Budget; and (iii) all cost overruns and costs not included in the Total Project Budget which Lender deems likely to be incurred;
2.5.3.3 the undistributed portion of the Loan Proceeds allocated to each item in the Total Project Budget at all times shall equal or exceed the amount necessary to pay for such items;
2.5.3.4 if for any reason the amount of such undistributed Loan Proceeds with respect to the Improvements or any of the individually budgeted items set forth in Exhibit D shall at any time be, or become, or in the judgment of Lender appear reasonably likely to become, insufficient for the purpose described in Subsections 2.5.3.2 or 2.5.3.3 (regardless of how such condition may be caused), Borrower will, within five (5) days after written request by Lender, deposit an amount equal to the deficiency with Lender, which deposit first shall be exhausted before any further disbursement of the Loan Proceeds shall be made; and
2.5.3.5 the amount of the outstanding indebtedness of Borrower to Lender shall not exceed 80% of the fair market value of the Premises as determined from time to time by appraisals acceptable to Lender.
2.6 Advances of Loan Proceeds
2.6.1 Provided Borrower shall have first expended $2,500,000.00 of its initial equity funds in the payment of hard costs listed in the Total Project Budget as certified to by Lender's construction representative or in the payment of soft costs listed in the Total Project Budget as verified by proof satisfactory to Lender; provided Borrower shall not be in default under, and there shall exist no event of default under, this Agreement or the Note, or any of the Security Instruments, or any other agreement or instrument executed in connection herewith, nor shall there exist any condition or event which, with the giving of notice or lapse of time, or both, would constitute such an event of default; provided Borrower shall have complied with the provisions of Section 2.2 hereof; and provided Borrower shall have paid all interest charges then due,
and all fees of Lender's construction representative and legal fees incurred in connection with the construction of the Improvements or the Note or the Loan evidenced thereby, and subject to the provisions of Section 2.5 hereof, Lender, upon written application by Borrower (made not less than seven (7) business days prior to the date of the requested advance under this Section 2.6 and made not more often than every thirty (30) days), shall make advances from the Loan Proceeds pari passu with any subordinated loans from MCRC or equity funds in excess of the first $2,500,000.00 of equity as hereinafter specified.
2.6.2 The amount of each such advance, together with advances from MCRC, shall represent:
2.6.2.1 ninety-five percent (95%) of the total "hard costs" incurred by Borrower (i.e., costs incurred under the Construction Contract) and approved by Lender in conformance with the budgeted expenses enumerated in Exhibit D in connection with the construction of the Improvements as of the date of the advance application in excess of funds required to be provided and expended by Borrower under the terms hereof as of the date of said advance application, less any amounts previously advanced by Lender from the Loan Proceeds but in no event more that the amount certified by Lender's construction representative (whose costs and fees shall be borne by the Borrower) as then being due and payable; and
2.6.2.2 such portion of the "soft costs" enumerated in Exhibit D incurred by Borrower in connection with the construction of the Improvements as of the date of the advance application, as Lender in its uncontrolled discretion shall deem reasonable in relation to the hard costs incurred as of the date of the advance application, provided that the Lender agrees that it shall advance Loan Proceeds to pay the architect's fees included in the Construction Contract.
2.6.3 Each application for advances pursuant to this Section 2.6. must be accompanied by the following:
2.6.3.1 a completed itemized request for payment, signed by Contractor and Borrower on a standard AIA Requisition Form or in such other form approved by Lender;
2.6.3.2 the written report of the Title Insurance Company as of the date of the making of such advance, affirmatively insuring such advance and that there are no liens or other encumbrances on the Premises (other than real estate taxes for the then current year, payment of which is not in default, the Security Instruments and such other liens and encumbrances as appeared in the policy of title insurance delivered prior thereto to Lender) and no notice of contract or other notice of intention to file liens thereon in any public office; unless released, subordinated or waived as provided in subparagraph 2.6.3.4 of this Section 2.6;
2.6.3.3 Lender's inspection and verification that, or (at Lender's option) a certificate of the construction representative of Lender, as selected by Lender in its sole discretion (who will make monthly inspections of the Premises and Improvements on Lender's behalf, the cost of each such inspection to be borne by Borrower), that all work performed at the site of construction when the advance is requested has been performed in good and workmanlike manner, that all materials and fixtures usually furnished and installed at that time have been furnished and installed, all in accordance with the Plans, and that sufficient hard cost Loan Proceeds remain undisbursed to complete the Improvements in accordance with the Plans and the Total Project
Budget set forth in Exhibit D;
2.6.3.4 such fully executed lien releases, waivers, partial waiver and subordination forms, and affidavits from, or the submission of other appropriate forms by, Borrower, Contractor, subcontractors and materialmen as Lender may require; and
2.6.3.5 an affidavit of Borrower that as of the date of the advance application, Borrower knows of no material or substantive fact which will or could in any way impair completion of the Improvements in accordance with the Plans or impair the timely repayment of the Loan or interfere with the operation of the Improvements for their intended purpose.
2.6.4 The making of any advance or any part of an advance shall not be deemed an approval or acceptance by Lender of the work theretofore done or of materials theretofore furnished.
2.6.5 Advances of the Loan Proceeds made pursuant to this Section 2.6
shall, at the option of Lender, be made (i) directly to Borrower by check or
wire transfer, or by depositing same in Borrower's checking account with Lender,
(ii) by check payable to Borrower and Contractor jointly and delivered either to
Borrower or Contractor, (iii) by check or wire transfer payable to Contractor
or, after the occurrence of an Event of Default or if the Lender determines it
is necessary to protect its lien upon the Premises, directly to other
subcontractors, materialmen, and creditors of the Improvements, (iv) to the
Title Insurance Company by check or wire transfer for disbursement in accordance
with Lender's directions, or (v) by any combination of the above. Lender
reserves the right to condition each and every advance pursuant to this Section
2.6.5 upon Borrower's certification that such advance(s) has or have been made
within such time as necessary to grant and/or preserve the priority of Lender's
lien on the Premises.
2.6.6 Lender shall advance to Borrower the balance of the funds to be
loaned hereunder for which Borrower has qualified (but not earlier than thirty
(30) days after the last advance of funds provided under this Section 2.6) as
soon as Borrower shall have delivered to Lender the following:
2.6.6.1 a written certificate of the construction representative selected by Lender, that the construction of the Improvements and the installation of the equipment to be installed therein has been completed in a good workmanlike manner in accordance with the Plans;
2.6.6.2 a duly executed, notarized and recorded Notice of Substantial Completion;
2.6.6.3 a written report of the Title Insurance Company that there are no liens or other encumbrances on the Premises (other than real estate taxes for the then current year, payment of which is not in default, the Mortgage and such other liens and encumbrances as appear in the policy of title insurance delivered prior thereto to Lender) and no notices of contract or other notice of intention to file liens thereon in any public office; if not previously submitted to and accepted by Lender in a format acceptable to Lender, a certificate by Borrower in form and substance satisfactory to Lender, listing all categories of Improvements costs and the amount paid by Borrower with respect to each;
2.6.6.4 the written certificates of Borrower and the Contractor that they, and each of them, have received no affidavits, notices of identification, or other notices in connection with the obtaining of a mechanic's lien by any contractor, subcontractor, subsubcontractor, materialman or laborer;
2.6.6.5 such lien releases, notices of dissolution of lien, waivers, subordinations and affidavits from, or the submission of other appropriate forms by Borrower, Contractor, any architect, subcontractors and materialmen as Lender may require;
2.6.6.6 an affidavit of Borrower that as of the date of the final advance application Borrower knows of no material or substantive fact which will or could in any way negatively impact the Improvements, repayment of the Loan, or operation of the Premises for their intended purpose;
2.6.6.7 a copy of the original permanent certificate of occupancy and all other applicable certificates, licenses, consents and approvals issued or required to be issued by the various governmental authorities having jurisdiction with respect to the Improvements and by the appropriate Board of Fire Underwriters, or other similar bodies; and
2.6.6.8 true, correct and complete copies of "as built" plans including the location of foundations, underground utilities, septic systems, retention and detention ponds, irrigation wells, drains, and irrigation system components.
2.6.7 Lender, in its sole discretion, may advance parts or the whole of any advances before the requirements in Section 2.6.3 or 2.6.6 are complied with, and all such advances or payments shall be deemed to have been made pursuant to this Agreement, provided Lender will consult with Borrower prior to doing so except in cases of emergency.
2.6.8 Borrower agrees that Lender shall assume no duty with respect to disbursement of the Loan Proceeds and that any sums disbursed by Lender in good faith and in reliance upon this Agreement, or the Security Instruments, shall be secured by the lien of the Security Instruments, and that Lender, in its discretion, may make such changes in the method of disbursing the Loan Proceeds and the conditions precedent thereto as Lender may deem reasonable.
2.6.9 With the exception of change orders of $10,000.00 or less in each instance up to an aggregate sum of $100,000.00, at no time shall Lender be under any obligation to make advances of the Loan Proceeds for any costs or expenses not specifically provided for in the Total Project Budget or for any costs or expenses in excess of the specific amount budgeted for such cost or expense in the Total Project Budget, all of which costs and expenses shall be promptly paid for by Borrower from Borrower's equity funds.
2.6.10 All interest payments due under the Note shall be paid by
Borrower. Borrower shall not be reimbursed for interest payments allocable to
periods prior to the commencement of construction of the Improvements. After the
commencement of construction of the Improvements, advances from the Loan
Proceeds for reimbursement of interest paid under the Note and for payment of
other soft costs shall be made (i) only in conjunction with approved advances
for hard construction costs and shall not be the basis for separate advances,
(ii) only to the extent provided for in the Total Project Budget, and (iii) only
if agreed to by Lender in accordance with Section 2.6.2.2 hereof.
2.6.11 Borrower shall promptly pay when due from Borrower's own funds, any costs for which Lender makes no advance pursuant to the terms of this Agreement.
2.6.12 Any sum which, in accordance with any provision of this Agreement, shall be payable by Borrower to Lender, at the election of Lender, shall be deemed an advance by Lender to Borrower pursuant to the provisions of this Agreement.
2.6.13 If Borrower shall fail to promptly pay (i) any installment of interest due under the Note, (ii) any construction supervisory fee incurred by Lender pursuant to Section 2.6.3.3 hereof, (iii) any expenses incurred by Lender as set forth in Section 2.10 hereof (including without limiting the generality of the foregoing, legal fees) or (iv) any other sums due to Lender under the Note, this Agreement or any of the Security Instruments, Lender shall be authorized to charge Borrower's checking account with Lender for the amount so due without the further approval of Borrower.
2.6.14 Lender reserves the right to refuse to make any advance(s) of the Loan (i) if, in Lender's sole determination, to do so would result in the advance being made more than twenty-five (25) days after the last day of the period stated in an accurate, duly executed partial waiver and subordination of lien form in substantially the form provided by M.G.L. c.254, (S)32; (ii) if, in Lender's sole determination, to do so would jeopardize the priority of the liens granted to Lender pursuant to the Security Instruments; (iii) if, following Lender's request, Borrower fails to record, or to cause to be recorded, a bond pursuant to M.G.L. c.254, (S) 14 sufficient in form, substance and amount to dissolve any lien which may encumber the Premises; or (iv) if, in Lender's discretion, reasonably exercised, the Borrower's ability to repay the Loan is impaired; or (v) if there shall have been filed or recorded documents claiming a lien pursuant to M.G.L. c.254, (S)4, which lien or claim of lien is not dissolved or waived prior to or contemporaneously with said advance.
2.7 Insurance
Borrower shall maintain insurance at its own expense in the form, type (including without limitation, fire, extended coverage, liability, builder's risk. collapse, earthquake and workers' compensation) and amounts reasonably required by Lender, which insurance shall name Lender as an additional insured party and loss payee and shall (to the extent obtainable) provide that (i) such insurance may not be cancelled or amended without at least thirty (30) days prior written notice to Lender, and (ii) no act or omission or negligence of Borrower, its agents or employees, shall in any way affect the validity of such insurance insofar as Lender is concerned. Borrower has the right of free choice in the selection of the agent and insurer through or by which insurance required hereunder is to be placed; provided, however, that all such insurance coverage shall be written by a company with a general policyholder's rating of A or A+ in Best's latest Rating Guide. Certificates evidencing such insurance coverage shall be promptly delivered to Lender. If Borrower shall fail to provide the insurance herein required, Lender may procure same at Borrower's expense, and such expenditure shall be secured by the Security Instruments and be considered an advance by Lender to Borrower pursuant to the provisions of this Agreement.
2.8 Events of Default
The occurrence of any one of the following events shall constitute an Event of Default under this Agreement:
2.8.1 if Borrower fails to pay any principal, interest or late charge under the Note within ten (10) days of the date due or at stated maturity or by acceleration or pursuant to any prepayment requirements;
2.8.2 if Borrower fails to observe or perform any other covenant, condition or agreement on its part to be observed or performed under the provisions of the Note, this Agreement or any of the Security Instruments within thirty (30) days after the earlier of (a) the date of written notice of default to Borrower from Lender, or (b) the date on which Borrower knew or should have known of the existence of such failure;
2.8.3 if Borrower fails to pay any amount of money within ten (10) days of the date any such sum becomes due or fails to observe or perform any other covenant, condition or agreement which is the obligation of Borrower to the Lender under any other existing or future note, mortgage, agreement or obligation within thirty (30) days after the earlier of (a) the date of written notice of default to Borrower from Lender, or (b) the date on which Borrower knew or should have known of the existence of such failure;
2.8.4 if Borrower is unable to pay its debts generally as they become
due; an involuntary petition against (if the same is not removed within thirty
(30) days), or a voluntary petition by, Borrower under any bankruptcy,
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or insolvency law; if the Borrower makes any general assignment for the benefit
of creditors; or if any trustee, custodian, receiver or liquidator appointed for
the Borrower or of all or any part of the Premises or any or all of the rents or
income thereof and such appointment remains in effect for more than thirty (30)
days;
2.8.5 if at any time title to the Premises and the Improvements is not satisfactory to Lender by reason of any lien, charge, encumbrance, title condition, or exception (other than exceptions contained in the said title insurance policy to be issued to Lender);
2.8.6 if the Title Insurance Company shall refuse to insure any advance made hereunder to be secured by the Mortgage as a valid second priority lien on the Premises and the Improvements (to the extent constructed and equipped);
2.8.7 if Borrower assigns or attempts to assign this Agreement, or any advance made or to be made hereunder, or any interest herein or therein, or if the Premises are conveyed or encumbered (except for the execution of leases consented to by Lender), in any way without the written consent of Lender;
2.8.8 if any survey, report, or examination, discloses that the Improvements, or any portion thereof, encroach upon or project over a street, or upon or over adjoining property, or violate any setback or other restriction, however created, or any zoning regulations, or any building restriction of any governmental authority having jurisdiction;
2.8.9 if, for any reason, construction of the Improvements had not been commenced within thirty (30) days of the date of this Agreement;
2.8.10 if the Improvements are materially damaged or destroyed by fire or otherwise in an amount exceeding $250,000.00 as determined by an independent insurance adjuster acceptable to Lender, and adequate insurance is not available to restore such damage within thirty (30) days of the occurrence of such damage or destruction (as a result of a determination of Lender pursuant to Section 2.4.11 not to make insurance proceeds available or for any other reason);
2.8.11 if Borrower or Contractor does not construct any of the Improvements substantially in accordance with the Plans previously furnished to and approved in writing by Lender, as the same may be amended and supplemented with the approval of Lender, and which have been. filed with and approved by all governmental authorities having jurisdiction with respect to the Premises;
2.8.12 if any representation or warranty herein, or in any report, certificate, financial statement, or other instrument furnished in connection with this Agreement or the advances made hereunder by or on behalf of Borrower shall prove to be false, misleading, or incomplete in any material respect;
2.8.13 if any mechanics', laborers', materialmen's, or similar statutory liens or any notice thereof shall be filed against the Premises and/or the Improvements and shall not be discharged, subordinated or dissolved within twenty (20) days of such filing;
2.8.14 if Borrower shall default in the due observance or performance of any covenant, condition or agreement contained in this Agreement on its part to be paid. performed, or observed beyond any applicable grace or cure period;
2.8.15 if any Event of Default described in the Note or any of the Security Instruments shall occur or any breach or default in the observance or performance of any condition, term, agreement, or covenant contained in the Note or the Security Instruments, or any of them, or any other instrument securing the Note after giving effect to any grace or cure period contained therein shall occur;
2.8.16 if any voucher is submitted at any time which Borrower knows or has reason to know has not been earned by the payee for services performed or for materials used in or furnished with respect to the Improvements;
2.8.17 if any cessation occurs at any time in construction of the Improvements for more than two (2) weeks except for strikes, riots, or other causes beyond Borrower's control, or if any substantial change is made in the schedule for the construction thereof from that provided in the Plans or this Agreement;
2.8.18 if the cost to complete the Improvements, as estimated by
Lender in good faith, at any time appears likely to exceed the balance of funds
retained by Lender after deducting from the amount hereof the total of unpaid
vouchers outstanding, and Borrower fails to pay the deficiency as required by
Section 2.5.3.4 hereof;
2.8.19 if Borrower requests a termination of the Loan or confesses inability to continue performance in accordance with this Agreement; or
2.8.20 if at any time Borrower permits any transfer, sale, redemption, retirement, or other change in the ownership of more than forty-nine percent (49%) of the outstanding voting stock of Borrower.
2.8.21 if IP Fibre Devices (UK) Limited defaults on its obligations under, or terminates or attempts to terminate, the Corporate Guaranty;
2.8.22 if Dr. Valentin P. Gapontsev defaults on his obligations under, or terminates or attempts to terminate, the Individual Guaranty; or
2.8.23 the occurrence of a default or event of default under any of the Security Instruments beyond any applicable grace period.
2.9 Lender's Rights and Remedies Upon Default
2.9.1 Upon the occurrence of any Event of Default as hereinabove referred to in Section 2.8, all obligations on the part of Lender to make advances under this Agreement, if Lender so elects, shall cease and terminate, and, at the option of Lender, the Note shall become immediately due and payable, and Lender shall thereupon be authorized and empowered to exercise any rights of foreclosure or as otherwise provided for the realization of any security for the Note covered by any of the Security Instruments; but Lender may make any advances or portions of advances, after the occurrence of any such Event of Default, without thereby waiving its right to demand payment of Borrower's indebtedness evidenced by the Note and secured by the Security Instruments, and without becoming liable to make any other or further advances as hereinabove contemplated by this Agreement.
2.9.2 In addition to the remedies hereinabove provided, upon the occurrence of any one or more of the Events of Default, Lender shall be authorized and empowered, at its election, (i) to enter upon the Premises and construct, equip and/or complete the Improvements in accordance with the Plans, with such changes therein as Lender may from time to time, in its sole discretion, deem appropriate, and to appoint watchmen to protect the Improvements, all at the risk, cost and expense of Borrower; (ii) to discontinue, at any time, any work with respect to the Improvements commenced by it or change any course of action undertaken by it in connection therewith, and shall not be bound by any limitations or requirements of time, whether set forth herein or otherwise; and/or (iii) to assume any construction contract or related agreement made by Borrower in any way pertaining to the Improvements and to take over and use all or any part or parts of the labor, materials, supplies, and equipment contracted for by Borrower, whether or not previously incorporated into the Improvements, all in the sole discretion of Lender.
2.9.3 In connection with any construction, equipping, and/or completion of the Improvements undertaken by Lender pursuant to the provisions of Subsection 2.9.2 (but without intending hereby to limit the powers and discretions conferred by said subsection), Lender may engage builders, contractors, architects, engineers, and others for the purpose of furnishing labor, materials, and equipment for the Improvements; pay, settle, or compromise all bills or claims which may become liens against the Improvements and the Premises or which have been or shall be incurred in any manner in connection with such construction, equipping, and/or completion of the Improvements; and take such action or refrain from acting hereunder as Lender may, in its sole discretion, from time to time determine, without limitation, to carry out the intent of this Section 2.9.
2.9.4 Borrower shall be liable to Lender for all costs paid or incurred for the construction, completion, and/or equipping of the Improvements, whether the same shall be paid or incurred pursuant to the provisions of Subsections 2.9.2 or 2.9.3, or otherwise, and all payments made or liabilities incurred by Lender hereunder of any kind whatsoever shall be paid by Borrower to Lender on demand, with interest to the date of payment at the rate set forth in the Note and shall be secured by the Security Instruments.
2.9.5 Upon the occurrence of any of the Events of Default, the rights, powers, and privileges provided in this Section 2.9 and all other remedies available to Lender under this Agreement or at law or in equity may be exercised by Lender at any time and from time to time, whether or not the indebtedness evidenced and secured by the Note and the Security Instruments shall be due and payable, and whether or not Lender shall have instituted any foreclosure proceedings or other action for the enforcement of its rights under the Note or any of the Security Instruments.
2.9.6 For the purpose of carrying out the provisions and exercising the rights, powers and privileges granted by this Section 2.9, Borrower hereby irrevocably constitutes and appoints Lender its true and lawful attorney-in-fact, and with full power of substitution, to execute, acknowledge, and deliver any instruments, and do and perform any acts which are referred to in this Section 2.9 in the name and behalf of Borrower. The power vested in said attorney-in-fact is, and shall be deemed to be, coupled with an interest and cannot be revoked.
2.10 Expenses of Lender
Borrower shall pay Lender, on demand, any and all expenses incurred or paid by Lender which relates to this loan transaction, this Agreement, the Note, and any Security Instruments, including (without limitation) the examination of title to the Premises, the cost of title insurance, charges for examining public records in connection with advances from the Loan Proceeds, inspections, drawing of papers, recording and filing fees, revenue stamps, if any, and the reasonable fees and disbursements of counsel and Lender's construction representative. At Lender's election all of such fees or expenses may be paid from the Loan Proceeds hereunder and in such event, shall constitute additional indebtedness of Borrower evidenced by the Note and secured by the Security Instruments.
2.11 Assignment of This Agreement
Lender may assign, negotiate, or pledge all or any portion of its rights under this Agreement or any of its rights or security with respect to the Note and the Security Instruments, and, in case of such assignment, Borrower shall accord full recognition thereto. Borrower shall not assign or attempt to assign directly or indirectly, any of its rights under this Agreement or under any instrument referred to herein without the prior written consent of Lender.
2.12 General Provisions
2.12.1 The captions in this instrument are for convenience and reference only and do not define, limit, or describe the scope of the provisions hereof.
2.12.2 The terms, covenants, agreements, and conditions contained herein shall extend to, include and inure to the benefit of, and be binding upon Borrower and Lender and their respective heirs, executors, administrators,
successors and assigns, and may not be terminated, changed, or amended orally.
2.12.3 Any notice, demand, request, instruction, document, or other communication to be given hereunder or in connection herewith shall be in writing and sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:
If to Lender: FAMILY BANK, FSB 370 Main Street Worcester, MA 01608 Attention: Senior Commercial Loan Officer with a copy to: George W. Tetler III, Esquire Bowditch & Dewey, LLP 311 Main Street Worcester, MA 01608 If to Borrower: IPG PHOTONICS CORPORATION 660 Main Street Sturbridge Business Park P.O. Box 519 Sturbridge, MA 01566 Attention: Controller with a copy to: Joel P. Greene, Esquire Lane, Greene, Murtha & Edwards, LLP 446 Main Street, Suite 1500 Worcester, MA 01608 |
Any party may change the address to which notices are to be sent to it by giving written notice of such change of address to the other party in the manner herein provided for giving notice. Any such notice, demand, request, or other communication shall be deemed given when mailed as aforesaid.
2.12.4 BORROWER AND LENDER MUTUALLY WAIVE ANY RIGHTS TO A TRIAL BY JURY, WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM, BROUGHT OR INSTITUTED BY ANY PARTY TO THIS AGREEMENT OR ANY OF THEIR SUCCESSORS AND ASSIGNS, WHICH RELATES DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE SECURITY INSTRUMENTS, THE OBLIGATIONS, OR THE RELATIONSHIP BY AND AMONG BORROWER, ANY CO-OBLIGOR OR GUARANTOR, LENDER AND/OR ANY OR ALL OF THEM.
2.12.5 This Agreement has been made in the Commonwealth of Massachusetts, and the provisions thereof shall be governed by and construed and interpreted in accordance with the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as a sealed instrument as of the day and year first above written.
FAMILY BANK, FSB
By /s/ Douglas J. G. MacLean ------------------------------------- ------------------------------------- Witness Douglas J. G. MacLean, Vice President |
IPG PHOTONICS CORPORATION
/s/ Joel P. Greene By /s/ Valentin P. Gapontsev ------------------------------------- ------------------------------------- Witness Valentin P. Gapontsev, Its President |
EXHIBIT A
The land in Oxford, Worcester County, Massachusetts situated on the easterly side of Old Webster Road and being shown as two (2) parcels of land on a plan entitled "Boundary Plan prepared to Elmar Realty Trust, by CME Associates, Inc., Engineers & Planners, Southbridge, Massachusetts, Scale 1" = 100, dated October 1, 1999", recorded with the Worcester Registry of Deeds in Plan Book 748, Plan 89, and shown as "N/F Elmar Realty Trust, area = 2.4 acres" and "N/F Elmar Realty Trust, area = 34.0 Acres, more or less".
Together with all rights of the Borrower, if any, in and to the French River.
BEING the same premises conveyed to the Borrower by deed of Elmar Realty Trust dated November 11, 1999 and recorded with the Worcester Registry of Deeds in Book 22042, Page 324.
EXHIBIT B
PLANS AND SPECIFICATIONS
DELIVERED DIRECTLY TO THE LENDER
EXHIBIT C
PERMITTED EXCEPTIONS
NONE
EXHIBIT D
TOTAL PROJECT BUDGET
DELIVERED DIRECTLY TO THE LENDER
EXHIBIT 10.19
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT, dated as of November 15, 2004 is by and between IPG PHOTONICS CORPORATION, a Delaware corporation with a principal place of business at 50 Old Webster Road, Oxford, Massachusetts 01540 (the "Borrower") and BANKNORTH, N.A., a national banking association with its principal office at 370 Main Street, Worcester, Massachusetts 01608 (the "Lender").
WITNESSETH:
BACKGROUND. The Borrower has requested the Lender to lend it up to the sum of $3,000,000.00 on a revolving line of credit basis (the "Loan"), and the Lender is willing to do so upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises herein contained, and each intending to be legally bound hereby, the parties agree as follows:
ARTICLE 1.0 DEFINITIONS
As used herein:
"Accounts", "Chattel Paper", "Collateral", "Commercial Tort Claims", "Contracts", "Deposit Accounts", "Documents", "Electronic Chattel Paper", "Equipment", "Financial Assets", "Fixtures", "General Intangibles", "Goods", "Instruments", "Inventory", "Investment Property", "Letter-of-Credit-Rights", "Payment Intangibles", "Promissory Notes", "Supporting Obligations" and "Tangible Chattel Paper" shall have the same respective meanings as are given to those terms in the Uniform Commercial Code as presently in effect in The Commonwealth of Massachusetts, if not otherwise defined in this Agreement.
"Affiliate" means, as to any Person, each other Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or under common control with, such Person.
"Agreement" means this Loan and Security Agreement (together with any and all schedules and exhibits attached from time to time hereto), as the same may from time to time be amended, modified or supplemented.
"Blocked Account Deposit Agreement" means the Blocked Account Deposit Agreement dated as of January 16, 2002 between the Borrower and the Lender with respect to the Blocked Account, as amended by a First Amendment to and Ratification of Blocked Account Deposit Agreement dated as of even date herewith in the form attached hereto as Exhibit 1.01(A).
"Blocked Account" means Money Market Deposit Account No. 8720483150, IPG PHOTONICS CORPORATION for the benefit of Banknorth, N.A., Blocked Account.
"Borrowing Base" means, at any time, the amount computed on the Borrowing Base Certificate most recently delivered to, and accepted by, the Lender in accordance with this Agreement and equal to the lesser of:
(A) $3,000,000.00; or
(B) Seventy-five percent (75%) of the Eligible Accounts of the Borrower.
"Borrowing Base Certificate" means a fully completed certificate in the form of Exhibit 1.01(B) to this Agreement, and to include the worksheets, supporting documentation and schedules as may be required by the Lender, certified by the chief financial officer or chief accounting officer of the Borrower to be correct and delivered to, and accepted by, the Lender pursuant to Section 3.01(Q) or Section 6.01(B)(7).
"Business Day" means a day other than a Saturday, a Sunday, or a day on which commercial banks in Worcester, Massachusetts are authorized to close.
"Change in Control" means any circumstance by which forty-nine percent (49%) or more of the aggregate voting power of the Borrower's voting stock is directly or indirectly transferred from the current ownership of such voting power of the voting stock of the Borrower.
"Closing" has the meaning given to such term in Section 3.01.
"Collateral" has the meaning given to such term in Section 4.01.
"Current Assets" means, at any time, all assets that, in accordance with GAAP, should be classified as current assets on a balance sheet of the Borrower and its Subsidiaries.
"Demand Note" means the Demand Note referred to in Section 2.03.
"Eligible Account" means, at any time, an Account that the Lender in its sole discretion, determines is eligible for inclusion in the Borrowing Base and that conforms and continues to conform to each of the following conditions:
(A) The Account arose from a bona fide outright sale of Goods by the Borrower or from services performed by the Borrower, and such Goods have been shipped to the appropriate account debtors or their designees (or the sale has otherwise been consummated), or the services have been performed for the appropriate account debtors;
(B) The Account is based upon an enforceable order or contract, written or oral, for Goods shipped or held or for services performed, and the same were shipped, held, or performed in accordance with such order or contract;
(C) The title of the Borrower to the Account and, except as to the account debtor, to any Goods is absolute and is not subject to any prior assignment, claim, lien, or security interest, except Permitted Liens;
(D) The amount shown on the books of the Borrower and on any invoice or statement delivered to the Lender is owing to the Borrower, less any partial payment that has been made thereon by anyone;
(E) The Account is not subject to any claim of reduction, counterclaim, set-off, recoupment, or any claim for credits, allowances, or adjustments by the account debtor because of returned, inferior, or damaged Goods or unsatisfactory services, or for any other reason, except for customary discounts not to exceed two percent (2%) allowed for prompt payment;
(F) The account debtor has not returned or refused to retain, or otherwise notified the Borrower of any dispute concerning, or claimed nonconformity of, any of the Goods or services from the sale of which the Account arose;
(G) The Account is due and payable not more than sixty (60) days from the date of the invoice therefor;
(H) The Account is not more than sixty (60) days past due nor outstanding more than ninety (90) days from the date of the invoice therefor;
(I) The Account is not with an account debtor which has outstanding, at any time, fifty percent (50%) or more of its accounts on an aggregate basis for a period of ninety (90) days from the date of the invoice therefor;
(J) The Account does not arise out of a contract with, or order from, an account debtor that, by its terms, forbids or makes void or unenforceable the assignment by the Borrower to the Lender of the Account arising with respect thereto;
(K) The Borrower has not received any note, trade acceptance, draft, or other Instrument with respect to, or in payment of, the Account, nor any Chattel Paper with respect to the Goods giving rise to the Account, unless, if any such Instrument or Chattel Paper has been received, the Borrower immediately notifies the Lender and, at the latter's request, endorses or assigns and delivers the same to the Lender and the Lender accepts same;
(L) The Borrower has not received any notice of the death of the account debtor or a partner thereof; nor of the dissolution, termination of existence, insolvency, business failure, appointment of a receiver for any part of the property of, assignment for the benefit of creditors by, or the filing of a petition in bankruptcy or the commencement of any proceeding under any bankruptcy or insolvency laws by or against, the account debtor. Upon the receipt by the Borrower of any such notice, it will immediately give the Lender written advice thereof;
(M) The account debtor is not an officer, agent, employee, shareholder (other than JDS Uniphase), director, Subsidiary or other Affiliate of, or a sales representative for, the Borrower; and
(N) The Lender has not deemed such Account ineligible because of uncertainty about the creditworthiness of the account debtor or because the Lender determines, in the exercise of its business judgment, otherwise reasonably considers the collateral value thereof to the Lender to be impaired or its ability to realize such value to be insecure.
In addition to the foregoing, Eligible Account shall mean any amount receivable by the Borrower under any insurance policy covering Goods which have, within the preceding forty-five (45) days, been damaged or destroyed by fire or other direct casualty loss, provided that a claim therefor has been made in compliance with such insurance policy, to the extent that such claim has not been in any way denied or contested by the insurer and provided that such insurer, if such insurer were an account debtor of the Borrower, would be a qualified account debtor under this Section.
The enumeration of the aforementioned conditions shall not in any way alter the right of the Lender, in its sole discretion, to exclude any Account from being an Eligible Account for any purposes hereunder.
In the event of any dispute under the foregoing criteria as to whether an Account is or has ceased to be an Eligible Account, the decision of the Lender shall control.
"Event of Default" has the meaning provided in Section 7.01.
"Financial Statements" means those financial statements presented to the Lender by the Borrower in connection with the underwriting of the Loan as more particularly described in Exhibit 1.01(C) attached hereto.
"Financing Statements" means those certain Uniform Commercial Code Financing Statements duly authorized and authenticated by the Borrower and duly filed or recorded for the benefit of the Lender, as from time to time supplemented or amended.
"Fixed Assets" means, at any time, all assets (other than Current Assets) that should, in accordance with GAAP, be classified as assets on a balance sheet of the Borrower and its Subsidiaries.
"GAAP" means generally accepted accounting principles applied consistently, with such changes or modifications thereto as may be approved in writing by the Lender.
"Guarantor" means Valentin P. Gapontsev.
"Guaranty" means with respect to the Guarantor, a duly authorized and executed Limited Guaranty dated as of even date herewith in the form attached hereto as Exhibit 1.01(D), as may be ratified or amended from time to time.
"Indebtedness" means, as to the Borrower or any Subsidiary, all items of indebtedness, obligation or liability whether joint or several, matured or unmatured, liquidated or unliquidated, direct or contingent, including without limitation:
(A) All indebtedness guarantied, directly or indirectly, in any manner, or endorsed (other than for collection or deposit in the ordinary course of business) or discounted with recourse;
(B) All indebtedness in effect guarantied, directly or indirectly, through agreements, contingent or otherwise: (1) to purchase such indebtedness; or (2) to purchase, sell, or lease (as lessee or lessor) property, products, materials, or supplies or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such indebtedness or to insure the owner of the indebtedness against loss; or (3) to supply funds to, or in any other manner invest in, the debtor;
(C) All indebtedness secured by (or for which the holder of such indebtedness has a right, contingent or otherwise, to be secured by) any mortgage, deed of trust, pledge, lien, security interest, or other charge or encumbrance upon property owned or acquired subject thereto, whether or not the liabilities secured thereby have been assumed; and
(D) All indebtedness incurred as the lessee of goods or services under leases that, in accordance with GAAP, should not be reflected on the lessee's balance sheet.
"Intellectual Property" means trademarks, service marks, trade names, trade styles, logos, goodwill, trade secrets, patents, applications, and licenses acquired under any statutory, common law or registration process in any state or nation at any time, or under any agreement executed with any person or entity at any time. The term "license" refers not only to rights granted by agreement from the owner of patents, trade marks, service marks and the like, but also to rights granted by a franchisor under a franchise or similar agreement. The foregoing enumeration is not intended as a limitation of the meaning of the word "license".
"Intercreditor Agreement" means that certain Intercreditor Agreement dated as of November 15, 2004 by and between the Lender and JDS Uniphase, as from time to time amended.
"IP Fibre Devices" means IP Fibre Devices (UK) Limited, a company registered in England and Wales with Company Number 2989622, whose registered office is at Stuart House, 59 Catherine Place, London.
"IP Fibre Devices Subordination Agreement" means that certain Subordination Agreement by and between IP Fibre Devices and the Lender dated as of November 15, 2004, as from time to time amended.
"JDS Uniphase" means JDS Uniphase Corporation, a Delaware corporation.
"JDS Uniphase Subordination Agreement" means that certain Subordination Agreement by and between JDS Uniphase and the Lender dated as of November 15, 2004, as from time to time amended.
"Laws" means all ordinances, statutes, rules, regulations, orders, injunctions, writs, or decrees of any government or political subdivision or agency thereof, or of any court or similar entity established by any thereof.
"Liabilities" means all Indebtedness that, in accordance with GAAP, should be classified as liabilities on a balance sheet of the Borrower and its Subsidiaries.
"Loan Documents" includes the Notes, the Guaranty, the Blocked Account Deposit Agreement, the Mortgage and the documents, whether deliverable at or after the Closing, required under Article 4.0.
"Mortgage" means that certain Mortgage and Security Agreement dated as of April 28, 2000 and recorded with the Worcester District Registry of Deeds (the "Registry") in Book 22541, Page 78 as amended by First Amendment to Mortgage and Security Agreement dated as of April 10, 2001 and recorded with the Registry in Book 23885, Page 74, and by Second Amendment to Mortgage and Security Agreement dated as of even date herewith, to be recorded with the Registry, in the form attached hereto as Exhibit 1.01(E), as from time to time supplemented or amended.
"Mortgage Note" means that certain Promissory Note dated April 10, 2001 in the face amount of $8,560,000.00 issued by the Borrower to the Lender.
"Mortgaged Property" means the property owned by the Borrower and located on Old Webster Road, Oxford, Massachusetts, as such term is defined in the Mortgage.
"Notes" means the Demand Note and the Mortgage Note, individually and collectively.
"Obligations" is intended to be used in its most comprehensive sense and means the obligation of the Borrower to the Lender of whatever kind and description, whether direct or indirect, absolute or contingent, primary or secondary, joint or several, due or to become due, or held or to be held by, the Lender for its own account or as agent for another or others, whether created directly or acquired by assignment or otherwise and howsoever evidenced, whether now existing or hereafter incurred or acquired and whether by way of loan, guaranty, discount, letter of credit, lease or otherwise, including without limitation, the following obligations:
(A) To pay the principal of, and interest on, the Notes in accordance with the terms thereof and to satisfy all other liabilities to the Lender, whether hereunder or otherwise, whether now existing or hereafter incurred, matured or unmatured, direct or contingent, joint or several, including any extensions, modifications, renewals thereof and substitutions therefor.
(B) To repay to the Lender all amounts advanced by the Lender hereunder or otherwise on behalf of the Borrower, including, but without limitation, advances for principal or interest payments to prior secured parties, mortgagees, or lienors, or for taxes, levies, insurance, rent, or repairs to, or maintenance or storage of, any of the Collateral;
(C) To perform and observe all covenants, agreements and undertakings of the Borrower pursuant to the terms and conditions of this Agreement, the Notes, the Loan Documents or any other agreement or instrument now or hereafter delivered to the Lender by the Borrower;
(D) All obligations under any interest rate swap agreement, foreign exchange contract, any cap, floor or hedging agreement or other similar agreement, or other financial agreement or arrangement designed to protect the Borrower against fluctuations in any interest rate charged by the Lender under the Notes or otherwise, including any obligations of the Borrower arising out of or in connection with any Automated Clearing House ("ACH") Agreement relating to the processing of ACH transactions, together with all fees, expenses, charges and other amounts owing by or chargeable to the Borrower under any ACH Agreement;
(E) All obligations to reimburse the Lender, on demand, in connection with overdrafts and other amounts due to the Lender under any existing or future agreements relating to cash management services; and
(F) All obligations to reimburse the Lender, on demand, for all of the Lender's expenses and costs, including without limitation the reasonable fees and expenses of its counsel, in connection with the preparation, administration, amendment, modification, or enforcement of this Agreement and the documents required hereunder or related hereto, including, without limitation, any proceeding brought, or threatened, to enforce payment of any of the obligations referred to in the foregoing Paragraphs (A) through (E).
"Perfection Certificate" means a duly authorized and executed Perfection Certificate from the Borrower in the form of Exhibit 1.01(F) to this Agreement.
"Permitted Investments" means: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof; (b) without limiting the provisions of paragraph (d) below, investments in commercial paper maturing within one year from the date of acquisition thereof and having, at such date of acquisition, a rating of at least "A-2" or the equivalent thereof from Standard & Poor's Corporation or of at least "P-2" or the equivalent thereof from Moody's Investors Service, Inc.; (c) investments in certificates of deposit, bankers' acceptances and time deposits (including Eurodollar time deposits) maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with (i) the Lender or (ii) any domestic office of any other commercial bank of recognized standing organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $250,000,000 and is the principal banking Subsidiary of a bank holding company having a long-term unsecured debt rating of at least "A-2" or the equivalent thereof from Standard & Poor's Corporation or at least "P-2" or the equivalent thereof from Moody's Investors Service, Inc.; (d) investments in commercial paper maturing within one year from the date of acquisition thereof and issued by (i) the holding company of the Lender or (ii) the holding company of any other commercial bank of recognized standing organized under the laws of the United States of America or any State thereof that has
(A) a combined capital and surplus in excess of $250,000,000 and (B) commercial paper rated at least "A-2" or the equivalent thereof from Standard & Poor's Corporation or of at least "P-2" or the equivalent thereof from Moody's Investors Service, Inc.; (e) investments in repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (a) above entered into with any office of a bank or trust company meeting the qualifications specified in clause (c) above; (f) investments in money markets funds substantially all the assets of which are comprised of securities of the types described in clauses (a) through (e) above.
"Permitted Liens" means:
(A) Liens for taxes, assessments, or similar charges, incurred in the ordinary course of business, that are not yet due and payable;
(B) Pledges or deposits made in the ordinary course of business to secure payment of worker's compensation, or to participate in any fund in connection with worker's compensation, unemployment insurance, old-age pensions, or other social security programs;
(C) Liens of mechanics, materialmen, repairmen, warehousemen, carriers, or other like liens, securing obligations incurred in the ordinary course of business that are not yet due and payable;
(D) Good faith pledges or deposits not exceeding an aggregate amount of $150,000.00 made in the ordinary course of business to secure performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, not in excess of thirty percent (30%) of the aggregate amount due thereunder, or to secure statutory obligations, or surety, appeal, indemnity, performance, or other similar bonds required in the ordinary course of business;
(E) Encumbrances consisting of zoning restrictions, easements, or other restrictions on the use of real property, none of which materially impairs the use of such property by the Borrower in the operation of its business, and none of which is violated in any material respect by existing or proposed structures or land use;
(F) Liens in favor of the Lender;
(G) Existing liens set forth or described on Exhibit 1.01(G), attached hereto and made a part hereof;
(H) Purchase money security interests granted to secure not more than seventy-five percent (75%) of the purchase price of assets, the purchase of which does not violate this Agreement or any instrument required hereunder; and
(I) Liens securing Indebtedness permitted by Section 6.02(K) of this Agreement;
(J) The following, if the validity or amount thereof is being contested in good faith by appropriate and lawful proceedings, so long as levy and execution thereon have been stayed and continue to be stayed and they do not, in the aggregate, materially detract from the value of the property of the Borrower or any Subsidiary, or materially impair the use thereof in the operation of its business:
(1) Claims or liens for taxes, assessments, or charges due and payable and subject to interest or penalty;
(2) Claims, liens and encumbrances upon, and defects of title to, real or personal property, including any attachment of personal or real property or other legal process prior to adjudication of a dispute on the merits;
(3) Claims or liens of mechanics, materialmen, warehousemen, carriers, or other like liens; and
(4) Adverse judgments on appeal.
"Person" means any individual, corporation, limited liability company, partnership, association, joint-stock company, trust, unincorporated organization, joint venture, court, or government or political subdivision or agency thereof.
"Records" means correspondence, memoranda, tapes, discs, papers, books and other documents, or transcribed information of any type, whether expressed in ordinary or machine readable language.
"Stockholders' Equity" means, at any time the aggregate of Subordinated Indebtedness, plus the sum of the following accounts set forth on a balance sheet of the Borrower and its Subsidiaries prepared in accordance with GAAP: (A) the par or stated value of all outstanding capital stock; (B) capital surplus; and (C) retained earnings.
"Subordinated Indebtedness" means all Indebtedness incurred at any time by the Borrower or any Subsidiary, the repayment of which is subordinated to the Loan in form and manner satisfactory to the Lender. All currently existing Subordinated Indebtedness is so specified in Exhibit 1.01(H).
"Subordination Agreements" means each and every of the Intercreditor Agreement, the JDS Uniphase Subordination Agreement and the IP Fibre Devices Subordination Agreement.
"Subsidiary" means any Affiliate organized in any state or territory of the United States of America that is directly, or indirectly through one or more intermediaries, controlled by the Borrower or not less than 50% of the voting interest of which is owned, directly or through one or more intermediaries, by the Borrower.
1.02 Accounting.
Accounting terms used and not otherwise defined in this Agreement have the meanings determined by, and all calculations with respect to accounting or financial matters unless otherwise provided herein shall be computed in accordance with, GAAP.
ARTICLE 2.0 THE LOAN
2.01 Disbursement of the Loan.
The Lender will credit the proceeds of the Loan to the Borrower's deposit account with the Lender.
2.02 General Terms.
Subject to the terms hereof, the Lender will lend the Borrower, from time to time until the earlier of the date the Lender makes demand on the Demand Note or the occurrence of an Event of Default, such sums as the Borrower may request by reasonable same day notice to the Lender, received by
the Lender not later than 11:00 A.M. of such day, but which shall not exceed, in the aggregate principal amount at any one time outstanding, the lesser of the then existing Borrowing Base or $3,000,000.00 (the "Line of Credit Commitment"). The Borrower may borrow, repay without penalty or premium and reborrow hereunder, from the date of this Agreement until the earlier the date the Lender makes demand on the Demand Note or the occurrence of an Event of Default, the lesser of the then existing Borrowing Base or the Line of Credit Commitment in integral multiples of $50,000.00. It is the intention of the parties that the outstanding principal amount of the Loan shall at no time exceed the amount of the then existing Borrowing Base, and if, at any time, an excess shall for any reason exist, the full amount of such excess, together with accrued and unpaid interest thereon as herein provided, shall be immediately due and payable in full.
2.03 The Demand Note.
The Line of Credit Commitment shall be evidenced by a note, payable on demand, in the form attached hereto as Exhibit 2.03.
2.04 Interest Rate and Payments of Interest.
(A) Interest shall be paid as follows:
(1) Except as otherwise provided under Section 2.04(B), interest on the principal balance of the Loan from time to time outstanding will be payable at the rate(s) of interest and in the manner set forth in the Notes.
(2) Interest shall be calculated on the basis of a 360-day year, counting the actual number of days elapsed, and shall be payable monthly in arrears on the first day of each month and at maturity, whether by acceleration or otherwise.
(B) All agreements between or among the Borrower, the Guarantor and the Lender are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the indebtedness evidenced by the Notes, this Agreement, or otherwise, shall the amount paid or agreed to be paid to the Lender for the use or the forbearance of the indebtedness evidenced by the Notes, this Agreement, or otherwise, exceed the maximum permissible under applicable law. As used herein, the term "applicable law" shall mean the law in effect as of the date hereof provided, however that in the event there is a change in the law which results in a higher permissible rate of interest, then the Notes shall be governed by such new law as of its effective date. In this regard, it is expressly agreed that it is the intent of the Borrower and the Lender in the execution, delivery and acceptance of the Notes and this Agreement to contract in strict compliance with the laws of The Commonwealth of Massachusetts from time to time in effect. If, under or from any circumstances whatsoever, fulfillment of any provision hereof or of the Notes or any of the Loan Documents or other financing instruments executed in connection herewith at the time of performance of such provision shall be due, shall involve transcending the limit of such validity prescribed by applicable law, then the obligation to be fulfilled shall automatically be reduced to the limits of such validity, and if under or from circumstances whatsoever the Lender should ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the principal balance evidenced by the Notes and not to the payment of interest.
This provision shall control every other provision of all agreements between or among the Borrower, the Guarantor and the Lender.
2.05 Payment to the Lender.
The Lender shall send the Borrower statements of all amounts due hereunder, which statements shall be considered correct and conclusively binding on the Borrower absent manifest error unless the Borrower notifies the Lender to the contrary within thirty (30) days of its receipt of any statement that it deems to be incorrect. Alternatively, at its sole discretion, the Lender may charge against any deposit account of the Borrower all or any part of any amount due hereunder.
ARTICLE 3.0 CONDITIONS PRECEDENT
The obligation of the Lender to make the Loan is subject to the following conditions precedent:
3.01 Documents Required for the Closing.
The Borrower shall have delivered to the Lender, prior to the initial disbursement of the Loan (the "Closing"), the following:
(A) The Demand Note duly executed by the Borrower, in the form attached hereto as Exhibit 2.03;
(B) A duly executed Second Amendment to Mortgage and Security Agreement from the Borrower in the form attached hereto as Exhibit 1.01(E);
(C) the duly executed Subordination Agreements;
(D) A duly executed Perfection Certificate from the Borrower in the form attached hereto as Exhibit 1.01(F);
(E) The Guaranty duly executed by the Guarantor in the form attached hereto as Exhibit 1.01(D);
(F) A First Amendment to and Ratification of Blocked Account Deposit Agreement duly executed by the Borrower in the form attached hereto as Exhibit 1.01(A);
(G) The Financing Statements and other instruments required by Article 4.0;
(H) A copy, certified as of the date of the Closing, of resolutions of the board of directors of the Borrower, authorizing the execution, delivery, and performance of this Agreement, the Demand Note, the Loan Documents, and each other document to be delivered pursuant hereto;
(I) A copy, certified as of the date of the Closing, of the bylaws of the Borrower;
(J) A certificate (dated the date of the Closing) of the corporate secretary or assistant secretary of the Borrower as to the incumbency and signatures of the officers of the Borrower signing this Agreement, the Demand Note, the Loan Documents, and each other document to be delivered pursuant hereto;
(K) A copy, certified as of the most recent date practicable by the Secretary of the State of Delaware, of the Articles of Incorporation of the Borrower, and all amendments thereto, together with a certificate (dated the
date of the Closing) of the corporate secretary or assistant secretary of the Borrower to the effect that such Articles of Incorporation have not been further amended since the date of the aforesaid certification of the Secretary of the State of Delaware;
(L) Certificates of tax and corporate good standing dated as of the most recent date practicable, issued by the Commissioner of the Department of Revenue and the Secretary of State of the State of Delaware as to the tax good standing and the legal existence and good legal standing, respectively, of the Borrower;
(M) Certificates, as of the most recent dates practicable, of the Secretary of The Commonwealth of Massachusetts and of the secretary of state of each other state in which the Borrower is qualified as a foreign corporation and, if applicable, of the department of revenue or taxation of each of the foregoing states, as to the good standing of the Borrower;
(N) A written opinion of legal counsel to the Borrower dated the date of the Closing and addressed to the Lender, in form satisfactory to the Lender and its counsel;
(O) A certificate, dated the date of the Closing, signed by the chief executive officer, the president or a vice president of the Borrower and to the effect that:
(1) The representations and warranties set forth in Section 5.01 are true as of the date of the Closing; and
(2) No Event of Default hereunder, and no event which, with the giving of notice or passage of time or both, would become such an Event of Default, has occurred as of such date;
(P) Copies of all documents evidencing the terms and conditions of any debt specified as Subordinated Indebtedness on Exhibit 1.01(H); and
(Q) A duly executed Borrowing Base Certificate as of a date not more than one (1) day prior to the Closing, acceptable to the Lender and certifying a Borrowing Base of not less than $3,057,559.62.
3.02 Documents Required for Subsequent Disbursements.
At the time of, and as a condition to, any disbursement of any part of the Loan to be made by the Lender subsequent to the Closing, the Lender may require the Borrower to deliver to the Lender a certificate, dated the date on which any such disbursement is to be made, signed by the chief executive officer, the president or a vice president of the Borrower, and to the effect that:
(A) As of the date thereof, no Event of Default has occurred and is continuing, and no event has occurred and is continuing that, but for the giving of notice or passage of time or both, would be an Event of Default;
(B) No material adverse change has occurred in the financial condition or results of operations of the Borrower or any Subsidiary, considered as a whole, since the date of the Financial Statements; and
(C) Each of the representations and warranties contained in Section 5.01 is true and correct in all material respects as if made on and as of the date of such disbursement (except for such representations and warranties made as of a particular date).
3.03 Certain Events.
At the time of, and as a condition to, the Closing and each disbursement of any part of the Loan to be made by the Lender at or subsequent to the Closing:
(A) No Event of Default shall have occurred and be continuing, and no event shall have occurred and be continuing that, with the giving of notice or passage of time or both, would be an Event of Default;
(B) No material adverse change shall have occurred in the financial condition or results of operations of the Borrower or any Subsidiary, considered as a whole, since the dates of the Financial Statements; and
(C) All of the Loan Documents shall have remained in full force and effect.
3.04 Legal Matters.
At the time of the Closing and, at the discretion of the Lender, at the time of each subsequent disbursement, all legal matters incidental thereto shall be satisfactory to Bowditch & Dewey, LLP, legal counsel to the Lender.
ARTICLE 4.0 COLLATERAL SECURITY
4.01 Composition of the Collateral.
The property in which a security interest is granted pursuant to the provisions of Sections 4.02 and 4.03 and pursuant to the Loan Documents is herein collectively called the "Collateral". The Collateral, together with all other property of the Borrower of any kind held by the Lender, shall stand as one general, continuing collateral security for all Obligations and may be retained by the Lender until all Obligations have been satisfied in full, but subject to Section 4.07 hereof.
4.02 Rights in Property Held by the Lender.
As security for the prompt satisfaction of all Obligations, the Borrower hereby assigns, transfers, and sets over to the Lender all of its right, title, and interest in and to, and grants the Lender a lien on and a security interest in, all amounts that may be owing, from time to time, by the Lender to the Borrower in any capacity, including, but without limitation, any balance or share belonging to the Borrower, or any deposit or other account with the Lender, which lien and security interest shall be independent of, and in addition to, any right of set-off that the Lender has under Section 8.06 or otherwise. The Lender's security interest in the Blocked Account shall be subject to the provisions of the Blocked Account Agreement.
4.03 Rights in Property Held Either by the Borrower or by the Lender.
As further security for the prompt satisfaction of all of the Obligations, the Borrower hereby assigns to the Lender all of its right, title and interest in and to, and grants the Lender a lien upon and a continuing security interest in all assets of every type and description, wherever located, whether now owned or hereafter acquired, together with all substitutions and replacements therefor, accessions thereto, and proceeds (including, but without limitation, insurance proceeds) and products thereof, including, without limitation, the following:
(A) All Inventory;
(B) All Accounts, Deposit Accounts, Contracts, accounts receivable, contract rights, and Chattel Paper, regardless whether they constitute proceeds of other Collateral;
(C) All Investment Property, securities entitlements and Financial Assets, and all General Intangibles (including Payment Intangibles), regardless whether they constitute proceeds of other Collateral, including, without limitation, all the Borrower's rights (which the Lender may exercise or not as it in its sole discretion may determine) to acquire or obtain Goods and/or services with respect to the manufacture, processing, storage, sale, shipment, delivery or installation of any of the Borrower's Inventory or other Collateral; all Payment Intangibles; and including any and all right, title and interest of the Borrower in, to or under any and all licenses, franchises, permits and approvals obtained or required in connection with Borrower's business operations;
(D) All rights to payment of any insurance proceeds or awards for damages in connection with any condemnations or takings of any interest in and to any real or personal property, wherever located, or any conveyance in lieu thereof;
(E) All products of and accessions to any of the Collateral;
(F) All liens, guaranties, securities, rights, remedies and privileges pertaining to any of the Collateral, including the right of stoppage in transit;
(G) All obligations owing to the Borrower of every kind and nature, and all choses in action, all Commercial Tort Claims, all Letter-of-Credit Rights and all Supporting Obligations;
(H) All tax refunds of every kind and nature to which the Borrower is now or hereafter may become entitled no matter however arising, including, without limitation, loss carry back refunds;
(I) All Intellectual Property, goodwill, trade secrets, computer programs, source codes, licenses, customer lists, trade names, copyrights, trademarks and patents, all domain names, internet web sites and other rights;
(J) All Chattel Paper (including Electronic Chattel Paper and Tangible Chattel Paper), Documents and Instruments, including Promissory Notes (whether negotiable or non-negotiable, and regardless of their being attached to Chattel Paper) and all money, cash and coins;
(K) All Equipment, including without limitation machinery, furniture, motor vehicles, Fixtures and all other goods used in the conduct of the business of the Borrower;
(L) All insurance policies and all proceeds of Collateral of every kind and nature and in whatever form, including without limitation both cash and non-cash proceeds resulting or arising from the rendering of services by the Borrower or the sale or other disposition by the Borrower of the Inventory or other Collateral and including all insurance proceeds;
(M) All books and records, magnetic tapes, electronic data, computer records and discs relating to the conduct of the Borrower's business including, without in any way limiting the generality of the foregoing, those relating to its Accounts;
(N) All Deposit Accounts maintained by the Borrower with any bank, trust company, credit union, investment firm or fund, or any similar institution or organization; and
(O) All property of the Borrower in the possession of the Lender, including without limitation, all sums in the Blocked Account.
4.04 Priority of Liens.
The foregoing liens shall be first and prior liens except for Permitted Liens.
4.05 Financing Statements and Certificates of Title.
(A) The Borrower will:
(1) Execute or authenticate and deliver to the Lender any writings and do all things necessary, effectual or reasonably requested by the Lender to carry into effect the provisions and intent of this Agreement, or to vest more fully in or assure to the Lender (including without limitation, all steps to create and perfect) the security interest in the Collateral granted to the Lender by this Agreement or to comply with applicable statute or law and to facilitate the collection of the Collateral, including the furnishing at the Borrower's cost and expense, at such intervals as the Lender may establish from time to time, of reports, financial data and analyses satisfactory to the Lender. The Borrower hereby authorizes the filing of any financing statements or continuation statement, and amendments to financing statements, in any jurisdiction and with any filing offices as are necessary or desirable to perfect the security interests granted to the Lender pursuant to this Agreement, and the Borrower hereby appoints the Lender as its attorney-in-fact (without requiring the Lender to act as such) to perform all other acts that the Lender deems appropriate to protect and preserve the Collateral;
(2) Pay, or reimburse the Lender for paying, all costs and taxes of filing or recording the same in all offices and registries in which it is necessary to file or record such financing statements so as to perfect the Lender's security interest in and lien on all Collateral; and
(3) Take such other steps as the Lender, from time to time, may direct, including the noting of the Lender's lien on the Collateral and, to the extent a motor vehicle is not subject to a Permitted Lien, on any Certificates of Title therefor, all to perfect to the satisfaction of the Lender the Lender's interest in the Collateral.
(B) In addition to the foregoing, and not in limitation thereof, to the extent lawful, the Borrower hereby appoints the Lender as its attorney-in-fact (without requiring the Lender to act as such) (i) to execute, authenticate, amend, file, record and/or register any financing statement in the name of the Borrower, and to perform all other acts that the Lender deems appropriate to perfect and continue its security interest in and lien on, and to protect or preserve, the Collateral; (ii) to enter into a control agreement or other agreement for the purpose of perfecting or maintaining the perfection of the security interests in and liens upon the Collateral; and (iii) to take any other action deemed necessary or prudent by the Lender, in the sole exercise of its discretion, to effect, perfect, continue or maintain the security interests in and liens upon any Collateral as contemplated by this Agreement or the Loan Documents.
4.06 Mortgagees', Landlords', and Warehousemen's Waivers.
The Borrower will, within thirty (30) days after any request of the Lender, cause any mortgagee of real estate owned by the Borrower, any landlord of premises leased by the Borrower, and any warehouseman or other bailee on whose premises any of the Collateral with a value in excess of $100,000 may be located to execute and deliver to the Lender instruments, in form and substance satisfactory to the Lender, by which such mortgagee, landlord or warehouseman or other bailee waives its rights, if any, in and to all Goods composing a part of the Collateral.
4.07 Termination.
When all indebtedness under the Demand Note has been fully, finally and indefeasibly paid and the Borrower acknowledges in writing that (a) Lender has no further obligations to make advances thereunder and (b) the Borrower has no claims, causes of action, demands or rights of setoff against the Lender under this Agreement or the Notes, then, provided no Event of Default exists hereunder, the Lender shall provide the Borrower with a written acknowledgment that the security interests granted by the Borrower to the Lender under this Article 4 have been terminated. In addition, upon receipt of a written acknowledgement from each counterparty to the Subordination Agreements or from the Guarantor, as applicable, that they have no claims, causes of action or rights of setoff against the Lender arising out of the applicable Subordination Agreement or the Guaranty, the Lender shall acknowledge that the Subordination Agreements or the Guaranty, as applicable, have been terminated.
ARTICLE 5.0 REPRESENTATIONS AND WARRANTIES
5.01 Original.
To induce the Lender to enter into this Agreement, the Borrower represents and warrants to the Lender as follows:
(A) The Borrower is a corporation duly organized, validly existing, and in good standing under the Laws of the State of Delaware; the Borrower has no Subsidiaries other than the Subsidiaries named in Exhibit 5.01(A); each Subsidiary is a corporation duly organized, validly existing, and in good standing under the Laws of its state of incorporation, all as set forth in Exhibit 5.01(A); the Borrower and Subsidiaries have the lawful power to own their properties and to engage in the businesses they conduct, and each is duly qualified and in good standing as a foreign corporation in Massachusetts and such other jurisdictions wherein the nature of the business transacted by it or property owned by it makes such qualification necessary; the states in which the Borrower and each Subsidiary are qualified to do business are set forth in Exhibit 5.01(A) or otherwise disclosed to the Lender in writing; the percentage of the Borrower's ownership of the outstanding stock of each Subsidiary is as listed in Exhibit 5.01(A); the identity of each shareholder of the Borrower and the number of shares owned by each is as listed on Exhibit 5.01(A); the addresses of all places of business of the Borrower and its Subsidiaries are as set forth in Exhibit 5.01(A) or otherwise disclosed to the Lender in writing; neither the Borrower nor any Subsidiary has changed its name, been the surviving corporation in a merger, acquired any business, or changed its principal executive office within five (5) years and one (1) month prior to the date hereof except as set forth in Exhibit 5.01(A); and all of the authorized, issued, and outstanding shares of capital stock of each Subsidiary are owned by the Borrower;
(B) Neither the Borrower nor any Subsidiary is directly or indirectly controlled by, or acting on behalf of, any Person which is an "Investment
Company", within the meaning of the Investment Company Act of 1940, as amended;
(C) Neither the Borrower nor any Subsidiary is in default with respect to any of its existing Indebtedness beyond any applicable grace or cure period (or, in the case of trade Indebtedness, is not more than ninety (90) days past due), and the making and performance of this Agreement, the Notes, and the other Loan Documents will not (immediately or with the passage of time, the giving of notice, or both):
(1) Violate the charter or by-laws of the Borrower or any Subsidiary, or violate any Laws or result in a default under any contract, agreement, or instrument to which the Borrower or any Subsidiary is a party or by which the Borrower or any Subsidiary or its property is bound; or
(2) Result in the creation or imposition of any security interest in, or lien or encumbrance upon, any of the assets of the Borrower or any Subsidiary except in favor of the Lender;
(D) The Borrower and the Guarantor, to the extent applicable to it or to him, has the power and authority to enter into and perform this Agreement, the Notes, and the other Loan Documents, and to incur the obligations herein and therein provided for, and has taken all actions necessary to authorize the execution, delivery, and performance of this Agreement, the Notes, and the other Loan Documents;
(E) This Agreement, the Notes, and the other Loan Documents are, or when delivered will be, valid, binding, and enforceable in accordance with their respective terms;
(F) Except as disclosed in Exhibit 5.01(F) hereto, there is no pending order, notice, claim, litigation, proceeding, or investigation known to the Borrower against or affecting the Borrower or any Subsidiary, whether or not covered by insurance, that would in the aggregate involve the payment of $50,000.00 or more or would otherwise materially or adversely affect the financial condition or business prospects of the Borrower or any Subsidiary, considered as a whole, if adversely determined;
(G) The Borrower and its Subsidiaries have good and marketable title to all of their assets, none of which is subject to any security interest, encumbrance or lien, or claim of any third Person except for Permitted Liens;
(H) The Financial Statements, including any schedules and notes pertaining thereto, have been prepared in accordance with GAAP, and fully and fairly present the financial condition of the Borrower and its Subsidiaries at the dates thereof and the results of operations for the periods covered thereby, and there have been no material adverse changes in the financial condition or business of the Borrower and its Subsidiaries, considered as a whole, from December 31, 2003 to the date hereof;
(I) As of the date hereof, the Borrower and its Subsidiaries have no material Indebtedness of any nature, including, but without limitation, liabilities for taxes and any interest or penalties relating thereto except to the extent reflected (in a footnote or otherwise) and reserved against in the balance sheet dated December 31, 2003 included in the Financial Statements or as disclosed in, or permitted by, this Agreement; and the Borrower does not know or have reasonable ground to know of any basis for the assertion against it or any Subsidiary of any such claim or litigation based upon such Indebtedness as of the date of the Closing except as disclosed on Exhibit 5.01(F) or otherwise disclosed to the Lender in writing;
(J) Except as otherwise permitted herein, the Borrower has filed all federal, state, and local tax returns and other reports required by any applicable Laws to have been filed prior to the date hereof, has paid or caused to be paid all taxes, assessments, and other governmental charges that are due and payable prior to the date hereof, and has made adequate provision for the payment of such taxes, assessments, or other charges accruing but not yet payable; the Borrower has no knowledge of any deficiency or additional assessment in a materially important amount in connection with any taxes, assessments, or charges not provided for on its books;
(K) Except to the extent that the failure to comply would not materially interfere with the conduct of the business of the Borrower or any Subsidiary, considered as a whole, the Borrower and its Subsidiaries have each complied with all applicable Laws with respect to (1) any restrictions, specifications, or other requirements pertaining to products that it manufactures or sells or to the services it performs; (2) the conduct of its business; and (3) the use, maintenance, and operation of the real and personal properties owned or leased by it in the conduct of its business;
(L) No representation or warranty by or with respect to the Borrower or any Subsidiary contained herein or in any certificate or other document furnished by the Borrower or any Subsidiary pursuant hereto contains any untrue statement of a material fact or omits to state a material fact necessary to make such representation or warranty not misleading in light of the circumstances under which it was made;
(M) Each consent, approval or authorization of, or filing, registration or qualification with, any Person required to be obtained or effected by the Borrower, any Subsidiary, or the Guarantor in connection with the execution and delivery of this Agreement, the Demand Note, and the Loan Documents or the undertaking or performance of any obligation hereunder or thereunder has been duly obtained or effected;
(N) All existing Indebtedness of the Borrower or any Subsidiary: (1) for money borrowed, or (2) under any security agreement, mortgage or agreement covering the lease by the Borrower or any Subsidiary as lessee of real or personal property is described in Exhibit 5.01(N);
(O) Except as described in Exhibit 5.01(O), attached hereto, or otherwise disclosed to the Lender in writing, (a) neither the Borrower nor any Subsidiary has any material leases, contracts, or commitments of any kind (including, without limitation, employment agreements; collective bargaining agreements; powers of attorney; distribution arrangements; licenses, patents or license agreements; contracts for future purchase or delivery of goods or rendering of services; bonuses, pension, and retirement plans; or accrued vacation pay, insurance, and welfare agreements); (b) to the best of Borrower's knowledge, all parties to all such material leases, contracts, and other commitments to which the Borrower or any Subsidiary is a party have complied in all material respects with the provisions of such leases, contracts, and other commitments; and (c) to the best of Borrower's knowledge, no party is in default under any thereof and no event has occurred which, but for the giving of notice or the passage of time, or both, would constitute a default, which default might have a materially adverse effect upon the business or financial condition of the Borrower or, as applicable, any Subsidiary, considered as a whole;
(P) All registered patents, trademarks and copyrights of the Borrower or any Subsidiary, all pending applications of the Borrower or any Subsidiary for registration of any patents, trademarks or copyrights, and all licenses or agreements in connection with any Intellectual Property of the Borrower or any Subsidiary are described in Exhibit 5.01(P) attached hereto;
(Q) The Borrower has not made any agreement or taken any action which may cause anyone to become entitled to a commission or finder's fee as a result of or in connection with the making of the Loan;
(R) The Borrower's federal tax returns for all years of operation, including the year ended December 31, 2003, have been filed with the Internal Revenue Service and have not been challenged;
(S) Any Employee Pension Benefit Plans, as defined in the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), of the Borrower and each Subsidiary meet, as of the date hereof, the minimum funding standards of 29 U.S.C.A. 1082 (Section 302 of ERISA), and no Reportable Event or Prohibited Transaction, as defined in ERISA, has occurred with respect to any Employee Benefit Plans, as defined in ERISA, of the Borrower or any Subsidiary; and
(T) The liens and security interests created pursuant to Sections 4.02 and 4.03 are in all cases first and prior liens except for Permitted Liens.
5.02 Survival.
All of the representations and warranties set forth in Section 5.01 shall survive until there remain no outstanding commitments hereunder.
ARTICLE 6.0 COVENANTS OF THE BORROWER
6.01 Affirmative Covenants.
The Borrower does hereby covenant and agree with the Lender that, so long as any of the Obligations remain unsatisfied or any commitments hereunder remain outstanding, it will comply, or if appropriate cause its Subsidiaries to comply, at all times with the following affirmative covenants:
(A) The Borrower will use the proceeds of the Loan only for the purposes set forth in Exhibit 6.01(A), and will furnish the Lender such evidence as it may reasonably require with respect to such use;
(B) The Borrower will furnish the Lender:
(1) As soon as available, but in any event within forty-five (45) days after the close of each calendar month in each fiscal year: (a) a statement of changes in cash flow of the Borrower and its Subsidiaries for such month; (b) income statements of the Borrower and its Subsidiaries for such month; and (c) balance sheets of the Borrower and its Subsidiaries as of the end of such month-all prepared by management on a consolidated basis in reasonable detail, subject to normal year-end audit adjustments and certified by the Borrower's chief executive officer, president, chief financial officer or chief accounting officer to have been prepared in accordance with GAAP;
(2) As soon as available, but in any event within one hundred twenty
(120) days after the close of each fiscal year: (a) a statement of stockholders'
equity and a statement of changes in cash flow of the Borrower and its
Subsidiaries for such fiscal year; (b) income statements of the Borrower and its
Subsidiaries for such fiscal year; and (c) balance sheets of the Borrower and
its Subsidiaries as of the end of such fiscal year-all such statements to be
prepared on a consolidated basis, together with other subsidiaries of the
Borrower, in reasonable detail, including all supporting schedules, comments,
footnotes and related management letters; the statements and balance sheets to
be audited by Deloitte & Touche or another independent certified public
accountant selected by Borrower and acceptable to the Lender,
and certified by such accountants to have been prepared in accordance with GAAP and to present fairly the financial position and results of operations of the Borrower and its Subsidiaries, together with other subsidiaries of the Borrower; the Lender shall have the right, from time to time to discuss the affairs of the Borrower directly with such independent certified public accountants after notice to the Borrower and opportunity of the Borrower to be represented at any such discussions.
(3) Upon request by the Lender, for the most recent fiscal quarter of IP Fibre Devices (a) an income statement of IP Fibre Devices for such fiscal quarter; and (b) a balance sheet of IP Fibre Devices as of the end of such fiscal quarter - all prepared in reasonable detail, subject to normal year-end audit adjustments and certified as accurate and complete by the chief executive officer, president or chief financial officer of IP Fibre Devices and acceptable to Lender in accordance with generally accepted accounting principles applicable in the United Kingdom and presented in United Kingdom pounds sterling, such statements to present fairly the financial position and results of operations of IP Fibre Devices (UK) Limited and to be stated in United Kingdom pounds sterling;
(4) Contemporaneously with the monthly financial report in conjunction with the end of each fiscal quarter and the year-end financial report required by the foregoing paragraphs (1) and (2), a certificate of the chief executive officer, president, chief financial officer or chief accounting officer of the Borrower stating that he has individually reviewed the provisions of this Agreement and that a review of the activities of the Borrower during such year or monthly period, as the case may be, has been made by him or under his supervision, with a view to determining whether the Borrower has fulfilled all its obligations under this Agreement, and that, to the best of his knowledge, the Borrower has observed and performed each undertaking contained in this Agreement and is not in default in the observance or performance of any of the provisions hereof in any material respect or, if the Borrower shall be so in default, specifying all such defaults and events of which he may have knowledge;
(5) Promptly after the sending or making available or filing of the same, copies of all reports, proxy statements, and financial statements that the Borrower sends or makes available to its stockholders and all registration statements and reports that the Borrower files with the Securities and Exchange Commission or any successor Person;
(6) Within fifteen (15) days after the end of each calendar month, in such form and detail as shall be satisfactory to the Lender, an aging, as of the end of such month, of (a) the then Eligible Accounts, (b) all other Accounts of the Borrower certified by the chief executive officer, president, chief financial officer or chief accounting officer of the Borrower to be complete and correct;
(7) Within fifteen (15) days after the end of each calendar month (and at any additional time in the discretion of the Lender or if any material deterioration in the Borrowing Base would be disclosed thereby) a Borrowing Base Certificate as of the end of such month (or as of a date not more than three (3) days prior to the date of any such additional Borrowing Base Certificate). Each Borrowing Base Certificate shall be effective only as accepted by the Lender (and with such revisions, if any, as the Lender may require as a condition to such acceptance), such acceptance to be presumed after receipt of such Borrowing Base Certificate unless the Lender otherwise
notifies the Borrower, whether thereafter, theretofore, or contemporaneously therewith; and
(8) Upon the Lender's request, from time to time, copies of any or all agreements, contracts, or commitments referred to in Section 5.01(O) hereof;
(C) The Borrower will maintain its Inventory, Equipment, the Mortgaged Property and its other real estate, and other properties in good condition and repair (normal wear and tear excepted), and will pay and discharge or cause to be paid and discharged, when due, the cost of repairs to, or maintenance of, the same, and will pay or cause to be paid in a timely manner all rental or mortgage payments due on such real estate. The Borrower hereby agrees that, in the event it fails to pay or cause to be paid any such payment, it will promptly notify the Lender thereof, and the Lender may, in its discretion, do so and on demand be reimbursed therefor by the Borrower;
(D) The Borrower and its Subsidiaries will maintain, or cause to be maintained, public liability insurance (subject to such deductibles for each entity as are acceptable to the Lender in its discretion) and fire and extended coverage insurance on all assets that are of a character usually insured by businesses engaged in the same or similar operations, all in form and amount sufficient to indemnify the Borrower or Subsidiary for 100% of the appraised value of any such asset lost or damaged (subject to any deductible customary in the Borrower's or Subsidiary's industry) or in an amount consistent with the amount of insurance generally carried on comparable assets within the industry and with such insurers as may be satisfactory to the Lender. The Borrower and its Subsidiaries will cause all such insurance policies to contain a standard mortgage clause and to be payable to the Lender as its interest may appear, to cause the Lender to be named as an additional insured on all such liability policies, to deliver the policies of insurance to the Lender, and, in the case of all policies of insurance carried for the benefit of the Borrower or any Subsidiary by any lessee, sublessee, subtenant, or other party having rights to occupy or use the mortgaged property or any part thereof or interest therein under any lease, sublease, or other agreement (whether oral, written, or otherwise evidenced), to cause all such policies to be payable to the Lender as its interest may appear. Such policies shall contain a provision whereby they cannot be cancelled except after thirty (30) days' written notice to the Lender. The Borrower will furnish to the Lender such evidence of insurance as the Lender may reasonably require. The Borrower hereby agrees that, in the event it or any Subsidiary fails to pay or cause to be paid the premium on any such insurance when due, the Lender, in its discretion, may do so and be reimbursed by the Borrower therefor. The Borrower and each Subsidiary hereby assign to the Lender any returned or unearned premiums that may be due the Borrower or any Subsidiary upon cancellation by the insurer of any such policy for any reason whatsoever and direct any such insurer to pay the Lender any amounts so due. provided, however, that the Lender will pay to the Borrower or the appropriate Subsidiary any such returned or unearned premiums within five (5) days after the receipt thereof if there has not occurred and be continuing an Event of Default hereunder. The Lender is hereby appointed the attorney-in-fact of the Borrower and each Subsidiary (without requiring the Lender to act as such), effective after demand upon the Demand Note or during the continuance of an Event of Default, to endorse any check which may be payable to the Borrower or any Subsidiary to collect any premiums or the proceeds of such insurance (other than proceeds of public liability insurance), and any amount so collected may be applied by the Lender toward satisfaction of the Loan and any other Obligations. If the Lender receives any proceeds from insurance in the absence of an Event of Default, it shall remit such proceeds to the Borrower or such Subsidiary within three (3) Business Days after the Lender's receipt of such proceeds, provided that immediately prior to any such remittance the
Lender is provided with a Borrowing Base Certificate reflecting a current Borrowing Base not less than the amount of the Loan then outstanding without first providing the Lender with thirty (30) days advance written notice of its intention to do so;
(E) The Borrower and its Subsidiaries will each pay or cause to be paid when due, all taxes, assessments, and charges or levies imposed upon it or on any of its property or which it is required to withhold and pay except where contested in good faith by appropriate proceedings with adequate reserves therefor having been set aside on its books; provided, however, that the Borrower and each Subsidiary shall pay or cause to be paid all such taxes, assessments, charges or levies forthwith whenever foreclosure on any lien that may have attached (or security therefor) appears imminent;
(F) The Borrower will maintain a Borrowing Base such that the amount of the Borrower's outstanding Loan will not, at any time, exceed its Borrowing Base;
(G) The Borrower and its Subsidiaries will each, when requested to do so, make available for inspection by duly authorized representatives of the Lender any of its books and records and will furnish the Lender any information regarding its business affairs and financial condition within a reasonable time after written request therefor;
(H) The Borrower and its Subsidiaries will each take all necessary steps to preserve its corporate existence and franchises and comply in all material respects with all present and future Laws applicable to it in the operation of its business, and all material agreements to which it is subject;
(I) The Borrower and its Subsidiaries will each collect its Accounts and sell its Inventory only in the ordinary course of business;
(J) The Borrower and its Subsidiaries will each keep accurate and complete Records of its Accounts, Inventory, and Equipment consistent with sound business practices;
(K) The Borrower and its Subsidiaries will each give immediate notice to the Lender of (1) any litigation or proceeding in which it is a party if an adverse decision therein would require it to pay more than $100,000.00 or deliver assets the value of which exceeds such sum (except where the claim is covered by insurance and the insurer has acknowledged coverage); and (2) the institution of any other suit or proceeding involving it that might materially and adversely affect its operations, financial condition or property of the Borrower or its Subsidiaries, considered as a whole;
(L) At the Lender's request, the Borrower will furnish the Lender with true, correct and complete copies of federal income tax returns filed by the Borrower, together with all schedules thereto. The Borrower will cause the full amount of each federal and other income tax refund (including any interest component thereof) received by the Borrower to be applied as an immediate repayment or partial repayment of the Loan, but such repayment shall not of itself reduce the Line of Credit Commitment;
(M) The Borrower and its Subsidiaries will each pay when due (or within applicable grace periods (or, in the case of trade indebtedness, no later than ninety (90) days from the date incurred)) all of its other Indebtedness due third Persons except when the amount thereof is being contested in good faith by appropriate proceedings and with adequate reserves therefor being set aside on its books; provided, however, that no payment shall be made in respect to Subordinated Indebtedness except in strict compliance with all of the terms of the Subordination Agreements or the terms
of such other applicable provisions of subordination theretofore approved in writing by the Lender. If default be made by the Borrower or any Subsidiary in the payment of any principal (or installment thereof) of, or interest on, any such Indebtedness, the Lender shall have the right, in its discretion, to pay such interest or principal for the account of the Borrower or such Subsidiary and be reimbursed by the Borrower or such Subsidiary therefor;
(N) The Borrower and its Subsidiaries will each notify the Lender immediately if it becomes aware of the occurrence of any Event of Default or of any fact, condition, or event that only with the giving of notice or passage of time or both, could become an Event of Default or if it becomes aware of any material adverse change in the financial condition (including, without limitation, proceedings in bankruptcy, insolvency, reorganization, or the appointment of a receiver or trustee), or results of operations of the Borrower, a Subsidiary, or the Guarantor or of the failure of the Borrower or any Subsidiary to observe any of their respective undertakings hereunder or under the Loan Documents;
(O) The Borrower and its Subsidiaries will each notify the Lender thirty
(30) days in advance of any change in the location of any of its places of
business or of the establishment of any new, or the discontinuance of any
existing, place of business;
(P) The Borrower and its Subsidiaries will each (1) fund any of its Employee Pension Benefit Plans in accordance with no less than the minimum funding standards of 29 U.S.C.A. 1082 (Section 302 of ERISA); (2) furnish the Lender, promptly after a request for same by the Lender, with copies of any reports or other statements filed with the United States Department of Labor or the Internal Revenue Service with respect to any such Plan; and (3) promptly advise the Lender of the occurrence of any Reportable Event or Prohibited Transaction with respect to any Employee Benefit Plan;
(Q) The Borrower will permit the Lender to conduct field audits periodically, and at least annually, at reasonable times on any premises occupied by the Borrower or on which any Collateral is located. The Borrower shall pay to the Lender the Lender's reasonable costs and expenses related to one such field audit in any calendar year, provided, however, that the Borrower shall pay to the Lender the Lender's reasonable costs and expenses related to any field audit conducted during the occurrence of an Event of Default; and
(R) The Borrower will maintain the Blocked Account in accordance with the provisions of the Blocked Account Agreement.
6.02 Negative Covenants.
The Borrower does hereby covenant and agree with the Lender that, so long as any of the Obligations remain unsatisfied or any commitments hereunder remain outstanding, it will comply, or if appropriate cause its Subsidiaries to comply, at all times with the following negative covenants, unless the Lender shall otherwise have agreed in writing:
(A) Neither the Borrower nor any Subsidiary will change its name, enter into any merger or consolidation (other than with wholly owned subsidiaries resulting in no change in the beneficial ownership of the Borrower);
(B) Neither the Borrower nor any Subsidiary nor IPG Laser GmbH will sell, transfer, lease, or otherwise dispose of all or (except in the ordinary course of business) any material part of its assets, excluding (i) obsolete inventory or equipment sold at depreciated book value or (ii) up to
$100,000.00 in assets in any one transaction or series of related transaction, provided the aggregate cumulative amount of such transactions shall not exceed $1,000,000.00;
(C) Neither the Borrower nor any Subsidiary will sell, lease, transfer, assign, or otherwise dispose of any of the Collateral except in the ordinary course of business or in the case of obsolete Inventory or Equipment, in sales for amounts equal to or exceeding depreciated book value;
(D) Neither the Borrower nor any Subsidiary will sell or otherwise dispose of, or for any reason cease operating, any of its divisions, franchises, or lines of business without first providing the Lender with thirty (30) days advance written notice of its intention to do so;
(E) Neither the Borrower nor any Subsidiary will mortgage, pledge, grant, or permit to exist a security interest in, or a lien upon, any of its assets of any kind, now owned or hereafter acquired, except for Permitted Liens, liens of the Loan Documents, and existing liens listed on Exhibit 1.01(G) to the extent shown on such Exhibit 1.01(G) to be permitted to exist after the Closing;
(F) Neither the Borrower nor any Subsidiary will become liable, directly or indirectly, as guarantor or otherwise for any obligation of any other Person without notifying the Lender in writing in advance, except for (i) the endorsement of commercial paper for deposit or collection in the ordinary course of business, and (ii) unsecured guarantees of obligations of foreign subsidiaries of the Borrower;
(G) Neither the Borrower nor any Subsidiary will incur, create, assume, or
permit to exist any Indebtedness except: (1) the Loan; (2) existing Indebtedness
listed on Exhibit 5.01(N); (3) trade indebtedness incurred in the ordinary
course of business, (4) contingent Indebtedness permitted by Section 6.02(F);
(5) operating lease obligations permitted by Section 6.02(M); (6) Indebtedness
secured by Permitted Liens; (7) Subordinated Indebtedness; and (8) capital
leases or purchase money Indebtedness permitted by Section 6.02(K);
(H) Neither the Borrower nor any Subsidiary (other than a wholly owned Subsidiary of the Borrower) will declare or pay any dividends, or make any other payment or distribution on account of its capital stock (other than shares of stock of, or other instruments issued by, the Borrower convertible into stock of the Borrower), nor make any assignment or transfer of Accounts, or, other than in the ordinary course of business, of Inventory;
(I) Neither the Borrower nor any Subsidiary will form any subsidiary, make any investment in (including any assignment of Inventory or other property), or make any loan in the nature of an investment to, any Person, other than investments of the Borrower in the Subsidiaries listed on Exhibit 5.01(A) without first providing the Lender within thirty (30) days advance written notice of its intention to do so;
(J) Neither the Borrower nor any Subsidiary will make any loan or advance to any officer, shareholder, director, or employee of the Borrower or any Subsidiary, except for (i) business travel, educational or relocation and similar temporary advances in the ordinary course of business, or (ii) loans not exceeding $100,000.00 to any one such individual up to $200,000.00 in the aggregate at any one time outstanding;
(K) Neither the Borrower nor any Subsidiary will make payments on account of the purchase or lease of Fixed Assets that, in the aggregate, in any fiscal year (commencing with the current fiscal year) will exceed the
lesser of 15% of the revenues of the Borrower for such fiscal year or $6,000,000; as used in this paragraph, the term "lease" means a lease reflected on a balance sheet of the Borrower and its Subsidiaries or a lease that should be so reflected under GAAP;
(L) INTENTIONALLY OMITTED;
(M) Neither the Borrower nor any Subsidiary will pay or commit to pay, in an aggregate amount for any fiscal quarter (commencing with the current fiscal quarter), lease obligations in excess of $210,000.00 without obtaining the Lender's prior written consent (as used in this paragraph, the term "lease" means a lease that is not capitalized in a balance sheet of the Borrower and should not be so capitalized under GAAP);
(N) Neither the Borrower nor any Subsidiary will purchase or otherwise invest in or hold securities, nonoperating real estate, or other nonoperating assets except: (1) Permitted Investments; (2) the present investment in any such assets held as of December 31, 2003 and reflected in the Financial Statements; and (3) operating assets that hereafter become nonoperating assets;
(O) Neither the Borrower nor any Subsidiary will permit any change in the active involvement of Valentin P. Gapontsev in the operations of the Borrower, without the prior written consent of the Lender, which consent shall not be unreasonably withheld or conditioned;
(P) Neither the Borrower nor any Subsidiary will prepay Indebtedness for borrowed money except the Obligations, Indebtedness secured by any of its assets (except the Obligations), or so-called "mandatory prepayments" of that Indebtedness due to JDS Uniphase which is subject to the Intercreditor Agreement (such prepayments to be in accordance with existing payment terms), or enter into or modify any agreement as a result of which the terms of payment of any of the foregoing Indebtedness are waived or modified;
(Q) Neither the Borrower nor any Subsidiary will enter into any sale-leaseback transaction without first providing the Lender with thirty (30) days advance written notice of its intention to do so;
(R) Neither the Borrower nor any Subsidiary will acquire or agree to acquire any stock in, or all or substantially all of the assets of, any Person without first providing the Lender with thirty (30) days advance written notice of its intention to do so;
(S) Neither the Borrower nor any Subsidiary will furnish the Lender any certificate or other document that will contain any untrue statement of material fact or that will omit to state a material fact necessary to make it not misleading in light of the circumstances under which it was furnished;
(T) Neither the Borrower nor any Subsidiary will directly or indirectly apply any part of the proceeds of the Loan to the purchasing or carrying of any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, or any regulations, interpretations, or rulings thereunder; and
(U) Neither the Borrower nor any Subsidiary will make distributions, directly or indirectly, to IP Fibre Devices except that the Borrower may make a distribution of up to US$150,000 to IP Fibre Devices in the fiscal quarter ending December 31, 2004 to be used to pay tax liabilities or for working capital requirements of IP Fibre Devices for such fiscal quarter and, thereafter, with the Lender's prior written approval, the Borrower may be
permitted to make additional distributions to IP Fibre Devices on a quarterly basis as may be necessary to pay tax liabilities or for working capital requirements of IP Fibre Device due and payable within such quarterly period.
ARTICLE 7.0 DEFAULT
7.01 Events of Default.
The occurrence of any one or more of the following events shall constitute an Event of Default hereunder:
(A) The Borrower or the Guarantor shall fail to pay when due any of its Obligations to the Lender within ten (10) days of the date due;
(B) The Borrower or the Guarantor or any Subsidiary shall fail to observe
or perform any other obligation to be observed or performed by it hereunder or
under any of the Loan Documents, and such failure shall continue for fifteen
(15) days after (1) notice of such failure from the Lender; or (2) the Lender is
notified of such failure or should have been so notified pursuant to the
provisions of Section 6.01(N), whichever is earlier;
(C) The Borrower or any Subsidiary shall fail to pay Indebtedness exceeding $50,000.00 due any third Person, and such failure shall continue beyond any applicable grace period (or, with respect to trade Indebtedness which is not subject to a grace period, within ninety (90) days of the date such trade Indebtedness is incurred), or the Borrower or any Subsidiary shall suffer to exist any other event of default under any agreement binding the Borrower or any Subsidiary;
(D) Any financial statement, representation, warranty, or certificate made or furnished by or with respect to the Borrower or the Guarantor or any Subsidiary to the Lender in connection with this Agreement, or as inducement to the Lender to enter into this Agreement, or in any separate statement or document to be delivered to the Lender hereunder, shall be materially false or incorrect when made;
(E) The Borrower or the Guarantor or any Subsidiary shall admit its inability to pay its debts as they mature or shall make an assignment for the benefit of itself or any of its creditors;
(F) Proceedings in bankruptcy, or for reorganization of the Borrower or any Subsidiary, or for the readjustment of any of their respective debts under the Bankruptcy Code, as amended, or any part thereof, or under any other Laws, whether state or federal, for the relief of debtors, now or hereafter existing, shall be commenced against or by the Borrower or the Guarantor or any Subsidiary and, except with respect to any such proceedings instituted by the Borrower, the Guarantor or a Subsidiary, shall not be discharged within sixty (60) days of their commencement;
(G) A receiver or trustee shall be appointed for the Borrower or the Guarantor or any Subsidiary or for any substantial part of their respective assets, or any proceedings shall be instituted for the dissolution or the full or partial liquidation of the Borrower or the Guarantor or any Subsidiary, and except with respect to any such appointments requested or instituted by the Borrower, the Guarantor or any Subsidiary, such receiver or trustee shall not be discharged within sixty (60) days of his appointment, and except with respect to any such proceedings instituted by the Borrower, the Guarantor or any Subsidiary, such proceedings shall not be discharged within sixty (60) days of their commencement, or the Borrower or the Guarantor or any Subsidiary shall discontinue business or materially change the nature of its business, or the Collateral becomes, in the reasonable judgment of the Lender, insufficient
in value to satisfy the Obligations, or the Lender otherwise reasonably finds itself insecure as to the prompt and punctual payment and discharge of the Obligations;
(H) The Borrower or the Guarantor or any Subsidiary shall suffer final judgments (which are not covered by insurance where the insurer has acknowledged coverage) for payment of money aggregating in excess of $100,000.00 and shall not discharge the same within a period of thirty (30) days unless, pending further proceedings, execution has not been commenced or, if commenced, has been effectively stayed;
(I) A judgment creditor of the Borrower or the Guarantor or any Subsidiary shall obtain possession of any of the Collateral by any means, including (without implied limitation) levy, distraint, replevin, or self-help;
(J) An uninsured loss by fire or other casualty to any security for the Loan exceeding $100,000.00 as determined by a public adjuster acceptable to the Lender;
(K) Failure by the Borrower or the Guarantor to pay any amount of money or to observe or perform any other covenant, condition or agreement which is the obligation of the Borrower or the Guarantor to the Lender under any other existing or future note, mortgage or other document or instrument;
(L) Any obligee of Subordinated Indebtedness shall fail to comply with the subordination provisions of the instruments evidencing such Subordinated Indebtedness; or
(M) The Guarantor shall fail to comply fully with the requirements of the Guaranty, or give notice of or assert the termination, discontinuance, invalidity or unenforceability of the Guaranty; or
(N) There occurs a Change in Control; or
(O) There is a change in the current ownership of more than twenty percent (20%) of the voting power of the capital stock of the Borrower, whether such change occurs by sale, transfer, redemption, retirement or alteration of the voting rights of existing capital stock of the Borrower or by the Borrower's issuance of additional capital stock.
Notwithstanding the enumeration of the foregoing Events of Default, the Borrower acknowledges and agrees that the Loan is a demand Obligation that is payable on demand regardless of the occurrence or non-occurrence of an Event of Default.
7.02 Acceleration.
At its option, and at any time, whether immediately or otherwise, the Lender may, upon the occurrence of any Event of Default, declare all Obligations immediately due and payable without further action of any kind including without limitation, notice, demand or presentment.
ARTICLE 8.0 THE LENDER'S RIGHTS AND REMEDIES
8.01 Account Debtors
Upon demand on the Demand Note or the occurrence of an Event of Default and at any time thereafter, the Lender, without presentment, demand, notice, protest or advertisement of any kind, may notify account debtors, at the Borrower's expense, that the Collateral has been assigned to the Lender and
that payments shall be made directly to the Lender. Upon request of the Lender, the Borrower will notify such account debtors that their accounts must be paid to the Lender. Upon demand on the Demand Note or the occurrence of an Event of Default and at all times thereafter, the Borrower will hold all checks, drafts, cash and other remittances in trust for the Lender and deliver them in kind to the Lender. The Lender shall have full power to collect, compromise, endorse, sell or otherwise deal with the Collateral or proceeds thereof in its own name or in the name of the Borrower.
8.02 Possession and Foreclosure of Collateral
Upon demand on the Demand Note or the occurrence of an Event of Default and at any time thereafter, to the extent that the Borrower could legally do so, the Lender, without presentment, demand, notice, protest or advertisement of any kind, may enter onto, occupy and use any premises owned by the Borrower or in which the Borrower has any interest. The Lender may take possession of all Collateral. In the Lender's sole discretion, the Lender may operate and use the Borrower's equipment, complete work in process and sell inventory without being liable to the Borrower on account of any losses, damage or depreciation that may occur as a result thereof (so long as the Lender acts in good faith). The Lender may lease or license the Collateral to any Person for such purposes. In any event, the Lender may sell, lease, assign and deliver the whole or any part of the Collateral, at public or private sale, for cash, upon credit or for future delivery, at such prices and upon such terms as the Lender deems advisable. The Lender may sell or lease Collateral alone or in conjunction with other property, real or personal, and allocate the sale proceeds or leases among the items of Collateral sold without the necessity of the Collateral being present at any such sale, or in view of prospective purchasers thereof. If notice of sale is legally required, the Borrower agrees that ten (10) days written notice shall be deemed reasonable. Upon such sale, the Lender may become the purchaser of the whole or any part of the Collateral sold, discharged from all claims and free from any right of redemption. In case of any such sale by the Lender of all or any of the Collateral on credit, or for future delivery, such Collateral so sold may be retained by the Lender until the selling price is paid by the purchaser. The Lender shall incur no liability in case of the failure of the purchaser to take possession and pay for the Collateral so sold. In case of any such failure, the said Collateral may be resold. Any Collateral remaining unsold after being offered at public auction may be abandoned or disposed of for no consideration in such manner as the Lender deems appropriate.
In any event, at any time and from time to time the Lender may abandon the Collateral or any part thereof. The Borrower agrees immediately upon demand to take possession of any and all abandoned Collateral and to remove it from any location in the possession of or under the control of the Lender.
8.03 INTENTIONALLY OMITTED;
8.04 Notification of Default to Third Parties
The Lender may notify account debtors of the Borrowers to pay over to the Lender for application against the Obligations any sums due from such account debtors to the Borrowers. In addition, upon demand on the Demand Note or the occurrence of an Event of Default and at any time thereafter, the Lender, without presentment, demand, notice, protest or advertisement of any kind, may notify the Borrowers' suppliers and other third parties of the default and of any and all decisions made and actions taken by the Lender with respect to this Agreement, the Obligations or the Collateral, without liability of any kind.
8.05 Assembly of Collateral
Upon demand on the Demand Note or the occurrence of an Event of Default and at any time thereafter, the Lender, without presentment, demand, notice, protest or advertisement of any kind, may require the Borrower to assemble the Collateral in a single location at a place to be designated by the Lender and make the Collateral at all times secure and available to the Lender.
8.06 Right of Set-Off.
The Lender may, and is hereby authorized by the Borrower, at any time and from time to time, to the fullest extent permitted by applicable Laws, without advance notice to the Borrower (any such notice being expressly waived by the Borrower), set-off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and any other indebtedness at any time owing by the Lender to, or for the credit or the account of, the Borrower against any or all of the Obligations of the Borrower or the Guarantor, now or hereafter existing, whether or not such Obligations have matured and irrespective of whether the Lender has exercised any other rights that it has or may have with respect to such Obligations, including without limitation any acceleration rights. The Lender agrees promptly to notify the Borrower after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Lender under this Section 8.06 are in addition to the other rights and remedies (including, without limitation, other rights of set-off) which the Lender may have.
8.07 Exercise of Other Remedies
Upon demand on the Demand Note or the occurrence of any Event of Default and at any time thereafter, the Lender, without presentment, demand, notice, protest or advertisement of any kind, may exercise the remedies of a secured party afforded by the Uniform Commercial Code and other applicable law or by the terms of any agreement between the Borrower and the Lender.
8.08 Cumulative Rights and Remedies
All rights and remedies of the Lender, whether provided for herein or in other agreements, instruments or documents or conferred by law, are cumulative and may be exercised alone or simultaneously.
8.09 Additional Rights and Remedies
(A) Upon demand on the Demand Note or the occurrence of an Event of Default, all obligations on the part of the Lender to make advances on the Demand Note, if the Lender so elects, shall cease and terminate, and, at the option of the Lender, the Demand Note shall become immediately due and payable, and the Lender shall thereupon be authorized and empowered to exercise any rights of foreclosure or as otherwise provided for the realization of any security for the Notes covered by any of the Loan Documents; but the Lender may, at its sole discretion, make any advances or portions of advances, after demand or the occurrence of any such Event of Default, without thereby waiving its right to demand payment of the Borrower's indebtedness evidenced by the Notes and secured by the Loan Documents, and without becoming liable to make any other or further advances as hereinabove contemplated by this Agreement.
(B) Upon demand on the Demand Note or the occurrence of any Event of Default, the rights, powers, and privileges provided in this Section 8.09 and all other remedies available to the Lender under this Agreement or at law or in equity may be exercised by the Lender at any time and from time to time,
whether or not the indebtedness evidenced and secured by the Notes and the Loan Documents shall be due and payable, and whether or not the Lender shall have instituted any foreclosure proceedings or other action for the enforcement of its rights under the Notes or any of the Loan Documents.
ARTICLE 9.0 ATTORNEY-IN-FACT
9.01 Attorney-In-Fact
The Borrower hereby irrevocably appoints the Lender, or its designee, as the Borrower's true and lawful attorney-in-fact, effective upon demand upon the Demand Note or during the continuance of an Event of Default, with full power as follows: (A) to endorse the name of the Borrower on any assignments, notes, checks, drafts, money orders, or other instruments of payment for Collateral; (B) to sign or endorse the name of the Borrower on any negotiable instrument, invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts, assignments, verifications and notices in connection with accounts; (C) to obtain, adjust, settle and cancel, in the Borrower's name, insurance policies as required by Section 6.01(D) and to sign the Borrower's name on settlement checks or drafts; (D) in the Borrower's name, to do any act which this Agreement requires Borrower to do, and, (E) to give notice to the United States Post Office to effect changes of address so that mail addressed to the Borrower may be delivered directly to the Lender. In exercising this power-of-attorney, the Lender shall not be liable to the extent that it acts in good faith.
ARTICLE 10.0 MISCELLANEOUS
10.01 Construction.
The provisions of this Agreement shall be in addition to those of any guaranty, pledge or security agreement, note, or other evidence of liability now or hereafter held by the Lender, all of which shall be construed as complementary to each other. Nothing herein contained shall prevent the Lender from enforcing any or all other guaranty, pledge or security agreements, notes, or other evidences of liability in accordance with their respective terms.
10.02 Further Assurance.
From time to time, the Borrower will execute and deliver to the Lender such additional documents and will provide such additional information as the Lender may reasonably require to carry out the terms of this Agreement and be informed of the status and affairs of the Borrower.
10.03 Enforcement and Waiver by the Lender.
The Lender shall have the right at all times to enforce the provisions of this Agreement and the Loan Documents in strict accordance with the terms hereof and thereof, notwithstanding any conduct or custom on the part of the Lender in refraining from so doing at any time or times. The failure of the Lender at any time or times to enforce its rights under such provisions, strictly in accordance with the same, shall not be construed as having created a custom in any way or manner contrary to specific provisions of this Agreement or as having in any way or manner modified or waived the same. All rights and remedies of the Lender are cumulative and concurrent and the exercise of one right or remedy shall not be deemed a waiver or release of any other right or remedy.
10.04 Expenses of the Lender.
The Borrower will, on demand, reimburse the Lender for all expenses, including the reasonable fees and expenses of legal counsel for the Lender, incurred by the Lender in connection with the preparation, administration, amendment, modification, or enforcement of this Agreement and the Loan Documents and the collection or attempted collection of any of the Obligations including without limitation by reason of enumeration, all reasonable expenses and fees of legal counsel for the Lender incurred in connection with any bankruptcy or insolvency action of the Borrower or the Guarantor or any Subsidiary.
10.05 Notices.
Any notices or consents required or permitted by this Agreement shall be in writing and shall be deemed delivered if delivered in person or if sent by certified mail, postage prepaid, return receipt requested, facsimile transmission, as follows, unless such address is changed by written notice hereunder:
(A) If to the Borrower: IPG Photonics Corporation
50 Old Webster Road Oxford, MA 01540 Attention: Its Chief Executive Officer With a copy to: IPG Photonics Corporation 50 Old Webster Road Oxford, MA 01540 Attention: Chief Financial Officer and General Counsel (B) If to the Lender: Banknorth, N.A. 370 Main Street Worcester, Massachusetts 01608 Attention: Senior Commercial Loan Officer With a copy to: George W. Tetler III, Esquire Bowditch & Dewey, LLP P.O. Box 15156 311 Main Street Worcester, MA 01615-015 |
Any party may change the address to which notices are to be sent to it by giving written notice of such change of address to the other party in the manner herein provided for giving notice. Any such notice, demand, request, or other communication shall be deemed given when mailed as aforesaid.
10.06 Waiver and Indemnification by the Borrower.
To the maximum extent permitted by applicable Laws, the Borrower:
(A) Waives (1) protest of all commercial paper at any time held by the Lender on which the Borrower is in any way liable; (2) except as the same may herein be specifically granted, notice of acceleration and of intention to accelerate; and (3) notice and opportunity to be heard, after acceleration in the manner provided in Section 7.02, before exercise by the Lender of the remedies of self-help, set-off, or of other summary procedures permitted by any applicable Laws or by any agreement with the Borrower, and, except where required hereby or by any applicable Laws, notice of any other action taken by the Lender; and
(B) Defends, indemnifies and holds harmless the Lender and its officers, attorneys, agents, and employees from all claims for loss or damage caused by any act or omission on the part of any of them in connection with the transactions contemplated by this Agreement or related to the banking relationship between or among the Borrower, the Guarantor and the Lender, excepting only the Lender's willful misconduct or gross negligence.
10.07 Participation/Pledge.
Notwithstanding any other provision of this Agreement, the Borrower understands that the Lender may at any time enter into participation agreements with one or more participating banks whereby the Lender will allocate certain percentages of its commitment to them. The Borrower acknowledges that, for the convenience of all parties, this Agreement is being entered into with the Lender only and that its obligations under this Agreement are undertaken for the benefit of, and as an inducement to, any such participating bank as well as the Lender, and the Borrower hereby grants to each such participating bank, to the extent of its participation in the Loan, the right to set off deposit accounts maintained by the Borrower with such bank. Notwithstanding the foregoing provisions of this Section, any Lender may at any time pledge or assign all or any portion of such Lender's rights under this Agreement, the Demand Note and the Loan Documents to a Federal Reserve bank; provided, however, that no such pledge or assignment shall release such Lender from such Lender's obligations hereunder or under the Demand Note or any of the Loan Documents.
10.08 WAIVER OF JURY TRIAL.
EACH OF THE LENDER AND THE BORROWER WAIVES ITS RIGHTS TO A TRIAL BY JURY WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM, BROUGHT OR INSTITUTED BY ANY PARTY TO THIS AGREEMENT OR ANY OF THEIR SUCCESSORS AND ASSIGNS, WHICH RELATES DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE LOAN, THE LOAN DOCUMENTS OR THE RELATIONSHIP BETWEEN THE LENDER AND THE BORROWER.
10.09 Applicable Law.
This Agreement is entered into and performable in The Commonwealth of Massachusetts and shall be subject to and construed and enforced in accordance with the laws of The Commonwealth of Massachusetts.
10.10 Binding Effect, Assignment, and Entire Agreement.
This Agreement shall inure to the benefit of, and shall be binding upon, the respective successors and permitted assigns of the parties hereto. The Borrower has no right to assign any of its rights or obligations hereunder without the prior written consent of the Lender. This Agreement, including the Exhibits hereto, all of which are hereby incorporated herein by reference, and the documents executed and delivered pursuant hereto, constitute the entire agreement between the parties and may be amended only by a writing signed on behalf of each party.
10.11 Severability.
If any provision of this Agreement shall be held invalid under any applicable Laws, such invalidity shall not affect any other provision of this Agreement that can be given effect without the invalid provision, and, to this end, the provisions hereof are severable.
10.12 Counterparts.
This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one and the same instrument.
10.13 Integration Clause
This Agreement is intended by the parties as the final, complete and exclusive statement of the transactions evidenced by this Agreement. All prior or contemporaneous promises, agreements and understandings, whether oral or written, are deemed to be superceded by this Agreement, and no party is relying on any promise, agreement or understanding not set forth in this Agreement. This Agreement may not be amended or modified except by written instrument describing such amendment or modification executed by the Borrower and the Lender.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as a sealed instrument as of the day and year first above written.
IPG PHOTONICS CORPORATION
By: /s/ Valentin P. Gapontsev ------------------------------------- ------------------------------------ Witness Valentin P. Gapontsev, Chief Executive Officer |
BANKNORTH, N.A.
By: /s/ Douglas J.G. MacLean ------------------------------------- ------------------------------------ Witness Douglas J.G. MacLean, Its Senior Vice President |
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of August 9, 2006 (the "First Amendment") is by and between IPG PHOTONICS CORPORATION, a Delaware corporation with a principal place of business at 50 Old Webster Road, Oxford, Massachusetts 01540 (the "Borrower") and TD BANKNORTH, N.A., a national banking association with its principal office at 370 Main Street, Worcester, Massachusetts 01608 (the "Lender"), formerly known as Banknorth, N.A.
W I T N E S S E T H:
WHEREAS, the Borrower and Banknorth, N.A. entered into a Loan and Security Agreement dated as of November 15, 2004 (the "Agreement"); and
WHEREAS, the Borrower has requested an increase in its borrowing availability and certain other modifications to the Agreement; and
WHEREAS, the Lender is agreeable to such modifications, subject to the terms and conditions set forth in this First Amendment.
NOW, THEREFORE, in consideration of the mutual promises contained herein and other valuable consideration, the parties do hereby agree as follows:
A. The Borrower acknowledges that TD Banknorth, N.A. is the holder of the Agreement and that all references to the Lender and Banknorth, N.A. in the Agreement shall henceforth mean and refer to TD Banknorth, N.A., with notices to be sent to TD Banknorth, N.A. at 370 Main Street, Worcester, Massachusetts 01608, Attention: Senior Commercial Loan Officer.
B. Amendments to the Agreement.
1. All references to the "Loan" and the "Line of Credit Commitment" in the Agreement, including without limitation the definition of "Line of Credit Commitment" in Section 2.02 of the Agreement, shall henceforth mean a revolving line of credit facility up to $7,000,000.00 to be furnished by the Lender to the Borrower.
2. Definitions.
a. The definition of "Demand Note" is hereby deleted from Article 1.0 of the Agreement and a definition of "Revolving Credit Note" substituted therefor to read as follows:
""Revolving Credit Note" means the Revolving Credit Note referred to in Section 2.03."
b. The definitions of "Borrowing Base", "Guarantor", "Guaranty" and "Notes" set forth in Article 1.0 of the Agreement are hereby amended and restated to read as follows:
""Borrowing Base" means, at any time, the amount computed on the Borrowing Base Certificate most recently delivered to, and accepted by, the Lender in accordance with this Agreement and equal to the lesser of:
(A) $7,000,000.00; or
(B) Eighty percent (80%) of the Eligible Accounts of the Borrower."
""Guarantor" or "Guarantors" means each and both of Valentin P. Gapontsev and IP Fibre Devices (UK) Limited.
"Guaranty" or "Guaranties" means (A) with respect to Valentin P. Gapontsev, a duly executed Limited Guaranty in the form attached hereto as Exhibit 1.01(D)-1, as may be ratified or amended from time to time and (B) with respect to IP Fibre Devices (UK) Limited, a duly authorized and executed Unlimited Guaranty dated as of May 3, 2005 in the form attached hereto as Exhibit 1.01(D-2), as may be ratified or amended from time to time."
""Notes" means the Revolving Credit Note and the Mortgage Note, individually and collectively."
c. Definitions of "Current Liabilities", "Current Ratio", "Debt Service Coverage Ratio", "IPO", "Leverage Ratio", "Life Insurance Assignment", "Tangible Net Worth" and "Total Liabilities" are added to Article 1.0 of the Agreement, to read as follows:
""Current Liabilities" means at any time all Liabilities that, in accordance with GAAP, should be classified as current liabilities on a balance sheet of the Borrower and its Subsidiaries.
"Current Ratio" means the ratio of (A) Current Assets to (B) Current Liabilities.
"Debt Service Coverage Ratio" means at any time the ratio of (A) the Borrower's cash available for debt service to (B) the Borrower's debt service requirements, such ratio to be calculated in accordance with the sample Covenant Compliance Calculation attached hereto as Exhibit 1.01(I).
"IPO" means an initial public offering by the Borrower of its common stock pursuant to which at least $100,000,000.00 of equity funding is raised by the Borrower.
"Leverage Ratio" means at any time the ratio of (A) Total Liabilities to (B) Tangible Net Worth.
"Life Insurance Assignment" means a Collateral Assignment of Life Insurance Policy dated July 27, 2001 with respect to life insurance policy number AUACOO1242 owned by the Borrower and issued by Valley Forge Life Insurance Company on the life of Valentin P. Gapontsev in the minimum amount of $3,000,000.00, acknowledged by Valley Forge Life Insurance Company on September 10, 2001.
"Tangible Net Worth" means, at any time, Stockholders' Equity, less the sum of:
(A) Any surplus resulting from any write-up of assets subsequent to December 31, 2005;
(B) Goodwill, including any amounts, however designated on a balance sheet of the Borrower and its
Subsidiaries, representing the excess of the purchase price paid for assets or stock acquired over the value assigned thereto on the books of the Borrower;
(C) Patents, trademarks, trade names, copyrights and licenses;
(D) Any amount at which shares of capital stock of the Borrower appear as an asset on the Borrower's balance sheet;
(E) Loans and advances to stockholders, directors, officers, or employees and any loans, advances or payables owing to any Affiliate;
(F) Deferred expenses; and
(G) Any other amount in respect of an intangible that should be classified as an asset on a balance sheet of the Borrower in accordance with GAAP.
"Total Liabilities" means all Indebtedness that, in accordance with GAAP, should be classified as liabilities on a balance sheet of the Borrower and any Subsidiaries."
3. General Terms.
a. Section 2.02 of the Agreement is restated in its entirety to read as follows:
"2.02 General Terms.
Subject to the terms hereof, the Lender will lend the Borrower, from time to time until the earlier of June 30, 2008 (the "Line of Credit Termination Date") or the occurrence of an Event of Default, such sums as the Borrower may request by reasonable same day notice to the Lender, received by the Lender not later than 11:00 A.M. of such day, but which shall not exceed, in the aggregate principal amount at any one time outstanding, the lesser of the then existing Borrowing Base or $7,000,000.00 (the "Line of Credit Commitment"). The Borrower may borrow, repay without penalty or premium and reborrow hereunder, from the date of this Agreement until the occurrence of an Event of Default, the lesser of the then existing Borrowing Base or the Line of Credit Commitment in integral multiples of $50,000.00. It is the intention of the parties that the outstanding principal amount of the Loan shall at no time exceed the amount of the then existing Borrowing Base, and if, at any time, an excess shall for any reason exist, the full amount of such excess, together with accrued and unpaid interest thereon as herein provided, shall be immediately due and payable in full."
b. Section 2.03 of the Agreement is restated in its entirety to read as follows:
"2.03 The Revolving Credit Note.
The Line of Credit Commitment shall be evidenced by a revolving credit note in the form attached hereto as Exhibit 2.03."
c. A new Section 2.06 is added to the Agreement to read as follows:
"2.06 The Commitment Fee.
The Borrower shall pay a commitment fee of one-quarter of one percent (0.25%) per annum on the average daily undisbursed amount of the Line of Credit Commitment during each quarterly period or portion thereof. This commitment fee shall be payable quarterly in arrears, on the last day of each June, September, December and March of each year, commencing September 30, 2006."
4. Affirmative Covenants. Section 6.01 of the Agreement is amended by adding Sections 6.01(S) and 6.01(T) as follows:
"(S) The Borrower shall maintain (1) a Debt Service Coverage Ratio at all times equal to or greater than 1.20:1.00, to be tested on a rolling four fiscal quarter basis at the close of each fiscal quarter beginning with the fiscal quarter ending on September 30, 2006;
(T) Upon successful completion of the IPO, the Borrower shall maintain at all times:
(1) a Current Ratio equal to or greater than 2.50:1.00, tested quarterly as of the end of each fiscal quarter, and
(2) a Leverage Ratio equal to or less than 2.01:1.00, tested quarterly as of the end of each fiscal quarter."
5. Negative Covenants.
a. Section 6.02(K) of the Agreement is hereby intentionally deleted.
b. Section 6.02(M) of the Agreement is hereby amended by striking "$210,000.00" and inserting "$500,000.00" in its place.
6. Events of Default. The last non-lettered paragraph is deleted from the end of Section 7.01 of the Agreement.
7. Certain Additional Amendments. The phrase "after demand upon the Demand Note or" is deleted from Section 6.01(D) of the Agreement, the phrase "demand on the Demand Note or" is deleted from each of Sections 8.01, 8.02, 8.05, 8.07, 8.09 and 9.01 of the Agreement and the phrase "demand upon the Demand Note or" is deleted from Section 9.01 of the Agreement.
8. Exhibits. Exhibit 1.01(B), Exhibit 1.01(D-1), Exhibit 1.01(D-2), Exhibit 1.01(I) and Exhibit 2.03, as attached to this First Amendment, are hereby added to the Agreement.
C. Representations and Warranties. The Borrower hereby represents and warrants that:
1. no Event of Default pursuant to the Agreement has occurred and is continuing, and no event has occurred and is continuing that, but for the giving of notice or the passage of time or both, would constitute an Event of Default; and
2. except as set forth on Exhibit C.2. attached hereto, each of the representations and warranties contained in Section 5.01 of the Agreement is true and correct in all material respects as if made on and as of the date hereof except to the extent any such representation and warranty pertains to a specific date other than the date hereof.
D. Ratification of Obligations. All Obligations of the Borrower to the Lender are hereby ratified and confirmed.
E. Bringdown. The Borrower hereby certifies to the Lender that:
1. since November 15, 2004 (the "Date of Closing") to and including the date hereof, there have been no amendments to or changes in the Articles of Organization or By-Laws of the Borrower as delivered to the Lender as of the Date of Closing;
2. nothing has occurred which would lead the Secretary of State of the State of Delaware to refuse to issue a Certificate of Legal Existence and Good Corporate and Tax Standing as of the date of this First Amendment or which would lead the Secretary of State of the Commonwealth of Massachusetts to refuse to issue a Certificate of Legal Existence and Good Standing as of the date of this First Amendment;
3. all taxes required to be paid or withheld and deposited by the Borrower as of the date of this First Amendment have been paid or withheld;
4. except as set forth on Exhibit E.4. attached hereto, there has been no change in the officers, directors or shareholders (or their holdings) of the Borrower since the Date of Closing to and including the date of this First Amendment; and
5. the resolutions adopted by the Borrower and attached to a Certificate dated as of and delivered to the Lender on or about the Date of Closing have not been rescinded or amended and remain in full force and effect.
F. Acknowledgements. The Borrower hereby acknowledges and agrees that it has no claim, cause of action, defense, right of setoff of recoupment or counterclaim against the Lender with respect to the Agreement, the Obligations, or any related loan documents as of the date hereof.
G. Commitment Fee. In consideration of the increase by the Lender to the Borrower's borrowing availability, the Borrower agrees to pay the Lender, contemporaneously with the execution of this First Amendment, a non-refundable fee in the amount of $10,000.00.
H. Capitalized Terms. All capitalized terms not otherwise defined herein shall have the same meanings set forth in the Agreement.
I. Entire Agreement. The Agreement, as hereby amended, shall remain in full force and effect pursuant to its terms and provisions as set forth herein.
IN WITNESS WHEREOF, the parties hereto have duly executed this First Amendment to Loan and Security Agreement as a sealed instrument as of the day and year first above written.
IPG PHOTONICS CORPORATION
/s/ Dallas Moody By: /s/ Timothy P.V. Mammen ------------------------------ ---------------------------- Witness Timothy P.V. Mammen, Chief Financial Officer |
TD BANKNORTH, N.A.
/s/ George W. Tetler By: /s/ Mark D. Fellion ------------------------------ ---------------------------- Witness Mark D. Fellion, Its Vice President |
THE COMMONWEALTH OF MASSACHUSETTS
Worcester, ss.
On this 9th day of August, 2006, before me, the undersigned notary public, personally appeared Timothy P.V. Mammen, Chief Financial Officer of IPG Photonics Corporation, proved to me through satisfactory evidence of identification, which was / / photographic identification with signature issued by a federal or state governmental agency, / / oath or affirmation of a credible witness, / / personal knowledge of the undersigned, to be the person whose name is signed on the preceding document, and acknowledged to me that he signed it voluntarily for its stated purpose as Chief Financial Officer of IPG Photonics Corporation.
/s/ Angelo P. Lopresti ------------------------------------------ Notary Public, Angelo P. Lopresti My Commission Expires: November 13, 2009 |
EXHIBIT 21.1
IPG PHOTONICS CORPORATION
SUBSIDIARY LISTING
IPG Laser GmbH
IPG Photonics (UK) Ltd.
IRE-Polus NTO
IPG Fibertech S.r.l.
IPG Photonics (Japan) Ltd.
IPG Photonics (India) Pvt. Ltd.
IPG Photonics (Korea) Ltd.
IPG Photonics (China) Ltd.
IPG Investment Corp.
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Registration Statement on Form S-1 of our report dated July 5, 2006, relating to the financial statements of IPG Photonics Corporation and subsidiaries appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP Boston, Massachusetts August 11, 2006 |